Brazil: Police Wiretap Jeopardizes Raytheon Radar Project

It was meant to be a shining model of the new era of inter-American trade: a $1.4 billion U.S. contract -- the largest ever awarded in Brazil -- in which the Massachusetts- based Raytheon Corp. would build a vast radar project in the Amazon jungle.

President Clinton and Commerce Secretary Ron Brown personally lobbied for it. Even the CIA played a supporting role. But after a year of controversies, culminating last week in a scandal in which even President Fernando Henrique Cardoso may have been wiretapped by federal police, the deal is in grave danger.

"Dead," is how one leading senator, Antonio Carlos Magalhaes, described it this week.

"The future isn't clear at this point," acknowledged U.S. Ambassador Melvyn Levitsky, in an interview.

Unless the Senate votes today to approve the project's financing, the contract will expire. But Dirceu Machado, secretary for the Senate commission handling the matter, told The Herald that the chance of such last-minute approval was "zero point zero zero zero zero."

The latest scandal over Sivam, the System for Vigilance over the Amazon, surfaced Friday, when Cardoso fired a senior aide, Julio Cesar Gomes dos Santos, following the leak of excerpts from a police wiretap tape in which Gomes appeared to suggest that a Brazilian representative of Raytheon bribe a senator opposing the project. Two days later, Air Force Minister Mauro Gandra resigned due to suggestions on the tapes that he had been improperly influenced as a houseguest of the Raytheon representative.

The charges have followed months of attacks by various legislators charging that the Sivam deal is too costly, Raytheon's technology is obsolete and that the bidding was improperly conducted.

"It's a mess," said one U.S. official who has been closely watching the deal's progress. "There are some serious people against this, including those with genuine concern about putting this much money into such a project, when Brazil has other needs. But others against it have more questionable motives."

One of these, he added, might be the hope that a full-scale congressional investigation will stall Cardoso's pending efforts to push through fundamental economic reforms requiring constitutional changes.

Through its Rio spokesman, Jim Carter, Raytheon denied any wrongdoing, and Levitsky stressed that no one has alleged the firm itself did anything unethical. Carter said the company continues to work with its representative, Jose Afonso Assumpcao.

None of this has stopped the scandal from escalating, with yet unanswered questions about how the investigation began and who authorized the wiretaps. Cardoso this week said he hadn't been informed about the secret recordings, and the press has described him as worried that he, too, may have been taped unknowingly.

Raytheon's troubles are especially irksome for U.S. officials who pulled out all the stops to chase the Sivam contract. The system would be the world's largest environmental project, a network of radar, satellites and ground stations to monitor Brazil's share of the Amazon basin, an area much larger than all of Western Europe. Backed vigorously by Brazil's military, the project is billed by Raytheon officials as the world's "greenest" business venture, since it is supposed to help protect the rain forest from illegal miners, loggers and drug traffickers.

The idea first came up in September 1990, but Raytheon was not selected to take part until last year. That decision came after Clinton wrote to lobby former President Itamar Franco, Commerce Secretary Brown pushed the project on a tour, and even the CIA reportedly joined the effort, in the heat of the battle for the contract, by producing evidence that the French had been offering large bribes to influential Brazilians.

Carter, of Raytheon, said the firm is discussing with government officials how they might preserve the deal if the contract expires. But with the current demands for a wide- ranging investigation, Machado, secretary for the Commission on Senate Economic Affairs, said he doubted the Senate would act for the rest of this year.
Cardoso has said he favors the project, but analysts believe he has had to choose between the foreign investment and the image he wants to present of a Brazil that will no longer tolerate even the appearance of corruption.

"Cardoso's trying to do a First World remake on how Brazil deals with ethical questions, as if we're not in a Third World country with all sorts of corrupt proceedings," said Dick Foster, editor of the business newsletter BrazilWatch.

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