Brazilian aircraft manufacturer Embraer SA won firm orders for 20 commercial planes and reached a deal to start assembling business jets in China, giving the company a lifeline in a massive market where its future was in doubt.
The deals, worth up to $1.4-billion (U.S.) if options for 15 more planes are exercised, were unveiled Tuesday in Beijing as Brazilian President Dilma Rousseff began a five-day visit to China, Brazil's biggest trade partner and foreign investor.
For the past year, Embraer and Brazilian diplomats have been lobbying China to allow the company to start producing its popular E-Jet family of regional planes in China.
That approval never came, in part because China is developing a similar regional plane, prompting Embraer to home in on China's business jet market instead.
The deals come as Ms. Rousseff, a results-oriented pragmatist who took office on Jan. 1, is pressing China to buy more products from Brazilian manufacturers as part of a broader push aimed at reducing the South American nation's dependence on sales of raw materials such as iron ore, oil and soybeans.
Tuesday's orders are for Embraer's E-190, a regional jet that can seat up to 100 passengers. China Southern Airlines Co. and Hebei Airlines each placed 10 firm orders for the E-190, which will be assembled at Embraer's main plant in Brazil, with deliveries starting in 2012.
Embraer chief executive officer Frederico Curado, one of more than 250 Brazilian business executives travelling with Ms. Rousseff in China, told reporters in Beijing that the deals included options for 15 more planes.
Mr. Curado also said Embraer's China joint venture, Harbin Aircraft Ltd, would be ready to start producing smaller business jets in 18 to 24 months.
Embraer plans to use existing infrastructure at the plant to assemble the Legacy 600/650, the first model of its business jet line-up.
Embraer's shares fell, underscoring worries that the deals were driven by political and not economic reasons. "We would prefer to see jet orders occur because the airlines truly need them, and not because politicians help spur such activity," said Stephen Trent, an analyst with Citigroup in New York.
Embraer's shares eased 0.3 per cent to 12.89 reais ($8.10 U.S.) in Sao Paulo. American depositary receipts slid 0.9 per cent to $33.12.
One reason for concern, according to a Sao Paulo-based trader, was Embraer's inability to clinch new customers in China, one of the world's biggest markets for regional aviation. Hebei already operates two Embraer's ERJ-145 regional planes.
In a separate development, Embraer and AEL Sistemas, a subsidiary of Israel's Elbit Systems, signed an agreement to evaluate a plan to develop unmanned aerial vehicles.
The company also announced the purchase of a 50-per-cent stake in Brazil-based Atech Negocios em Tecnologias for 36 million reais ($23-million).
The move highlights the potential for business in the defence segment as geopolitical and economic events lead Brazil and other countries to beef up security to protect extensive natural resources.
By buying defence services companies, Embraer could make it easier to market its planes to countries that use diverse defence systems.