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Brazil crime crackdown excites defense firms at arms expo as economy doubts linger

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By Gabriel Stargardter

RIO DE JANEIRO (Reuters) – Global defense and security firms gathered at Latin America’s biggest security expo in Rio de Janeiro this week hope Brazil’s crackdown on crime will bolster sales to the new right-wing government even as they fret about the weak economy and tough political climate.

Elected to tackle graft and rising violence, right-wing President Jair Bolsonaro has vowed wrongdoers no mercy. But his first weeks in office have been blighted by in-fighting, scraps with Congress and a sluggish economy that are hurting his poll numbers and prompting concerns he may fail to deliver.

“Concerns over public security have been big issues, whether in the presidential or state elections, and certainly, we hope that will bring good results for our company,” said Elton Borgonovo, country manager of Motorola Solutions Inc , which was promoting its body camera technology.

Bolsonaro, who took office on Jan. 1, is struggling to get traction for his landmark pension reform, open up the country’s hidebound economy and accelerate the recovery from a long recession.

For companies that rely on state and federal government contracts, success is likely to depend on the state of Brazil’s public finances, said Jean-Luc Alfonsi, vice president of Airbus SE subsidiary Helibras, a helicopter manufacturer.

As such, he added, the approval of pension reform was crucial, a necessary condition to give Brazilian governments and private customers financial stability to make major purchases.

“Public finances are a result of politics, so we’re waiting to see if the new administration and lawmakers will work together to clarify the country’s budgetary policy,” he said.

Marcos Fellipe, a sales representative for chemicals, defense and aerospace company IPI do Brasil, the local unit of U.S. firm Island Group Enterprises, said he was hopeful Bolsonaro would relax trade restrictions and attack bureaucracy.

“But so far, I haven’t seen any change,” he said, adding that after taking part in three LAAD fairs, he had not seen one so empty, which he attributed to Brazil’s economy.

Shortly after taking office, Bolsonaro signed a temporary decree making it easier for Brazilians to buy guns – a move that Fellipe thought would bolster his munitions business.

However, he said the move to loosen gun controls, which he called “timid,” had not had any noticeable effect on sales.

One of the immediate winners of Bolsonaro’s gun decree was Brazilian gun manufacturer Taurus Armas SA, whose shares rose ahead of the measure, but have since tumbled.

Speaking at LAAD on Tuesday, Taurus Chief Executive Salesio Nuhs praised Bolsonaro’s administration.

“I think Brazil is in a better phase, and we think this government will really bring growth for our country, and … things will improve,” he told Reuters.

While Taurus waits for a gradual expansion of Brazil’s arms market, Nuhs said the company will double its production capacity this year in the United States, where it ranks fourth in sales.

Other executives at the Rio fair, however, wanted to see Brazil open up more quickly, with new tenders for international firms that have struggled across Latin America in recent years.

“I would like to see more business … and I hope Brazil will get out of the crisis to push these projects forward,” said Bernhard Brenner, Airbus Defence and Space’s executive vice president of marketing and sales.

He added that it was too soon to know whether Bolsonaro’s law-and-order focus would translate into better sales.

“Ask me in two years,” he said.

(Reporting by Gabriel Stargardter; Additional reporting by Rodrigo Viga Gaier and Sergio Queiroz; Editing by Brad Haynes, Susan Thomas and Lisa Shumaker)

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