Brazil and France sign $12 bln defense pact

RIO DE JANEIRO, Dec 23 (Reuters) - Brazil and France signed a defense deal on Tuesday worth about 8.6 billion euros ($12 billion) which includes the transfer of technology for Latin America's largest economy to develop its own arms industry.

The accord was signed by Brazilian President Luiz Inacio Lula da Silva and French President Nicolas Sarkozy, who ended a two-day visit to Rio de Janeiro on Tuesday.

Under the deal Brazil will buy 50 EC725 helicopters built locally by Helibras, Eurocopter's subsidiary in Brazil. Eurocopter is the helicopter subsidiary of European aerospace group EADS (EAD.PA: Quote, Profile, Research). The helicopters, worth an estimated 1.9 billion euros, are to be delivered from 2010.

France will also provide the technology for Brazil to assemble four conventional submarines worth around 4.1 billion euros and subsequently its first nuclear-powered submarine.

Of the total 8.6 billion euros, 6 billion will go to French companies and 2.6 billion to Brazilian firms, a source with the French delegation said.

"It is an historic decision because France believes that a powerful Brazil is an important element for the stability of the world," Sarkozy told a news conference.

Lula hailed the accord as a breakthrough that reflected Brazil's status as an emerging power.

"France is willing to ... build an alliance in Brazil, to transfer technology so Brazil can have a defense industry that corresponds to its importance in the hemisphere, in the world," Lula told the news conference.

Brazil last year earmarked $880 million to complete a nuclear reactor for the submarine.