Being based in a market where a great many senior executives commute to work by helicopter, it seems surprising that Embraer has not attempted to breach the helicopter market until now.

The Brazilian aircraft manufacturer recently signed a memorandum of understanding (MOU) with Anglo-Italian AgustaWestland that targets establishing a rotorcraft final assembly line in Brazil. While production collaboration would be the first step, developing new helicopters as part of the joint venture does not seem too far-fetched in the longer term.

Moving into the helicopter business would be the latest step in Embraer's broader diversification strategy. The company has long focused on the regional aircraft market, initially with the EMB-110 Bandeirante, followed by the EMB-120 Brasilia and then the ERJ 145, the big seller in the 1990s, when small regional jets became so popular. With the market for smaller regional jets weakening, the company moved up with the launch of its E-jets, which serve the 70-120-seat market and are no longer purely geared toward regional airlines. In fact, some low-cost carriers such as JetBlue Airways are operating them.

The diversification strategy led Embraer to enter the business jet market with its Legacy family. In 2007, the company also announced the launch of the KC-390 military transport, which is intended to strengthen its defense business. This would also benefit from the AgustaWestland cooperation, once military types are included.

But it is not like the country has no experience with helicopters. Brazil developed the Beija-Flor (Beautiful Flower) light helicopter before Embraer was formally set up in 1969. Much of the knowledge that went into that project was gleaned from the country's research institutes.

While Embraer is rediscovering its roots, AgustaWestland has been assessing how best to enter one of the world's booming helicopter markets. Brazil's helicopter demand has been growing by 20% annually, propelled by the private sector and the growing oil and gas enterprises.

“Before you go into a market you start with two business plans, one with a partner and one without. Embraer is a natural partner, a powerful OEM with an established supply chain,” says Roberto Garavaglia, vice president of marketing at AgustaWestland.

He tells Aviation Week that negotiations between the two parties began six months ago resulting in the signing of an MOU in mid-January.

The move into Brazil is strategic. It provides access to the one remaining BRIC (Brazil, Russia, India, China) nation where AgustaWestland is not represented, Garavaglia says. Agreements are in place in India and China and the company has just begun final assembly of AW139 helicopters in Russia in conjunction with state-owned Russian Helicopters.

Previously, helicopter sales in Latin America have been dominated by Bell and Eurocopter. Eurocopter has sold more than 600 AS350 Ecureuils, built in Brazil by subsidiary Helibras as the Esquilo, while Bell's Model 212s and 412s dominate the military fleets of many South American countries. But in recent years, Sikorsky has been selling the Black Hawk to Brazil, Chile and Colombia, while several operators use the S-92 for oil and gas operations. AgustaWestland's best-seller in the region is its A109 family of light twins; approximately 100 are used in Brazil alone by private individuals, while the navy operates a small fleet of Lynx maritime helicopters.

“The AW139 and AW189 are at the forefront of this agreement,” says Garavaglia, largely based on the need for twin-engine medium helicopters to support the thriving oil and gas industry in Latin America, he notes.

Law enforcement organizations in Brazil will most likely be adding to their fleets in preparation for the country's hosting of the World Cup in 2014 and the Summer Olympics in 2016, although the government has said the armed forces will be covering the security for these major events. Though no concrete timeline has been released, AgustaWestland anticipates a joint venture within a few months of the final agreement. Interest in the two major sporting events suggests that the program could be up and running within a year or 18 months.

Assembly in-country is an essential requirement if AgustaWestland wants to be successful in both the military and oil and gas sectors. Current national legislation demands that any defense procurement worth more than $5 million must have domestic content of around 50%. At the same time, state-owned energy company Petrobras looks more favorably at contractors who make use of Brazilian-sourced products.

Eurocopter has already undertaken a similar strategy by expanding the role of its Brazilian subsidiary, Helibras. After three decades of producing the Esquilo, the company is now producing 50 EC725 Caracals for all three branches of the country's armed forces with the aircraft featuring the full 50%-mandated Brazilian content by the time production ends. Helibras has also received an MOU from local oil and gas operator Lider Aviacao for 14 civil versions of the Caracal, the EC225 for use in the offshore support market. The company is set to play a role in the design and development of an indigenous helicopter for the Eurocopter product line in the mid-2020s.

Garavaglia added that development of a new helicopter model between Embraer and AgustaWestland could not be ruled out. His company is already working on a 2.5-metric-ton rotorcraft with Russian Helicopters.