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Brazil court suspends Boeing-Embraer tie-up

Boeing and Embraer announced a deal in July handing the US aerospace giant an 80 percent stake in the Brazilian company's commercial business
Boeing and Embraer announced a deal in July handing the US aerospace giant an 80 percent stake in the Brazilian company's commercial business Boeing and Embraer announced a deal in July handing the US aerospace giant an 80 percent stake in the Brazilian company's commercial business AFP/File
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Sao Paulo (AFP)

A Brazilian federal court on Thursday suspended a proposed $4.75 billion tie-up between US aerospace giant Boeing and the civilian business of Brazilian plane-maker Embraer pending the government of president-elect Jair Bolsonaro taking office.

The Sao Paulo court said it was it was taking action to avoid "possible concrete acts" that would be irreversible being taken on the aviation deal before the new administration comes in under Bolsonaro, who takes over on January 1.

Boeing and Embraer announced the deal in July. Under its terms, Boeing was to hold an 80 percent stake in the Brazilian company's commercial business, thus allowing Boeing to offer planes with capacity of up to 150 seats -- a market it currently does not operate in.

Embraer's military aircraft business was excluded to overcome Brazilian government opposition to giving up a national champion to a foreign entity.

The agreement was seen as a response to a similar strategic partnership announced in October 2017 between Boeing's European arch-rival Airbus and Canada's Bombardier.

Embraer, the third largest aircraft manufacturer in the world, was founded as a state group in 1969 before being privatized in 1994, although the Brazilian government retains the right to make strategic decisions for the company.

The deal, which Embraer had said it expected to be finalized by the end of 2019, was struck under Brazil's outgoing President Michel Temer.

Thursday's ruling effectively prevents Temer's government from seeing through the Boeing-Embraer deal in its final days before Bolsonaro's team takes over.

Bolsonaro, a far-right politician, had a long record as a nationalist and protectionist when it came to Brazil's economy.

But he changed tack to win over voters and investors in the run-up to his November election by advocating privatizations.

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