WEAPONS FOR THE MASSES : SOME PARIAH NATIONS ARE FINDING THERE’S A NEW WORLD ORDER FOR THEIR CUT-RATE ARMS

SPIDERMAN IS ON TV IN SANTIAGO, CHILE. NOT THE cartoon Spiderman, with sticky goo shooting out of his wrists. The Spiderman on TV in Santiago is human, and every bit as fantastic as anything in Marvel Comics.

Spiderman is a technician-actor demonstrating the powers of “Spider,” a weapons system manufactured by France’s Ruggieri, SA. Light as a suitcase and deployable on land or at sea, the Spider is touted in a promotional video as a cost-effective defense system: antipersonnel, antitank, anti-guerrilla and anti-mob.

Our hero is strolling through dry brush on the video promo, carrying what looks like a small card table. He hears something and stops. Spiderman snaps open the case’s tubular legs, then pops the caps off six coffee-can-sized tubes. Walking backward, he unwinds a spool of detonator cable, taking cover behind a bush 50 feet away. Fingers sprint across Spider’s miniature computer keyboard, then . . . k-a-a-a-a-a-BOOM !!

When the smoke clears, Spiderman is admiring a crater the size of a minivan. With a tug and a whir, the cable disappears. The lids are screwed back onto the coffee cans. Spiderman resumes his march, secure in the knowledge that the Spider also belches smoke, tear gas, shrapnel and an earsplitting, incapacitating siren. A quick dance along the keyboard and Spider blasts 900 tungsten-carbon bullets into an array of steel posts, stand-ins for the enemy. The camera zooms in on the holes where, on human targets, Spider’s projectiles would cleave hunks of flesh off of arms, legs and torsos.

Spiderman is in Santiago for the International Air and Space Fair, FIDAE by its Spanish abbreviation. FIDAE is one of more than 70 weapons bazaars that will be held this year around the war-weary globe. From Las Vegas, Nev., to Kuala Lumpur, Malaysia, lethal hardware will be displayed and fondled like silk scarves at Saks, proof that the New World Order has not extinguished mankind’s enthusiasm for settling conflicts violently.

Exotic figures who keep a low profile on the international scene are still fixtures at the air show, a biennial event held in early March at the Los Cerillos Air Force Base. Isn’t that ex-dictator Augusto Pinochet touring the grounds? And there is Southern Air Transport. The airline, a creature of the CIA that ran a charter service for principals of the Iran-Contra scandal, has its booth in Pavilion G. Faisal ibn Hussein, a Jordanian prince, is touring with his young bride, the Princess Alia. So is a delegation from Poland’s state helicopter company, checking the competition from Beijing, Jerusalem and Buenos Aires as scratchy elevator music wafts from the PA system--”Moon River,” “Strangers in the Night,” “As Time Goes By.”

Schoolchildren on a field trip climb in and out of black mini-tanks. Young women in light blue dresses, hostesses to a global clientele, adjust their makeup, spin on high heels and practice their smiles behind glass display cases. Inside, hand grenades, mortar shells and coils of razor-tipped concertina wire are tagged by model number.

Such events grease the $30-billion-a-year international weapons trade. However huge that market seems, the traffic in arms is actually in a downtrend, declining by about 10% between 1990 and 1991. In almost any industry, a 10% annual decline constitutes a depression. But the new era of good feelings is practically an Armageddon for the manufacturers moving product at FIDAE. This is especially true for the new Third World dealers, who were born in the human-rights ‘70s and grew up tough in the belligerent ‘80s. “All military markets are reducing demand in general,” laments Yitshak Assayag, a marketing official with the Israeli government’s Israel Military Industries. “Peace hits very hard.”

The Israelis are here to hold on to market share in the Third World, still a very dangerous place to live. Between 1979 and 1989, according to the State Department, annual military expenditures in the developing world rose from $100 billion to $167 billion, adjusted for inflation. Brazil, for instance, spent $2.6 billion in 1979 but was laying out $6 billion by the end of the decade. For Taiwan, expenditures rose from $4.5 billion to $8 billion.

The consensus is that the Third World is where most of the rest of the decade’s wars will be fought. Yesterday’s proxy conflicts are reverting to their traditional ethnic and class dynamics within national borders. So forget about Stealth bombers and Cruise missiles. The wars of the ‘90s are being fought hand-to-hand and street-to-street. Forget Desert Storm and Just Cause. Think of the Serbs and the Croats, Peru’s Shining Path, the civil war in Somalia.

Fairs like this are where the Third World shops for bargains in such basic hardware as armored cars, rockets and helicopters. But FIDAE has a darkly unique pedigree--founded, funded and flacked by nations arming themselves outside the trade rules of Western governments. Nations that, for reasons of ideology or gross human-rights abuse (or both), find themselves so distrusted by the West, they must create their own arms industries to keep themselves in bullets. Pariah nations, in other words.

The event’s 1980 inauguration was the in-your-face answer to policies aimed at so-called outlaw nations such as Chile, South Africa and Iraq. As long as Chile, for example, was run by the Pinochet junta, most big U.S. companies were restricted in what they could sell to the regime. Conscious of Chile’s poor standing in Congress, contractors would come to the fair to market easily converted “civilian” versions of their helicopters and radar, and leave grumbling about the sales lost to such competitors as Israel Military Industries, South Africa’s Armscor and China’s Precision Machinery Import & Export Corp.

Nevertheless, flagging First World contractors still look to these events to drum up what business they can. Dassault and Giat are here from France, along with Germany’s Deutsche Aerospace and British Aerospace Defence, Ltd. “You don’t come,” says Neil Anderson, international marketing director for General Dynamics, “you’re forgotten.”

General Dynamics’ sales pod, with its display panels, guest lounge and product brochures, shares hangar space with a coterie of other big American contractors: McDonnell Douglas, Rockwell International, Bell Textron, Lockheed. Supporting their friends, the U.S. Air Force sent a F-117 Stealth bomber to slice the smog over the Andes. Smaller suppliers are represented by the U.S. Commerce Department, which brought literature for 52 contractors selling everything from notebook computers to fireproof jumpsuits.

THE UPSTART PARIAHS MADE MONEY PLYING DISCOUNT, LOW-TECH WARES, making end runs around arms embargoes. As more and more advanced weaponry found its way to Third World hot spots, the outlaws discovered that cooperation would end their dependence on the developed countries’ defense industries, freeing them to openly hawk their “indigenous” designs. Almost any weapon can be broken down, reverse-engineered and reassembled as a bootleg product for sale to a third country. Congress won’t let Chile buy an F-16? Israel sells an upgrade kit modeled on the Kfir, its bootleg of France’s Mirage. “When you export the weapon, you export the technology,” says Gary Milhollin of the University of Wisconsin, an expert on arms proliferation. “The pariahs have managed to live by supplying things no one else will supply. They really have their own market.”

Such alliances are looking more and more ominous in the ‘90s. Observers fear deals between the opportunist and the unstable. “What happens when North Korea and Syria develop indigenous ballistic-missile capability?” ponders an aide to the Senate Foreign Relations Committee. “They are prepared to sell missiles and production facilities. It’s just getting worse.”

Starting almost from scratch, pariah producers like South Africa and Chile have, in the last decade, carved out multimillion-dollar niches in the world’s arms trade. Adding in the business done by veterans like Israel and China, the group has a market share of 10% of world sales.

Yet who is a pariah is often in the eye of the beholder. Thus, Israel--an early victim of Europe’s refusal to sell advanced weapons for political reasons--is, to many, the prototypal pariah. But not to the U.S. Congress. Once-notorious South Africa has been practically rehabilitated following a peace treaty in Angola and democratic reforms at home. The People’s Republic of China, the Third World’s largest arms dealer, is an outlaw when it is accused of selling missile technology to Syria, but a responsible member of the Desert Storm coalition when it sells missiles to Saudi Arabia. Chile, Argentina and Brazil were considered pariahs when they had military dictatorships but not under their new civilian presidents.

Egypt, Taiwan, South Korea and Singapore are four slightly more respectable weapons exporters whose defense industries started when U.S. manufacturers began using cheap local labor to offset costly technology. As a rule, any developing country with an authoritarian regime is a potential pariah. Such a country will almost certainly attain that status once it is involved in hostilities, as “responsible” governments impose an arms embargo on the conflict area.

Yet the eight-year Iran-Iraq war--to say nothing of the current carnage in Yugoslavia and Azerbaijan--showed how porous such embargoes are in practice. According to classified documents, the Reagan Administration itself violated a congressional ban by allowing Saudi Arabia to transfer American weapons to Iraq in the mid-’80s. “It’s difficult to regulate,” concedes a State Department official. “Both sides of the war manage to get access to arms, sometimes legally, sometimes illegally.”

What most pariahs have in common is their instability: unpopular governments threatened by unruly elements of their own population. A coffee can that can spit tungsten-carbon bullets lets dictators rest easier after dark, the raison d’etre for weapons like the Spider.

Ruggieri’s Spider is being co-marketed by FAMAE (the Chilean Army’s industrial holding company, Fabricas y Maestranzas del Ejercito) as a standard feature for its locally produced armored cars.

FAMAE is a $200-million-a-year business with 3,000 employees. It claims a history stretching back to Fray Luis Beltran, the gunsmith cleric who forged cannons for Simon Bolivar. But the real founder may be Massachusetts Sen. Edward M. Kennedy, who sponsored legislation in 1976 to cut the Pinochet regime off from U.S. arms sales. Their slogan, “The Alternative in Defence Technology,” is a salvo aimed at high-priced French, British and American arms makers setting up across the Tarmac, as well as a dig at the U.S. Congress, which hopes to thwart the Third World arms race by restricting sales by American firms. However noble its intention, the policy is effective at making enemies of U.S. contractors while energizing the arms business overseas.

FAMAE makes 60-, 81- and 150-mm mortars based on a licensing agreement with France’s Thomson-Brandt. Its Piranha armored personnel carrier is manufactured under license from Switzerland’s Motorwagenfabrik AG. FAMAE’s new 9-mm submachine pistol fires 1,300 rounds per minute and comes equipped with a silencer--a logical convenience for a country that helped make death squad part of the lexicon.

The company’s inventory of artillery products includes the Rayo 160-mm ballistic rocket launcher, based on technology developed by FAMAE with the U.K.’s Royal Ordnance Ltd. “In the 1970s, our problem wasn’t Kennedy, it was the general state of our economy,” says Maj. Carlos Sepulveda, FAMAE’s business director. “We needed to open up and become more productive. No more money from the state, so we had to start selling overseas.”

In the 1980s, FAMAE mainly exported small arms. Later it went into aviation bombs, submarine mines and rockets. The bombs proved popular with both Iraq and Iran during their eight-year blood bath, with smaller lots dealt to Ecuador and Paraguay. The firm is now looking to sell upgrade kits for first-generation Cobra antitank cannons. At a fraction of the fee charged by the British or the Swiss, the organization can turn a World War II-vintage howitzer cannon into a laser-guided Chariot of Fire.

“Malaysia and Thailand have a lot of the old models,” Sepulveda explains. “Africa is another good market for us.” But customers aren’t satisfied anymore with simply getting the hardware, Sepulveda says. What sells these days is the whole factory. “Every country in the Third World wants to make its own weapons. If that’s how they want to spend their money, it’s not Chile’s problem.”

FAMAE has prospered during the recession, with overseas sales this year projected at $60 million, up about 50% since 1990. There is an agreement to build a rifle-assembly plant in a North African country, whose name Sepulveda discreetly declines to mention. FAMAE is also negotiating a joint venture in Malaysia for bombs and mortars. Paraguay and Uruguay, he says, “can be interesting markets for us.” But isn’t that just making more competition for him in the future? He shrugs. “A lot of these countries may think they’re ready to produce weapons, but five years later they’re back to us for more business.”

While Chile might have used the U.S.-led arms embargo to justify a home-grown weapons establishment, it took a full-blown war to make the pariahs an international industry. Saddam Hussein, by launching his war against Iran, made profiteering accessible to even the poorest arms merchants.

Many of Hussein’s arms purchases were indirectly financed by Western credit. The strongman spent scarce hard currency on his arsenal, and used foreign commodities credits to import food and medicine. In effect, regimes in Argentina, Chile and Brazil--whose militaries were off-limits to U.S. defense contractors because of poor human-rights records--were able to survive as arms exporters thanks to the U.S. tilt toward Baghdad during the Iran-Iraq war.

Brazil was one of 45 nations that sold to the combatants (and one of 28 that reportedly sold to both ). Chronically burdened by the developing world’s largest debt, Brazil was reduced to bartering soybeans for crude oil in order to withstand the oil shocks of the ‘70s. That brought its arms merchants into the Middle East war bazaar; they sold to Kuwait, Qatar and Saudi Arabia along with Iraq.

Avibras Aerospacial is the country’s largest private defense firm. In 1987, it sold $320 million in rockets and other explosives, mainly in the Gulf. Avibras’ advantage: the Astros II multiple rocket launcher. According to Roberto Lopes, representing Avibras at the fair, the Astros II is the world’s only truck-launched ballistic system capable of heaving 18-foot rockets 10, 40 and 60 kilometers, essentially doing the work of three systems at a fraction of the cost.

During the Prime Time War against Iraq, American viewers knew them as Hussein’s portable Scud launchers. “Actually, there were three nations using the Astros II in Desert Storm,” Lopes says. “Saudi Arabia bought the system when Saddam invaded Kuwait, and so did Qatar.”

When the weapon was still in the prototype stage, Avibras went looking for funding at FIDAE, since Brazil’s own armed forces were too poor to support Brazilian contractors. “We look for the first buyer who will guarantee the production,” says Lopes. And that buyer was? “The army of Iraq.”

Several Brazilian manufacturers have declared bankruptcy since the Gulf War, a fate Avibras narrowly escaped by selling elsewhere in the region. Iraq, so generous in the mid-1980s, proved to be a fragile client after the U.N. imposed sanctions. The company was stuck for $150 million in Iraqi Astros II deliveries by the time the Astros II-toting allies drove Hussein’s forces back to Baghdad. “Thanks to God we got through it,” Lopes brightens. “After the war we had $70 million more in sales.”

Having survived the defeat of its best customer, Avibras is back at the air show with a new gadget, the FOG-MPM. Lopes describes it as the Third World’s first fiber-optic antitank missile, designed to impress Third World regimes already impressed by how First World tanks chopped up the Iraqis. Launched from a truck or even a mortar, the five-foot projectile wafts above the carnage, guided by a TV camera in the nose. U.S. and European manufacturers can’t produce a weapon this good, this cheap, Lopes says. “This is a missile that is new, it is ready. If only we can find a buyer.”

Over in Pavilion B, South Africa’s Armscor reveals itself as yet another brave veteran of the Iran-Iraq marketing wars, also pining for a new sugar-daddy dictator. More than 5,000 Armscor employees have been let go since South Africa’s 1988 peace with Angola, and the company has been forced to scour the international market for enough sales to remain in business.

Armscor used to be the pariah’s pariah--an outcast even by the most exacting standards. Yet Armscor has been a fixture on the scene, a perennial FIDAE exhibitor, always playing mix-’n’-match with everyone from Israel to Taiwan to Chile. Thanks to Saddam Hussein’s war, Armscor rocketed South Africa into the top 10 of world weapons exporters during the 1980s, a bona-fide outlaw success story muscling into territory dominated by the U.S., the U.K., the Soviet Union, China and France.

Armscor’s G5 cannon was crucial in turning the tide for Iraq in the Iran war. During Desert Storm, Armscor started marketing its cousin, the G6, to Hussein’s enemies, shamelessly using the slogan “Some things are better suited to the desert.” By war’s end, a G6 shipment was on its way to the United Arab Emirates.

Following the strategy of Brazil’s Avibras, Armscor’s Atlas Aircraft Corp. brought a pair of prototypes to the air show: twin helicopters, the Rooivalk combat model and its sister, the Oryx, for deploying support troops. Abu Dhabi, a tiny Mideast oil state, has already expressed interest in financing the attack copter.

For the more ambitious client, South Africa is selling access to the Overberg Test Range, a state-of-the-art missile-launch field. Bordering the De Voot Game Reserve on an isolated Indian Ocean beach, Overberg is suitable for land and sea testing, 12 months a year. “Weather is a problem in some countries in the Northern Hemisphere,” explains pitchman Jannie Nel, as the promotional video rolls. “Also, Europe is very crowded for this type of testing.” Overberg, Nel explains, promises excellent weather conditions and utter secrecy for clients who may not want to alert potential adversaries to their advanced launch capabilities.

The price, around $500,000 per week, is also competitive, two to three times cheaper than testing in France or the United States. Best of all, the tests are environmentally correct. “It’s a very sensitive ecological area,” Nel continues. “Before every test, we do an environmental-impact statement. For example, when the whales are breeding, we shoot further into the sea, to not upset the mothers and their babies.” Whale-friendly Scuds.

PEACE IS HELL FOR THE WAR BUSINESS, AND MOST OF THE EXHIBITORS COMING to Santiago put up a brave face to the new world. With Iraq put on ice, financing has become scarcer for the next line of cut-rate battlefield products. The hunger for cheap explosives to lob at human waves of holy warriors has been all but sated.

On the bright side, steely Third World regimes addicted to their home-grown defense industries may be in a position to expand long after they have become an egregious drain on public coffers. Then, too, there will always be another dictator with deep pockets. Who will save the pariahs? “Libya still has cash, and so does Iran,” says Milhollin of the University of Wisconsin. “Iran seems to be spending it big time.”

“Eventually there is going to be a shakeout,” says Ethan Kapstein, director of the Economics and National Security program at Harvard. “There will be a few important players in the market. The pariahs who survive are going to be the ones finding a way to make it in the gray market, either by selling to terrorists or by being conduits.”

Kapstein is referring to conduits of surplus Warsaw Pact materiel and of Western technology, often modified into even deadlier versions. Middlemen may indeed prosper in the coming years. With dictators falling and hot spots cooling, many big arms producers say that commerce in weapons should flow freely, even that North should join with South to make weapons and save jobs.

General Dynamics has come to the Pariah Arms Bazaar optimistic that a Congress worried about the trade deficit and the prospect of aerospace jobs disappearing overseas will loosen restrictions on the sale of such sophisticated items as its F-16 fighter. GD’s Neil Anderson has been honing his pitch at air shows from Dubai to Singapore. “They need them because they don’t want technology to pass them completely by. Some goofball decides to conquer the world and the U.N. takes him on, their military will want to help out. But they can’t help out with antique airplanes. I’m sure it’s no fun for a Mirage III pilot to think about coming up against a MiG-29, no fun at all.”

Anderson is proselytizing a plan for a consortium in South America, with the aircraft industries of Chile, Brazil and Argentina joining forces with the Yanks to produce 200 F-16s. If half the parts can be made in U.S. plants, Anderson explains, that’s as good as selling 100 F-16s in Latin America, something GD wouldn’t have a prayer of doing without throwing in with the pariahs.

Like Wall Street after the crash, Texas after the boom, the era of limits has arrived in the weapons trade and the pariahs are part of the sales pitch. So much for the carrot and the stick. In the battle for market share, it’s a case of if you can’t beat ‘em, join ‘em.