HOW WASHINGTON WORKS...ARMS DEALS

By DOUGLAS WALLER/WASHINGTON

Over the Easter weekend, President Bill Clinton gave his approval for U.S. defense contractors to market jet fighters to Chile. The decision represented a victory for the new Secretary of Defense, William Cohen, whose Pentagon had pushed hard for lifting restrictions that Washington has had for almost 20 years on the sale of jets to Latin America. For Madeleine Albright, who argued against rushing into the jet sales and who had vowed to reign supreme over U.S. foreign policy as Clinton's second Secretary of State, the decision represented a defeat. Latin America is thus poised to begin an arms race--a race from which the U.S. will doubtless profit handsomely.

Albright probably stood little chance of blocking the presidential decision. By the time Clinton made up his mind, a classic Washington tale of bureaucratic intrigue, skillful press manipulation, high-powered industry lobbying and fat campaign contributions had foreordained the outcome.

Until 1995, U.S. defense contractors paid little attention to Latin America. In a good year, Latin American generals bought no more than $1 billion worth of weapons, small change as long as aerospace giants had hundreds of billions of dollars in aircraft sales to the Pentagon and the Middle East. But with the Defense Department shrinking weapons buys and Arab countries no longer placing large orders, the billion-dollar Latin American market suddenly looked attractive.

But there was a snag. Jimmy Carter had instituted an informal ban on U.S. manufacturers' selling sophisticated offensive weapons like F-16 and F/A-18 attack fighters to Latin America, because most military strongmen wanted the jets for flybys over the presidential palaces they occupied. Every American President since Carter supported the prohibition. If Lockheed Martin, which produces the F-16 Falcon, and McDonnell Douglas, which manufactures the F/A-18 Hornet, wanted in on the Latin American arms market, they had to change that policy.

Getting the Pentagon to lobby for lifting the restraints was easy. Then Defense Secretary William Perry had met with Latin American generals, and was convinced their days of overthrowing governments was over. If the Pentagon was lucky, it might even be able to unload some of its older model F-16s south of the border and use the proceeds to restock its air wings with newer versions of the Falcon. Industry executives and Perry aides began publicly plugging the idea of lifting the restrictions: the countries of Latin America save for Cuba were now democratic, their economies were rebounding, and the jets their air forces flew in many cases were 1950s vintage, went the spiel. "We treat the Latins like children when we say they can't have new planes," says Joel Johnson, the Aerospace Industries Association's international vice president, implying that to have fully adult relations with other countries requires supplying them with sophisticated armaments.

The State Department, which approves overseas arms sales, wasn't persuaded. Voters did elect Latin American Presidents, but the democracies were fragile. The economies were improving, but more than 150 million people in the 20 countries covered by the arms ban still live in poverty. With no communist threat and the countries mostly at peace with one another, the last thing their Presidents needed was American attack jets at $24 million a copy. "We should be promoting arms control in the region first, not arms sales," says Bernard Aronson, the State Department's Assistant Secretary for Latin America during the Bush Administration.

The aerospace industry faced another problem. "Nobody in Latin America showed any interest in buying these jets," says Alexander Watson, Clinton's Assistant Secretary of State for Latin American affairs until last spring. Brazilian defense officials viewed expensive new F-16s and F/A-18s as a low priority. Argentina, which has been demilitarizing, was worried at the thought of the jets' being sold to its neighbor Chile. Buenos Aires would have to buy the same planes to keep up. Even Venezuela, the only country given a waiver of the Carter prohibition and allowed to buy 26 F-16s in 1982, parked many of them in hangars much of the time because of the high cost of repairs.

The arms lobby first had to stir up demand among the Latin Americans. The Pentagon quietly arranged for Puerto Rican Air National Guard pilots to fly Brazilian generals in F-16s. In March 1996 an armada of U.S. warplanes flew to Chile for an air show. As scores of Latin American officers and hundreds of civilians squinted into the sunny sky, an F-16 Falcon soared high up, then roared down in a kamikaze dive. A B-2 Stealth bomber flew over the Santiago fairground. A giant C-17 air cargo plane rumbled along the taxiway with a Chilean flag fluttering from a cockpit window. The State Department was furious with the stunts, but the air show accomplished exactly what the Pentagon had wanted. Within six months, Chile and Brazil had sent formal requests to Washington for information on buying F-16s and F/A-18s.

It was now time to turn on the pressure from Congress. Aerospace lobbyists helped circulate one letter for House members to sign and another for Senators, which urged then Secretary of State Warren Christopher to lift the arms-sales ban. The arms industry, which contributed more than $10.8 million during the 1996 campaign season, had no problem collecting signatures. The 78 Representatives and 38 Senators who signed the letters received more than $1 million from PACs controlled by Lockheed Martin, McDonnell Douglas and the major subcontractors for the F-16 and F/A-18. The million-dollar letters jolted Christopher. He had paid little attention to Latin America, but was sensitive to the fact that $1 billion in aircraft sales overseas created 20,000 jobs back home. Three months earlier, Christopher had returned from a trip to South America impressed with its leaders and cosmopolitan cities. He was not eager to battle Perry and this many lawmakers.

The aerospace lobbyists received another boost. Peru, which had fought a border skirmish with Ecuador two years earlier, decided to buy 18 MiG-29 jets from Belarus. Peru insisted that it was only keeping up with Ecuador, which had just bought four Israeli Kfir jets to replace losses in the conflict with Lima. The State Department protested the Peruvian purchase. But Washington had helped along the little Andean arms race. Because the Kfir's engine was American made, the U.S. had veto rights over any foreign sale of the jet. But the Israeli lobby was far too powerful in Washington for any U.S. official to consider blocking it. American contractors were delighted. The Peruvian buy reinforced a favorite argument for selling jets abroad: if we don't, others will.

The lobby for restraint belatedly began mobilizing. The Council for a Livable World, an arms-control group, organized its own congressional letters to Clinton, urging that he keep the ban in place. But the council was outgunned. Its PACs had raised only $220,000 for the 49 Senators and Congressmen who signed the letters. State Department officials under Christopher who opposed the arms sales, however, were savvy enough to know that the best way to make sure the proposal to lift the ban never reached Clinton's desk was to debate it to death in interagency meetings, which they proceeded to do through the summer of 1996.

Frustrated Pentagon officials tried to leapfrog the snarl with one of the oldest bureaucratic tricks in the book. During July and August, they planted in major newspapers stories that claimed the Administration was ready to lift the restraints on Latin American arms sales. The Administration wasn't about to do any such thing. State Department and Pentagon aides were still deadlocked. "The Pentagon hoped the President would see the stories and call Perry and Christopher to ask what was going on," a State Department official explained. The maneuver backfired. Clinton never noticed the press reports. But his Vice President did. Gore aides warned that their boss was worried that lifting the ban might spark an arms race in the region.

Fearing that momentum was slipping, Perry lobbied Christopher to join him in a written recommendation to the President on Latin American arms before the two men resigned at the beginning of this year. Christopher finally agreed to watered-down language. The secret memo the two Secretaries sent Clinton cautioned that the U.S. should still exercise "restraint" in selling arms to Latin America. Washington still wanted to strengthen democratic governments there and promote regional stability. But if the countries really wanted new jets, the sales should now be considered "on a case-by-case basis."

The ink had barely dried on the memo when Pentagon spinmeisters went to work. On Jan. 16, Christopher sat at his desk fuming over wire-service reports citing Pentagon sources who claimed he now favored swinging the door wide open to arms sales. Christopher ordered his spokesman Nicholas Burns to knock down the reports. The memo Christopher had signed cracked the door only slightly. The Pentagon "shouldn't characterize the views of the Secretary of State," Burns told reporters. But the Defense Department had already won the p.r. war. "We got rolled," said a State Department official.

Chile became the test case for opening the arms pipeline to Latin America. Chile's military, which takes a 10% cut of revenues from the country's copper exports, had the cash to buy 24 new jets. Washington had to act fast if it wanted to be among the eager foreign bidders, Chilean President Eduardo Frei warned Clinton during a February visit. The Chilean military wanted detailed specifications on the F-16 and F/A-18 by the end of March.

House Speaker Newt Gingrich and Representative Lee Hamilton, the ranking Democrat on the House International Relations Committee, next weighed in with letters to Clinton urging him to end the restrictions. Gingrich's 1996 campaign had received $27,000 in PAC money from the F-16's and F/A-18's manufacturers. Hamilton's campaign had received $18,500. On March 10, aerospace executives met with a Gore aide and presidential counselor Thomas ("Mack") McLarty, who is Clinton's special envoy on Latin American trade issues. Chile, the executives warned, would probably take delivery on new jets by 2000, an election year, when Gore could ill afford to see jobs lost in California, Florida, Texas and Ohio, where the Falcon and Hornet are built.

Bill Cohen, who as a Maine Senator received $10,100 from the jet manufacturers' PACs, had signed the letter to Christopher demanding an end to the restrictions. Now he lobbied the White House to send Chile the F-16 and F/A-18 specifications before March 31, warning that the Americans would be left out of the bidding if they missed the deadline.

Albright had misgivings. The Chileans weren't serious about their deadline, she argued. They would wait. First, before aerospace companies began peddling their wares, the Administration needed to decide whether it wanted to change its Latin American arms policy. But by now the arms lobby was too formidable. Clinton sided with Cohen, insisting that the green light to send jet specifications didn't necessarily mean the Administration would later approve their sale. But in the past, sales licenses have almost always followed if an American company won a bid overseas. "We have a different situation now than we did in the late '70s," says White House spokesman David Johnson. "We've got a region that has undergone a substantial transformation." Yet some things, like the lure of expensive new weapons, never seem to change.

--With reporting by Jane Knight/Caracas, Elizabeth Love/Santiago and Rudolf ten Hoedt/Quito

With reporting by JANE KNIGHT/CARACAS, ELIZABETH LOVE/ SANTIAGO AND RUDOLF TEN HOEDT/QUITO