How Brazil Built a World-Beating Aircraft Manufacturer⁠↗

Embraer was founded as a majority owned state company, with its founders coming from both ITA and DCTA. The company understood early on that it would need to focus on a niche product and said initial product would be the EMB-110, a small commuter plane for both military and civilian use that could operate well in areas with poor infrastructure, as was the case in Brazil.

How did Embraer achieve this success? We’re already explored one hugely important factor, the general and high-quality expertise provided by ITA and DCTA, but several other factors also played a big role, many of them quite typical in IP. Firstly, as a state-owned company, the government provided the substantial initial investment required, not a trivial issue given the relatively underdeveloped capital markets of Brazil in the 60s, and continued to fund projects in the first 2 decades or so. Secondly, the military was an important source of orders throughout its early history, providing it with a steady flow of orders. Thirdly, the company, jointly or separately from ITA and DCTA, kept close links with foreign aeroplane manufacturers, having created partnerships as early as the 70s.16 Fourthly and in a similar vein, relatively early on Embraer was already exporting substantial amounts of its planes and this focus on exports remained throughout its history.

Embraer also took a big bet around that time that paid off exceedingly well: it decided to start manufacturing regional jets in addition to its previous focuses.20 Again, this was a smart bet on a niche product, as the US market, the biggest market for regional planes, was dominated by inefficient turboprop planes in the early 90s and fuel-efficient jets were primed to take over. Indeed, the Canadian manufacturer Bombardier was first to take the plunge and was very successful in the beginning. This leads to a long story of the competition between Embraer vs Bombardier. To keep things brief, despite or perhaps because of Bombardier’s initial head start in the area, Embraer was able to quickly catch up, leading to a competitive duopoly that lasted for around 10 years. However, thanks to its less expensive aeroplanes21 and a huge strategic blunder by Bombardier of trying to manufacture larger planes, Embraer was able to take the reins definitely by the mid-2000s.

Embraer is now the biggest regional jet manufacturer in the world and is by far the most technologically advanced manufacturer in Brazil. Indeed, with Boeing’s current woes, there’s been a lot of discussion of whether Embraer might take the plunge itself and try to enter the larger jet market. Personally, I doubt that it will or should, given what happened to Bombardier and how the company perpetually chooses to focus on more niche products, but who knows?