Brazil has rejected a contract for Boeing’s F/A-18 fighter jets in favor of the Swedish Saab’s JAS 39 Gripens. The unexpected move to reject the US bid comes amid the global scandal over the NSA’s involvement in economic espionage activities.

The announcement for the purchase of 36 fighters was made Wednesday by Brazilian Defense Minister Celso Amorim and Air Force Commander Junti Saito. The jets will cost US$4.5 billion, well below the estimated market value of around US$7 billion.

Saito said the development of the fighters will occur in conjunction with Embraer and other unspecified companies.

The 12 Mirage aircraft currently in use by the Brazilian Air Force (FAB) will be retired at the end of this year. They were acquired by Brazil in 2005. As it waits for the new fighters, the FAB will use the F5 style, which will stay viable up to 2025.

During a visit in Brasilia last week, French President Francois Hollande was accompanied by an entourage that included the president of Dassault Group, stirring speculation that the French jet manufacturer had the edge over Saab and Boeing.

Competition over which company would win the right to supply Brazil with the fighter jets began in the late 1990s during Fernando Henrique Cardoso’s administration, continued during Luiz Inácio Lula da Silva’s time in office and into current President Rousseff’s term. A FAB report in 2010 indicated a preference in Saab, though then-President Lula leaned toward the cheaper Dassault jet, Rafale.

Boeing was considered to have the inside track to win the contract earlier this year, yet revelations of intrusive surveillance of global officials’ communications, including those of Brazilian President Dilma Rousseff, by the US government’s National Security Agency led to distrust of the American company.

“The NSA problem ruined it for the Americans,” a Brazilian government source told Reuters.

The Chicago-based Boeing’s bid was rejected because of Saab’s better performance and cost of its aircraft as well as "willingness to transfer technology," defense minister Celso Amorim said, as cited by Bloomberg.

'Economic espionage' fallout

Brazil is currently probing reports released by former NSA contractor Edward Snowden that the spy agency monitored the personal communications of President Rousseff and hacked into government ministries to gather information. Among the institutions targeted by NSA espionage were state oil giant Petrobras and the Ministry of Mines and Energy, contradicting claims by Washington that it did not engage in “economic espionage.”

Rousseff lambasted US spying on her country during the UN General Assembly in September, calling it a “breach of international law.” She further warned that the NSA surveillance, revealed since June, threatened freedom of speech and democracy.

“Meddling in such a manner in the lives and affairs of other countries is a breach of international law and as such it is an affront to the principles that should otherwise govern relations among countries, especially among friendly nations,” Rousseff said.

Just before her address at the UN summit, Rousseff canceled a state visit to Washington, scheduled to take place in October, because of indignation over spying revelations. Rousseff has stated she wants an apology from US President Barack Obama.

Snowden has promised to aid Brazil in a probe into the NSA’s spying program in the country.

“A lot of Brazilian senators have asked me to collaborate with their investigations into suspected crimes against Brazilian citizens,” said Snowden, in an open letter published by Brazilian paper Folha de S.Paulo. Snowden hinted in the letter that he may ask Brazil for asylum.

“The American government will continue to limit my ability to speak out until a country grants me permanent political asylum,” wrote Snowden.

The whistleblower is currently under temporary asylum in Russia. Brazil plans to host a global summit on internet governance in April 2014.

Brazil resident Glenn Greenwald, the former Guardian journalist renowned for publishing Snowden’s leaks, criticized on Wednesday European Union governments’ muted response to the revelations about the NSA’s mass surveillance apparatus. He also contradicted Washington’s claim that no economic espionage is involved amid NSA spying.

“What a lot of this spying is about has nothing to do with terrorism and national security. That is the pretext. It is about diplomatic manipulation and economic advantage.”