HOW WASHINGTON WORKS...ARMS DEALS

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.