Brazilian President Luiz Inácio Lula da Silva has pushed for an increase of more than 50% in Brazilian defence spending through to 2010. The country is developing a national defence plan, which may include increasing troop numbers in the Amazon, building nuclear and conventional submarines to protect offshore oil fields and modernise its weapons industry. It has signed an agreement with France to buy 50 military helicopters and five submarines, including one nuclear-powered vessel, the value of which could exceed $11bn. A seriously deteriorating economy could put pressure on these plans. President Luiz Inácio Lula da Silva remains under pressure. The opposition Partido Movimento Democrático Brasileiro (PMDB) has control of both houses of parliament, and is seeking greater influence on national politics. This could threaten the ruling coalition and we wait to see if the PMDB will support Lula’s presidential candidate, Dilma Rousseff, in next year’s poll. Our outlook for Brazil’s economy has deteriorated – we expect a contraction of 0.6 per cent this year, with consumption and overall output unlikely to recover this year. The main means of bolstering the economy available to Lula are stimulus packages, and in mid-May the China Development Bank gave $800 billion to its Brazilian counterpart, known as BNDES, to shore up its cash amid the financial crisis. This quarter, we have introduced a significant new aspect to BMI’s Defence reports, which is the City Terrorism Rating (CTR). This assesses the risk of a terrorist attack. The CTR takes into account the overall BMI Terrorism Rating for the country in question. It also incorporates the ‘prevalence’ of terrorism, which recognises the frequency of attacks, and whether the city is a target for terrorists. The CTR also recognises the ‘threat’ of terrorism in terms of the likely numbers of victims and the ability of groups to launch sustained campaigns. In Brazil we assess the CTRs for Brasilia, Rio de Janeiro and Sao Paulo. These City-Specific Ratings are created via an integration of the state-wide threat, with an evaluation of the city-specific characteristics and level of activity.