Brazilian aircraft maker Embraer is teaming with Anglo-Italian helicopter designer and manufacturer AgustaWestland to start a production and assembly line in Brazil.

Embraer's new deal signaled the Brazilian defense manufacturer's expansion into a market that has been dominated by North American and European manufacturers.

Embraer's plans for entering the helicopter market, reported in 2012, generated speculation about potential partners.

Embraer last year announced advances in tactical transport and tanker aircraft but is still trying to get into the U.S. market with its Super Tucano light attack aircraft after a U.S. Air Force contract fell through.

Brazil has yet to announce how it will fulfill the Brazilian air force requirements for a new fleet of multi-role jet fighters. Boeing's F/A-18 Super Hornet, France's Rafale and Swedish Saab's JAS-39 Gripen NG are competing for the contract.

Analysts said it seems likely that Brazil would insist on a maximum technology transfer deal to enable Embraer or another local manufacturer to build capacity to produce combat aircraft in a not-too-distant future.

Embraer said it reached a joint memorandum of understanding with AgustaWestland, a wholly owned subsidiary of Finmeccanica, to manufacture the helicopters in Brazil.

The company aims to produce AgustaWestland helicopters for both commercial and military use in Brazil and the rest of Latin America.

"This is an important step for Embraer as we continue expanding our business," Embraer President and Chief Executive Officer Frederico Fleury Curado said.

"The combined skills and competences of Embraer and AgustaWestland will create great value for customers in the region," he said.

AgustaWestland Chief Executive Bruno Spagnolini said, "Brazil is an important market for AgustaWestland and we believe having an industrial presence in this country will help us to further grow our business in one of the world's fastest growing markets."

AgustaWestland already has several international partnerships, including training academies at Philadelphia in the United States, in Britain, Malaysia and Italy.

Both Embraer and AgustaWestland see a strong market potential for helicopters. Brazil's multibillion-dollar oil and natural gas exploration program and similar but small energy and mining development programs in Central and South America and the Caribbean have created a growing demand for helicopters.

Brazilian and other air forces in Latin America are also investing in military upgrades.

AgustaWestland has a Brazilian subsidiary, AgustaWestland Do Brasil Ltda, focused on customer support.

Last week Embraer's defense and security division signed a contract with the Brazilian air force to modernize five of its EMB 145 Airborne Early Warning and Control aircraft.

The $215 million contract provides for the updating of electronic warfare and command and control systems, electronic countermeasures and air surveillance radar.

Atech, an Embraer Defense and Security company, participates in the development of the command and control system. The contract also comprises six mission planning and analysis stations that will be employed in the training and improvement of crews.