While those ambitious projects were pursued, Engesa was in a bad shape. It reached its apex of plants and employees in the middle of the decade and then entered a state of decay in the late 80s. The winds were no longer blowing in its direction. The company’s modus operandi, once ad hoc and centered on the paternalistic and almost autocratic leadership of José Luiz, didn’t stand to the complexity of the challenges now faced, and its leader’s authority was eroded by clever subordinates.
The military was no longer in power. The national economy as a whole was falling apart with hyperinflation advancing unchecked; the 80s are known as a “lost decade” in the continent. The government’s anti-inflation measures made the exchange rate unfavorable for exports, which were the primary source of revenue. Abroad, demand for weapons was on a downwards trend. Saddam’s successful development of an Iraqi arms industry reduced his need to buy from Engesa, and after the end of his war with Iran the Gulf made less defense purchases. Shrinking demand was paired with expanding supply as Europeans and other producers entered into grinding competition for Engesa’s Third World markets. All of this happened at the same time the Osório’s development hogged a lion’s share of its resources.
Engesa fell on rankings of the most important companies and rose near the top in debt rankings. It could no longer find the credit to even maintain its production. In one case an excellent contract was signed with Venezuela but its delegation of officers came back with empty hands and no purchase after months of waiting -there was no way to produce what was agreed to. In another, at the South American Military Sports Union congress in October 1987, Bolivia’s subsecretary of Defense publicly complained that Engesa had sold them 700 trucks and failed to follow up with replacement parts, with the entire fleet grounded in three years, much to the company’s humiliation. Its stand at the 1989 Baghdad expo was barebones, while Eastern European sellers with Western marketing had showy exhibitions.

The 90s were an even more hostile environment. As President, Fernando Collor shifted focus away from national defense. Soviet goods flooded the international arms market. The Gulf War made powerful repercussions: Brazil joined the international condemnation of Saddam, cutting off the vital trade relations with Iraq. Saudi Arabia drew closer to America. Engesa’s last hope was the profit it could make from the Al-Fahd contract.
Instead, what it got was its killing blow. On November 1990 the Saudis finally decided for the Abrams, buying 315 of them for U$ 3,1 billion. The reasons for this decision are a point of much contention. It is said that it all happened due to American political pressure, and amongst other things, argued that Engesa was a supplier of anti-American militaries (such as precisely Iraq). In fact, the CIA did monitor Engesa and examined sattelite imagery of its plants in the 80s, fearful of the final destination of its products; wheter and how pressure was applied in the 90s is not clear. This, however, ignores the reasons the Saudis themselves had to make their choice. The Abrams was already in service and had well-established production lines; by picking it they knew they’d have their orders delivered and would get what they paid for. In contrast, the Osório would require a small company that never dealt in tanks before to start up production from scratch with a long and convoluted logistical chain. The Abrams was clearly the safer choice. It was also geopolitically better to grow closer relations with America than with Brazil. In fact, most likely the Abrams had already been chosen and negotiations for the Osório were merely used to force America to lower its prices.