SWEDEN has selected Embraer's C-390 Millennium as its next military cargo aircraft, while Brazil intends to buy more Gripen fighter jets from Swedish defence company Saab , the European country's government said.

The letter of intent signed last week comes after lengthy talks between the countries for Brazil to increase its existing Gripen orders and Sweden to tap the Embraer plane as replacement for its aging fleet of Lockheed Martin's C-130.

Brazil signed a contract in 2010 with Saab to buy 36 JAS 39 Gripen fighter jets. It now plans to extend the contract by 25 per cent, the Swedish government said.

In return, Sweden has selected Embraer's C-390 Millennium as its new military cargo aircraft and will now start the process of buying it, reports Reuters.

"Sweden carried out a very in-depth analysis, evaluated several competitors and interacted with current C-390 operators and customers. We are very happy," Embraer's defence head Bosco da Costa Junior told Reuters in an interview.

The Nordic country did not immediately reveal how many C-390s it would buy or when a firm order would be placed. Mr Costa said Sweden had some urgency and hoped it would start adding the aircraft "as soon as possible".