Citing an air force technical report, the newspaper said the French jet was not even the Air Force's second pick for the new fighters. The runner-up was the F/A-18 Super Hornet by US group Boeing.

The Rafale, an multirole fighter made by Dassault, had been seen as leading the pack since President Luiz Inacio Lula da Silva and French President Nicolas Sarkozy announced jointly in September that Brazil was negotiating to buy the delta-winged aircraft.

If that intent to purchase is confirmed, it would be the first export sale of the Rafale, possibly making it more attractive to other potential buyers Switzerland and India.

But Saab and Boeing are fighting fiercely to land the Brazilian contract, reportedly slashing prices to do so.

Lula's government has said the deal is not yet done with Dassault.

It is waiting for an air force evaluation of the three contenders to be completed. Still, Lula has stressed that the final decision is his, and will be based on political and strategic considerations.

The priority for Brazil is to acquire technology through the purchase so it can end up with the capability to build its own 21st-century fighters.

Folha said the air force preferred the Swedish model because it was less costly and potentially had better commercial possibilities. And profit margins on future local production of the French jet were theoretically less interesting to local aviation giant Embraer, the Folha report added.

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