Brazilian aircraft maker Embraer launched a new hangar Tuesday that will be used for the final assembly of its KC-390 military cargo plane, a major step in its expansion into the defense sector.

“No one can have any doubt that the defense industry is strategic,” said Brazilian President Dilma Rousseff at the launch ceremony. “Many will also agree that it has extraordinary potential for technological development.”

Embraer, the world’s number three commercial plane-maker, has been working to expand its defense arm in recent years.

The company announced Tuesday it had signed a 7.2-billion-real ($3.3-billion, 2.4-billion-euro) contract with the Brazilian air force to sell it 28 KC-390s in the next 10 years to replace its aging fleet of US-built Hercules planes.

The first is due for delivery in late 2016.

“With these 28 planes we are sending a signal so that (other countries) can confidently purchase a Brazilian product,” said Defense Minister Celso Amorim.

“This not only means a major boost for our national defense industry but also fulfils a need for our armed forces.”

Embraer is currently finishing work on a prototype of the new medium-sized plane, which is due to make its first test flight at the end of the year.

The KC-390 has a cargo capacity of 21 tonnes and a maximum cruise speed of 860 kilometers (530 miles) per hour.