February 1, 2019 / 12:21 PM / 5 months ago

GM and Sao Paulo in talks to invest $2.5 billion for tax breaks: report

FILE PHOTO - The GM logo is seen at the General Motors plant in Sao Jose dos Campos, Brazil, January 22, 2019. REUTERS/Roosevelt Cassio

SAO PAULO (Reuters) - Automaker General Motors Co is in talks to invest 9 billion reais ($2.5 billion) in the Brazilian state of Sao Paulo over the next three years in return for tax incentives, newspaper Valor Economico reported on Friday.

GM has in recent weeks warned its employees in Brazil that “sacrifices” would be necessary for the company to return to profit in the country, raising concerns about layoffs or shuttered assembly lines. Last month, the carmaker told public officials and unions it was in talks with Sao Paulo state about tax incentives.

Valor reported that GM would invest in its product line until 2022, and then the following year, the company would start to enjoy tax rebates. Valor, which also reported that GM’s losses in Brazil last year totaled 1 billion reais despite being the country’s market leader, did not specify the exact amount GM would expect to generate in tax incentives.

GM declined to comment.

Last year, Brazil’s government granted carmakers a 15-year package of tax breaks – extending subsidies for an industry that has struggled to compete directly with production elsewhere despite high import barriers.

Economy Minister Paulo Guedes, who took office as part of a new business-friendly federal government this month, has said Brazil cannot afford to keep subsidizing powerful industries, arguing that an end to protectionist policies will make the economy more competitive.

($1 = 3.6503 reais)

Reporting by Tatiana Bautzer; editing by David Evans and Chizu Nomiyama

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