February 8, 2017 / 1:56 PM / in a year

Brazil challenges Canada at WTO over Bombardier loans

BRASILIA/SAO PAULO, Feb 8 (Reuters) - Brazil opened a formal complaint against Canada at the World Trade Organization (WTO) on Wednesday, accusing the country of distorting the global aerospace industry with subsidies for planemaker Bombardier Inc .

Brazil has threatened for months to open the WTO process, arguing that support for Bombardier’s new CSeries was undercutting the market for commercial jets made by Brazilian rival Embraer SA.

The latest support for Bombardier came on Tuesday in the form of interest-free loans worth C$372.5 million ($283 million) from the Canadian government. Canadian Trade Minister Francois-Philippe Champagne said the loans complied with WTO rules and the government would defend itself against litigation.

Brazil’s Foreign Ministry cited news of additional subsidies for Bombardier in a statement on Wednesday, criticizing “at least $2.5 billion in government support” for the Canadian planemaker.

“It is the understanding of Brazil that these Canadian subsidies artificially affect international competitiveness,” the Brazilian ministry said in a statement. “New support that has been announced could further deepen the distortions in the aeronautical sector in detriment to Brazilian interests.”

The province of Quebec, where Bombardier is based, injected $1 billion into the company’s CSeries program. The province’s largest pension fund invested $1.5 billion in the company’s rail unit last year.

Embraer Chief Executive Paulo Cesar Silva said in a statement that the ongoing subsidies “have not only been fundamental in the development and survival of the CSeries program, but have also allowed Bombardier to offer its aircraft at artificially low prices.”

Bombardier representatives did not immediately respond to a request for comment.

Both countries now have up to 60 days to try to settle the dispute before the creation of a panel of experts to help the WTO make a ruling in the case.

The latest WTO standoff follows nearly a decade of sparring between Brazil and Canada over state financing for Embraer and Bombardier’s exports.

However, the current dispute is closer in substance to the clash between the United States and the European Union over allegedly unfair government loans to Boeing Co and Airbus Group SE.

The WTO found government loans from EU member states to support Airbus aircraft development constituted unfair subsidies, prompting the threat of U.S. sanctions. The case has still not completed a lengthy WTO legal and compliance process.

$1 = C$1.3182 Reporting by Brad Haynes and Alonso Soto; Editing by Daniel Flynn and Paul Simao

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