MONTREAL — Brazil said Wednesday it has launched a formal complaint to the World Trade Organization over Canadian subsidies to the aerospace industry, hours after the federal government announced $372.5-million in interest-free loans to Bombardier.
The South American government said it has requested consultations with Canada under the WTO dispute settlement system.
"Canadian subsidies artificially affect the international competitiveness of the sector, in a manner inconsistent with Canada's WTO obligations,'' the Brazilian government said in a statement.
A technician walks under the belly of a Bombardier Inc. CS300 passenger jet at the China International Aviation & Aerospace Exhibition in Zhuhai, China, on Tuesday, Nov. 1, 2016. (Photo: Qilai Shen/Bloomberg via Getty Images)
Brazil said Bombardier received at least US$2.5 billion in government support last year and that additional contributions may hurt the country's interests by further distorting the aerospace industry.
Last year, Bombardier received a US$1-billion investment for the CSeries passenger jet program from the Quebec government in exchange for a 49.5-per-cent stake. The company also sold a 30 per cent stake in its railway division to pension fund manager Caisse de depot for US$1.5 billion.
On Tuesday evening, Ottawa announced it will provide $372.5 million in new loans to Bombardier to paid in installments over four years to support the Global 7000 and CSeries aircraft projects.
Sao Paolo-based Embraer, a fierce rival of Bombardier's, said it supports its government's complaint. CEO Paulo Cesar Silva said the subsidies given to Bombardier have helped the development and survival of the CSeries and allowed the Montreal company to sell the plane at artificially low prices.
"It is essential to restore a level playing field to the commercial aircraft market and ensure that competition is between companies, not governments,'' he said in a separate news release.
Brazil, which had threatened in December to launch a trade complaint, said the move will give it access to additional information about support to Bombardier.
The federal government and Bombardier couldn't immediately be reached for comment.
But Canadian International Trade Minister Francois-Philippe Champagne said Ottawa is prepared to defend financial support like the one awarded Tuesday.
"I am very much prepared to fight for what we are doing,'' he said Tuesday, adding that all countries, including Brazil, help their aerospace sectors.
Bombardier CEO Alain Bellemare was similarly defiant Tuesday.
"This is the best plane in its class, so people are finding ways to come after us,'' he said.
The Brazilian government said the timing and location of talks with Canada should be agreed upon by the two countries in the coming weeks.