The government of Brazil on Wednesday launched a formal complaint against Canada over aerospace sector subsidies, just a day after the Canadian government said it would make interest-free loans of $372.5 million to Bombardier.
"In Brazil's understanding, Canadian subsidies artificially affect the international competitiveness of the sector, in a manner incompatible with the Canada's obligations to the WTO," Brazil's Ministry of Foreign Affairs said in a statement. "New contributions have been announced, which may further deepen distortions in the aircraft sector, to the detriment of Brazilian interests."
- Federal government to give $372.5M in loans to Bombardier
- Federal loan to Bombardier not enough, say critics
Brazil charged that in 2016 Bombardier received at least $2.5 billion US in government support. The government of Quebec has put $1 billion US into the company's CSeries jet program, while Caisse de dépôt et placement du Québec, the largest pension fund in the province, invested $1.5 billion US in the company's rail business.
The federal loans announced Tuesday would see the bulk of the money go to back Bombardier's Global 7000 business aircraft program, with the remainder going to the CSeries passenger jet.
Bombardier spokesperson Simon Letendre said in statement emailed to CBC News that the company is "very confident that all forms of support provided to Bombardier...are fully compliant with Canada's international trade obligations."
Brazil said it has submitted a request for consultations with Canada under the World Trade Organization's dispute settlement system, and says the two countries should agree on the timing and location of talks within the coming weeks.
The two countries have up to 60 days to try to settle the squabble before a panel of experts is created to help the WTO make a ruling, Reuters reported.
Paulo Cesar Silva, the CEO of Bombardier's Brazilian-based rival Embraer SA, said subsidies to the Quebec company "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."
Canadian International Trade Minister Francois-Philippe Champagne pointed out on Tuesday that all countries, including Brazil, back their domestic aerospace industries, adding that Canada was ready to defend its financial assistance to Bombardier.
Alain Bellemare, the CEO of Bombardier, said Tuesday that the financial backing from the governments of Canada and Quebec is WTO compliant.
"This is the best plane in its class, so people are finding ways to come after us," Bellemare said.
Canada and Brazil have had a long-running dispute over government backing of Bombardier and Embraer, with both sides filing complaints against the other.
Karl Moore, an associate professor at McGill University's Desautels Faculty of Management, said Bombardier is a global player with competitors, such as Boeing, Embraer and Airbus, that get government support.
"If you want to play in the big leagues in this industry — different than many other industries — you need government support," Moore said. "The Canadian government, as well as the the Quebec government, have stepped up to the plate and that's what's necessary and appropriate in this particular industry."