Business

Bombardier investments break international trade rules, says Brazil

Brazil vowed to launch a trade challenge against Canada before the World Trade Organization over financial support for Bombardier, a move the Montreal-based company said was without merit.

Brazil says financial support for the aerospace giant has affected competitive market conditions

Brazil is complaining the $2.5 billion US in investments in Bombardier this year to help it survive are not compliant with international trade rules. (Ryan Remiorz/The Canadian Press)

Brazil vowed on Monday to launch a trade challenge against Canada before the World Trade Organization over financial support for Bombardier, a move the Montreal-based company said was without merit.

"We are very confident that all investments associated with Bombardier are fully compliant with all WTO rules and regulations," Olivier Marcil, vice-president of external relations, said in an email.

Bombardier responded after Brazil's Foreign Ministry issued a statement saying it will proceed with a WTO challenge, alleging that financial support for the aerospace giant has affected competitive market conditions in a way that is incompatible with Canada's commitments to the WTO.

Brazil is complaining about $2.5 billion US in investments in Bombardier this year to help it survive.

Investments from Quebec, Ottawa

Bombardier received a $1 billion US investment in the CSeries passenger jet from the Quebec government in exchange for a 49.5-per-cent stake in the plane.

Late last year, the company sold a 30 per cent stake in its railway division to pension fund manager the Caisse de depot for $1.5 billion US.

Ottawa is also looking to invest $1 billion US, which Brazil alleges is designed to "ensure the viability of the new CSeries aircraft and its placing on the market at artificially reduced prices."

Prime Minister Justin Trudeau said he hopes to reach a deal with Bombardier before next year's federal budget, adding that all countries, including Brazil, help their aerospace industries.

"There are rules around what we can do and what we can't do, and we are making sure we comply by the rules," he said.

WTO asked to 'level playing field'

Embraer, Bombardier's Brazilian-based rival, said it welcomes the decision to launch a WTO challenge against Canada.

"The formal dispute settlement process at the WTO is the only means to ensure a level playing field in the market," CEO Paulo Cesar Silva said in a news release.

"Canada's subsidies have caused significant market distortions and are not in compliance with international trade rules."

The Caisse said its investment was made independent of the Quebec government, based on commercial principles.

The CSeries entered commercial service this year after years of delays and cost overruns.

now