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Brazil Province Halts Ford, GM Aid

March 22, 1999

SAO PAULO, Brazil (AP) _ A southern Brazilian province is suspending more than $250 million in fiscal incentives to General Motors Corp. and Ford Motor Corp., saying the money is needed for infrastructure projects.

The southern state of Rio Grande do Sul on Monday said it would suspend disbursement of $257 million in investments, loans and other incentives originally earmarked for the Brazilian subsidiaries of the two U.S. automakers.

``The money has to be used where it is needed most,″ Marcelo Lucca of the State’s Industrial Development Department said. ``It has to be used for education, health, basic sanitation and to pay civil servants.″

The money is part of a $470 million package put together in 1997 by the state’s previous government to lure the two automakers to the state.

``General Motors expects the state of Rio Grande do Sul to meet all of its contractual obligations,″ GM’s corporate director Jose Carlos Pinheiro Neto said in a statement. Ford said it requested a meeting with State Governor Olivio Dutra, but would not comment on the matter until after that.

Lucca said state officials were negotiating with the two automakers ``to seek ways we can honor Rio Grande do Sul’s commitments without dipping into the state’s coffers. There is simply not enough money.″

``We don’t want to see General Motors or Ford leave the state,″ Lucca said. ``The money has to come from somewhere else, like international lending organizations.″

The GM plant in Rio Grande do Sul is scheduled to begin operating at the end of the year with an annual production capacity of 120,000 vehicles. The Ford plant is also expected to begin making 120,000 cars a year as of 2001.

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