Government ministers meet in attempt to settle long-running dispute over sales subsidies to Embraer and Bombardier

Brazilian and Canadian Government ministers are due to meet this week in Brazil to discuss their acrimonious five-year dispute over sales subsidies given to Embraer and Bombardier.

The move comes as Brazil threatens to seek $4 billion in compensation from Canada unless it complies with the latest World Trade Organisation (WTO) ruling prohibiting $1 billion in financing extended earlier this year to Air Wisconsin to purchase Bombardier regional jets.

Canadian trade minister Pierre Pettigrew is due to meet Brazilian foreign minister Celso Lafer on 22 November.

The renewal of negotiations follows an interim ruling that Canada broke WTO rules in 1996 by supporting a CRJ200 sale to Comair with an $880 million subsidy.

Matters came to a head earlier this year when the Canadian Government extended $1 billion financing to Air Wisconsin to place an order for 75 CRJ200s to counter what Bombardier claims was a similar offer from Brazil. Canada has refused to comment on the WTO decision or whether it will appeal, until the final ruling is published at the end of the month.

"If Canada does not withdraw, Brazil is very likely to ask for compensation from Canada of $4 billion," says Mauricio Botelho, Embraer chief executive.

Brazil also faces C$2.4 billion ($1.5 billion) in WTO-approved sanctions levied by Canada over earlier illegal subsidies on the sale of Embraer ERJ-145 regional jets.

Ottawa has so far not implemented the sanctions, preferring instead to get Brazil back to the negotiating table.

Embraer managed a net profit of R252 million ($99 million), up 34% from last year, from $775 million sales, thanks to export growth driven by a weak Brazilian real. But the company's cash reserves were depleted by aircraft financing, intended to support customers after 11 September, and only a third of its $736 million receivables are due in cash.

Source: Flight International