Canadian Government hopes that giving a low-interest loan to Air Wisconsin for its April order for Bombardier CRJs would force Brazil back to the negotiating table have proved unfounded. Ottawa has been forced to offer a second below-market-rate loan to persuade Northwest Airlines to buy CRJs instead of Embraer ERJs.
The Air Wisconsin loan was seen as an "exception measure" by Canada to end the long-running battle, as it deliberately violated World Trade Organisation (WTO) subsidy rules. Ottawa says it was matching finance offered by Brazil to force Brasilia to comply with WTO guidelines.
The WTO has ruled the latest revision of Brazil's export finance programme, Proex 3, to be legal provided its use meets conditions. Two previous versions were ruled to be illegal, and in December the WTO authorised Canada to impose trade sanctions on Brazil.
Instead, Ottawa offered finance from the cabinet-controlled Canada Account, saying it was forced to offer a low-interest loan to Northwest because Brazil was offering financing which did not meet the WTO's "clear conditions". Ottawa's loan is for 71% of the $1.7 billion firm order, to be paid over 15 years at 1-2% below the market interest rate.
Source: Flight International
