Fiat is in talks with the government of Brazil's state of Pernambuco to open a second car factory in Brazil.

An anonymous source told Reuters the automaker wants to build the factory in the industrial complex of the port of Suape and a formal announcement about the deal is expected to take place next Tuesday, 14 December, when President Inacio Lula da Silva visits the state.

On the record, Fiat told Reuters: "Fiat and the government of Pernambuco are maintaining negotiations about possible investments in the state," without elaborating.

The report noted the negotiations come as Fiat's Brazilian factory is operating nearly at full capacity to meet booming demand and as other automakers such as Toyota and Hyundai are also planning investments in factories in Brazil.

Fiat's factory in the state of Minas Gerais has capacity of around 800,000 cars per year. Company executives have recently said they could boost sales in Brazil by using idle capacity at the firm's Cordoba, Argentina, plant.

The company recently announced plans to invest R$10bn (US$5.8bn) by 2015 in Brazil, a plan that includes cars, auto parts, and agricultural equipment.

Seventy percent will be invested in cars, with the company expecting in 2011 to unveil 20 new models or upgraded versions of current ones.

In March, Fiat opened a R$1bn ($585m) facility in Brazil to produce agricultural equipment.