General Motors plans to invest $US240 million to expand a plant in southern Brazil where it will produce a new model, with Brazil winning out over possible projects in China and Mexico, a spokesman for GM’s Brazilian unit told Reuters.

The unnamed official reportedly said the investment would increase production at the Gravatai plant, in the southern state of Rio Grande do Sul, to 210,000 [Opel Corsa-based] Celta model cars from the current 120,000 by 2006.

Reuters said news of the investment could represent a new lease of life for Brazil’s automotive sector after high interest rates and an economic slump last year led to layoffs and a 3.4% drop in annual sales to their lowest level since 1999.

The spokesman told the news agency that the announcement of the investment will be made officially by GM chairman and chief executive officer Rick Wagoner on February 5.

Reuters noted that GM has been operating in Brazil for 79 years, has three plants in the country and sold 333,420 vehicles in Brazil last year, a 1.5% drop compared with 2002. GM was second in Brazilian vehicle sales behind Fiat, the report added.