Despite top talent, Mexico lags in production incentives

Brazil and Argentina have gone to great lengths to ensure homegrown pics get made and receive fair play on local screens. In recent years, Chile and Colombia have weighed in with some tax breaks and incentives of their own. Ironically, Mexico, which has spawned the likes of acclaimed helmers Alfonso Cuaron, Alejandro Gonzalez Inarritu and Guillermo del Toro, has been the slowest to catch up.

Witness the following perks for Argentine filmmakers:

  • exemptions from duties for celluloid print imports;

  • screen quotas for local pics, allowing for longer runs at peak moviegoing hours;

  • state subsidies;

  • soft loans;

  • state-backed international promotion.

As a result of these measures, some 70 local films screened nationwide in Argentina last year, up from 44 in 2002 and 53 in 2003.

Brazil

Brazil’s film industry, long the envy of its neighbors in the region, has been at the vanguard of state-backed support. Two laws, the Audiovisual and Rouanet, have nurtured its pic business since the early ’90s. The laws have contributed to a sharp increase in the market share of local pics to 21% in 2003 and 14% in 2004 from nearly zilch in 1992. Total coin raised between 1995 and 2003 amounts to 642 million reals (roughly $220 million).

Incentives include:

  • Giving Hollywood studios the option to invest in local pics or pay an additional 11% tax on the revenues they take out of the country;

  • Allowing non-film companies to invest part of their income tax on local films;

  • Screen quotas obliging single-screen theaters to play at least two Brazilian pics for a minimum of 35 days. Quotas for multiplexes operate on a sliding scale. For instance, 10-screen plexes must screen at least 10 local pics for a total of at least 455 days this year.

The first incentive has prompted studios to invest in local cinema. Columbia TriStar 2003 release “Carandiru” by Hector Babenco scored the highest B.O. in Brazil since the early ’90s, raking in $10.2 million. Another Columbia-backed pic, Sandra Werneck and Walter Carvalho’s “Cazuza” was No. 1 last year.

Colombia, Chile

Thanks to a new law in 2003 that set up a film fund sourced from ticket sales as well as tax incentives for investors in film production, Colombia will release some 18 local pics in 2005, a dramatic spike from its five-film-per-annum average in recent years. Chile saw film production quadruple after similar moves by its government.

Mexico

Just last November, the Mexican Congress passed an incentive aimed at encouraging non-pro investment in local films. The incentive allows individuals and entities to deduct the equivalent value of their investment in a Mexican film from their federal income tax. In other words, someone who invests $5,000 in a movie can deduct $5,000 from their income tax bill. This deduction has a cap at 3% of the total tax bill, and is thus most interesting to big corporations, for whom 3% can be quite a bit of money. The incentive has a nationwide annual cap of 500 million pesos ($45 million).

Despite its proximity to the U.S., and thus theoretically direct competition with Canada for runaway production, Mexico has lagged far behind other countries in offering tax breaks for filmmakers. Indeed, while Canada offered substantial tax rebates and refunds to producers, Mexico offered nothing but an over-complicated permitting and importation process.

In 2003, the first real film-related fiscal incentive finally went into effect in Mexico. It gives foreign productions a full rebate on the country’s 15% value added tax (VAT). The rebate has been little publicized, however, and to date, only one production has taken advantage, a $3 million Spanish-language Miramax-backed pic called “Curandero.” According to producers, the pic has recouped virtually all it spent on VAT taxes — which are applied to nearly all goods and services — while shooting in Mexico last summer.

Given the novelty of these incentives, information about who is taking advantage of these tax breaks is hard to come by.

Trouble afoot

While the funding and new measures have helped spur a surge in homegrown film production and exhibition across the region, all is not entirely well.

Argentina’s Lita Stantic, producer of Adrian Caetano’s “Un oso rojo” and Lucrecia Martel’s “La Nina Santa” among others, says the system needs strict control. There have been complaints that exhibitors are not adhering to the screen quotas.

Stantic is considering assigning some of her staff to oversee the guarantees.

While the system of state subsidies in Argentina has fueled a production boom, it has a ceiling. The amount of funding fluctuates with ticket sales and other economic factors. When ticket sales are up, more money is available for production.

To go beyond 50-100 productions a year, private financing is essential, says Jose Luis Castineira de Dios, a professor at an art and film university in Buenos Aires.

But not everyone is happy with the film subsidies. In Brazil, critics say taxpayers’ money would be better invested in public services such as education and health. Others gripe that studios, while major backers of local films, are more concerned with their bottom lines than artistic merit. And some non-pro companies, seeing few returns on their investments, have cut back on their support for local cinema.

(Charles Newbery in Argentina, Marcelo Cajueiro in Brazil and Ken Bensinger in Mexico contributed to this report.)

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