RIO DE JANEIRO — HBO Brazil will co-produce $2 million series “Carnaval” (Carnival) with “City of God” producer 02 Filmes, thanks to new government incentives that are heating up TV production in Brazil.

Helmer Cao Hamburger will begin lensing the six 52-minute episodes next year. Elena Soarez is working on the script. Story is set during carnival season.

Partner in 02, Andrea Barata Ribeiro will produce, but “City of God” helmer Fernando Meirelles, also an O2 partner, will not be involved in the project.

HBO is funding the series through a local regulation created in 2002 to prompt foreign pay TV programmers to produce locally.

Not unlike a film law that encourages the majors to co-produce local pics, the regulation stipulates that programmers must devote 3% of their revenues to local productions to avoid an 11% revenue tax. Monies go into a fund, and programmers have nine months to select projects and local producing partners. Programmers are free to produce any genre and own the shows’ rights.

“This system is a major boost to the local independent production sector. It is one of the wisest production regulations ever made in Brazil,” said Leonardo Monteiro de Barros, a partner in Conspiracao Filmes.

Conspiracao is producing the $2 million, eight-episode “Mandrake” for HBO under the same system. Jose Henrique Fonseca, Arthur Fontes and Lula Buarque will direct.

According to Vera Zaverucha, assistant to the president of the National Cinema Agency (Ancine), programmers deposited $4.8 million last year in the fund, and $3 million was distributed among 10 projects. Most of these will be in production this year. “Mandrake” will lense in July.

“Based on the results of the initial months of this year, I expect programmers will deposit 21 million reals ($7 million) in 2004,” Zaverucha said.