While the global economic crisis drains credit and private equity from film and presales markets elsewhere, a wave of optimism has swept Brazil’s film industry, with some forecasting local production could make it through the downturn virtually unharmed.

The Brazilian sector boasts the deployment of a new incentive, the so-called Sector Fund. Though approved while the economy was still growing, the plan is now being launched at a most opportune time, creating a relatively safe haven for international companies and filmmakers who, by going into business with local producers, gain access to the enticing plan.

As Andrea Barata Ribeiro, exec director of helmer Fernando Meirelles’ indie production company O2 Filmes, puts it, “The Sector Fund is irrigating the market when it is most needed, as the economic crisis will apparently affect investments through the pre-existing mechanisms.”

The current incentive program was introduced in the early 1990s as a response to the closure of state-owned production and distribution company Embrafilme and the collapse of the local production sector. The gradual expansion and streamlining of incentives over the following years stimulated growth in the production sector, which increased from virtually no pics in 1991 and ’92 to more than 70 features per year.

But those incentives (which yield tax deductions on profits to local companies) have shrunk as profits dipped during the crisis, leaving the Sector Fund to compensate for some of the negative impact on the economy.

According to Manoel Rangel, president of Brazil’s Cinema Agency (Ancine), the Sector Fund will flood the market this year with 74 million reais ($34 million), of which $27.6 million is earmarked for the film sector: $13.8 million for pic production, $9.2 million for funding indie distributors of local pics and $4.6 million for P&A costs — significant money considering most local feature budgets range from $1 million to $5 million. The remaining $6.4 million will benefit indie TV production companies.

“In the upcoming years, the Sector Fund will contribute to the industry with an annual average of 100 million reais ($46 million),” Rangel explains. “We will use part of this money to expand and (make the) upgrade to digital for the exhibition sector serving the low- and middle-income population. We are also studying a special credit line to finance international co-productions.”

Helmer Jose Padilha, who directed 2008 Golden Bear winner “Elite Squad,” welcomes the Sector Fund but warns that the leading production companies in Brazil will likely avoid tapping coin from the new system, since it gives the government equity in the film and could therefore cut into profits. “I expect established production companies to seek first the traditional nonrefundable incentives,” he predicts.

Brave new world

Such economic advantages boost Brazil’s attractiveness abroad. The incentives, new production agreements between Brazil and a number of countries, and the work of government-backed Cinema do Brasil (which promotes local pics abroad and helps Brazilian producers find foreign partners) have already contributed to the expansion of international co-productions.

“News of Brazil’s film incentive system has reached the world. In this crisis period, Brazil became an alternative for the production of films,” says Sergio Sa Leitao, president of RioFilme, a city government-owned company focused on stimulating Rio’s film industry.

Recent international co-productions to benefit from the program include “Elite Squad” (a Brazilian production with U.S. and Argentine investment), Fernando Meirelles’ “Blindness” (a Canada/Brazil/Japan co-production) and Marco Bechis’ “Birdwatchers” (Italy/Brazil).

In a typical international co-production, a Brazilian shingle teams up with one or more foreign companies, and they apply for local soft coin. According to Ancine, there are 41 international co-productions enrolled with the agency to tap local incentives, including Henrique Goldman’s “Jean Charles,” about the Brazilian national who was shot by London police in the wake of the 2005 subway bombings.

Top local producer Conspiracao Filmes is raising incentive coin to participate as minority equity holder in international co-productions of English- and Spanish-language pics, opening an office in Germany last year. The first such project, Andrucha Waddington’s “Lope,” begins lensing this month (a co-production with Spain’s Antena 3, Ikiru Films and El Toro Films).

Conspiracao has expressed interest in co-producing a future Woody Allen film that would feature Rio as a setting, much as the filmmaker used Barcelona in “Vicky Cristina Barcelona.” According to Sa Leitao, RioFilme is also negotiating a potential investment in the project.

In some cases, international co-productions don’t tap into Brazilian incentives at all, as in the deal between Universal Pictures and O2 Filmes that produced Heitor Dhalia’s “Adrift.” However, many other international production companies and filmmakers have specifically chosen to establish themselves in Brazil to benefit from the system.

For example, Costa Films, a company owned by Eduardo Costantini (son of the Argentine millionaire, arts patron and entrepreneur of the same name), associated itself with emerging Brazilian shingle Bananeira Filmes, which produced “The Dead Girl’s Feast” and “December.” Deal gives Costantini a foot in Brazil, whose incentive program he calls “an example for the regional and world industry.”

Helmer Stephen Hopkins and U.S. producer Brent Travers teamed up with Clear Channel Entertainment Brazil’s former managing director Lawrence Magrath to open GreenGo Prods.

Partnering with local Total Filmes, Hopkins plans to direct English-language romantic comedy “Chasing Bohemia” in Rio by the end of the year. GreenGo also is negotiating a U.S. or U.K. TV remake of Brazil’s “Estomago: A Gastronomic Story.”