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Quebec sees no trade dispute risk around Bombardier investment

A plane flies over a Bombardier plant in Montreal, January 21, 2014. REUTERS/Christinne Muschi

By Euan Rocha

TORONTO (Reuters) - Quebec is sure that its $1 billion lifeline for Bombardier Inc (BBDb.TO) will not result in any trade disputes triggered by concerns from the train and plane maker's rivals, the Canadian province's finance minister said on Monday.

"We have structured this as a separate company and a limited partnership between the government and Bombardier," said Quebec Finance Minister Carlos Leitão, while speaking with media on the sidelines of the P3 2015 investment conference in Toronto.

"This is well within permitted standards because it is not a subsidy," Leitão said. "It is an equity participation."

Last week, the Quebec government outlined plans to invest $1 billion in Bombardier's CSeries jets in return for a nearly 50 percent stake in the struggling project.

Some fear that Quebec's support may raise an outcry from Brazil's Embraer (EMBR3.SA), which has lodged complaints in the past about government backing for rival Bombardier and the CSeries.

Quebec's aerospace industry is closely tied to the fortunes of Bombardier, whose 18,000-strong workforce in the province is largely focused on the sector. The company's presence also helps support many smaller vendors and suppliers in the province.

The province estimates that Bombardier accounts for roughly 40,000 direct and indirect jobs there, with average salaries almost double the local average.

Leitão declined to weigh in on how any federal investment in the company would be structured. Quebec has indicated that it intends to ask the incoming Liberal federal government to match its own $1 billion investment.

"It would be up to the federal government and the company to decide," said Leitão. "The way we've structured it, I think, makes a lot of sense."

Leitão said he did not think Bombardier had formally approached the federal government for this money.

The company has stated that it is still exploring a range of options, including the sale of a minority stake in its rail arm.

Bombardier's narrow-body CSeries line of aircraft, set to compete against Boeing Co's (BA.N) 737 planes and Airbus Group's (AIR.PA) A319 and A320 jets, has been delayed for years and is billions of dollars over budget. Struggles with the CSeries have left Bombardier saddled with more than $9 billion in debt.

(Reporting by Euan Rocha; Editing by Jeffrey Hodgson and Lisa Von Ahn)