The new factory will be located in the industrial complex in Suape, a port in the northeastern state of Pernambuco, Brazilian President Luiz Inacio Lula da Silva and Fiat executive Cledorvino Bellini said Tuesday at a ceremony in Salgueiro, Pernambuco.
The facility will employ up to 3,500 people to turn out 200,000 vehicles per year, according to the state government, which said Fiat's "strategic investment" will also spur industrialisation in Pernambuco.
Besides the assembly plant, Fiat plans a research and development center at the site and may also establish a training facility.
"We are living today something historic for Brazil and for the northeast," said Lula, who was born in impoverished Pernambuco, while Bellini said the plant in Suape is part of Fiat's plan to invest $6 billion in its Brazilian operations between now and 2014.
The factory's output is intended both for the Brazilian market and for export to other countries in Latin America, according to a statement from Fiat, which already produces cars in the southeastern Brazilian state of Minas Gerais.