There's no doubt that incentives introduced in the early '90s sparked a production boom in Brazil that has continued to reverberate. The numbers tell the story: In 2007, local pic releases reached 78, up from just 28 in 2003.

But the inverse proportion of market share earned by local pics has fueled concerns that incentives are not only funneling taxpayers' money away from more important priorities like education and health care, but tend to indulge filmmakers who exhibit little concern for the commercial viability of their work.

Under current provisions, producers and helmers get paid during the production process, regardless of their pics' B.O. performances.

As to whether the film industry can ever be self-sustainable without subsidies, most execs and analysts respond with a flat "no."

"Soft money is a reality in today's world film business," says Conspiracao Filmes' Leonardo Barros. "It will be necessary as long as Hollywood continues to have an 80% market share of the world box

office."

Barros adds the effort should now focus on creating incentives that are refundable and stimulate ticket sales, adding Brazil's regulatory National Cinema Agency (Ancine) is already following this path with the introduction of the Sector Fund.

This new system includes loans and investments in the equity of pics and companies, designed to be refundable and, in some cases, profitable.

Manoel Rangel, president of Ancine, says the Sector Fund will allocate a total investment of $21.8 million in production, distribution and exhibition in 2008. He adds the Sector Fund has an additional budget of $32.9 million for investments this year, but the federal government may decide to cut part or all of this extra money.

Another new incentive plan, Article 3-A, will allow local broadcasters and pay TV programmers to invest part of their tax revenue (due from money remittances abroad) in pics and/or TV shows. Rangel says the system will be operational in the coming months. It is expected to eventually reach a yearly investment of 42 million reais ($25 million).

Two other existing incentive systems have also been designed to stimulate commerce:

Funcine, with a budget of $19 million, offers production, distribution and exhibition coin, and requires a return on its investment.

The Prize for Box Office Performance distributed $ 4.9 million to producers, distribs and exhibs in 2007.