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General Motors do Brasil Ltda is in talks with two government banks for long term loans to finish off its planned three-year, $2.5 billion investment strategy, the company announced Wednesday.

General Motors Co.'s (GM) Brazilian subsidiary said it signed on to a roughly $172 million loan with state-run Rio Grande do Sul Development Bank and is currently in talks with Banco Regional de Desenvolvimento Economico, BRDE, in south Brazil, and the nation's leading development bank, BNDES, to cap off its financing needs.

GM's local chief executive, Jaime Ardilla, announced another $1 billion investment Wendesday. The total completes the planned $2.5 billion announced already this year, and will go to the creation of two new compact and mid-sized vehicles to be built in Rio Grande do Sul state, Brazil's southern-most state.

The total $2.5 billion investment is for a revamp of the assembly lines in Sao Paulo and a redesign and upgrade of 18 Chevrolet models.

Roughly half of the capital needs have come from General Motors do Brasil. None of the financing is coming from U.S. corporate headquarters or private lenders.

GM is the third largest car retailer in Brazil, trailing Volkswagen AG (VLKAY) and Fiat SPA (FIATY). Brazil is General Motors Co.'s third largest market behind the U.S. and China.

The "new" GM counts Brazil among its many overseas subsidiaries post-bankruptcy. The U.S. government owns a 60% stake in the new company because of the $50 billion it invested to keep the company alive.

The Brazilian subsidiary is financially independent from the troubled Detroit auto maker and hasn't tapped corporate headquarters for cash in more than three years, Ardilla said recently.

-By Kenneth Rapoza, Dow Jones Newswires, 5511-2847-4541, kenneth.rapoza@dowjones.com