Ford Motor Co plans to invest 4 billion reais ($2.26 billion) in Brazil to boost output as record-low borrowing costs and a recovery in Latin America's largest economy stoke demand for new cars, Mark Fields, the company's president for the Americas, said on Friday.

Most of the funds, 2.8 billion reais, will go to two plants in Ceara and Bahia states in northeastern Brazil, said Marcos de Oliveira, chief executive for Brazil and the Mercosur region. Ford expects the investments to create 1,000 jobs and increase output at plants in northeastern Brazil to 300,000 cars from 250,000 now, he added.

As part of the investment plan, unveiled in a ceremony with President Luiz Inacio Lula da Silva, Brazil's government will extend state and federal tax breaks to Ford.

Ford is the fourth-largest automaker by sales in Brazil and ranks second in the United States, behind General Motors Co.

Brazil is a major market for global automakers such as Italy's Fiat, Germany's Volkswagen AG, U.S.-based GM and Ford. Asian and French manufacturers are also relying increasingly on Brazil to offset slumping sales at home.

Brazil has remained a bright spot for global automakers, which are suffering much more in core markets like the United States and Europe. Car sales in the country are forecast to rise to a record in 2009, helped by government tax incentives that helped lower car prices and lure consumers to showrooms.

The tax breaks are set to expire at the end of December, but Brazil's automobile dealers' association expects sales to grow another 9 percent in 2010 as Latin America's largest economy expands 5 percent next year.

($1=1.737 reais)
(Reporting by Peter Murphy, Writing by Elzio Barreto, editing
by Matthew Lewis)