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The plant will start operations in 2015 and is expected to produce 120,000 vehicles a year and employ 2,000 workers.
Honda posted a 5.1 per cent gain in operating profit to $1.90 billion in the June quarter.
Demand in the United States and Asia helped offset weak domestic sales.
Brazil is the world’s fourth-biggest car market.
The new plant will be located in Itirapina city close to Sao Paulo and looks set to double Honda’s annual production in the Latin American country to 240,000 vehicles.
In 2012, the Brazilian government announced tax breaks for carmakers to increase investment in the country.
Demand in the automobile market is expected to grow in Brazil as it prepares to host the World Cup in 2014 and the Olympic Games in 2016.
Honda Motor Co Ltd develops, manufactures and distributes motorcycles, automobiles and power products.