Latin American filmmaking takes global biz by storm.

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MEXICO CITY -- With all the buzz surrounding Latin American cinema these days, the search is heating up for fresh talent emerging from Mexico, Argentina and Brazil, the territory's top three markets. Yet despite the world's growing appetite for Latin American flavor, cash-strapped filmmakers and producers continue to struggle at home. Hardly surprising then that many of the region's promising directors have turned to prestigious international festivals like Cannes, where their vibrant voices have found receptive audiences.

Over the years, the Festival de Cannes has served as a key platform for up-and-coming Latin American talent. Mexican directors Guillermo del Toro ("Pan's Labyrinth") and Alejandro Gonzalez Inarritu ("Babel") saw their careers take off after presenting their first features on the Croisette.

This year, Latin America's strong presence stands out in the International Critics' Week sidebar, which features numerous entries and special screenings from Mexico, Argentina and Brazil. Actor-turned-director Gael Garcia Bernal, the sidebar's ambassador, will be presenting his feature debut, "Deficit." So far, the Latin American crop of films has generated unprecedented enthusiasm.

"This year, our favorite films were very, very Latin," says Critics Week director Jean-Christophe Berjon. "They have a certain freshness to them, a liveliness. When we all got together, everyone had about one or two Latin films they loved. It was rather exceptional."

As for the official selection, Mexican helmer Carlos Reygadas will vie for the Palme d'Or with his latest film, the Mennonite love story "Silent Light."

No one doubts that Mexico, Brazil and Argentina are producing impressive talent -- after all, the Cannes' selections prove that the nations' top filmmakers can compete on an international level.

Even more impressive, they have emerged from countries where Hollywood fare dominates, where local producers must battle the majors for screen time, and where financing is hard to come by. Given the difficult market conditions, the greatest fear is that too many voices are going unheard.

The fact remains that Latin America's production output has increased significantly in recent years, thanks in large part to government funding. Producers in Mexico, Argentina and Brazil rely heavily on state financing. Without government backing, says one industry source, very few projects would get made.

The private sector also is showing growing interest in domestic production. As the Latin American cinema craze takes off, more local shingles are cropping up throughout the region, while an increasing number of foreign producers -- including divisions of major Hollywood studios -- are becoming more involved in production.

Unfortunately, Mexican, Argentine and Brazilian production companies find it extremely difficult to recoup their investments at the boxoffice, and since domestic product captures a small market share, it's not easy to stay afloat. Many producers in Mexico acknowledge that if their film doesn't travel abroad, the best they can hope for is a break-even scenario.

An obvious target, particularly for Spanish-speaking Mexico and Argentina, is the fast-growing U.S. Latino market. Yet with the exception of some hits, like the Lionsgate releases of "La Mujer de mi Hermano" and "Amores Perros," reaching Hispanic moviegoers has proved more difficult than it would seem.

The following offers a closer look at what's happening in each market.


"Blue Eyelids"

MEXICO

Given the numerous accolades bestowed upon Mexican talent this awards season, the question many people are asking these days is whether Mexico's long-neglected film industry has fully recovered. While there are a number of positive signs, those in the know aren't doing a hat dance just yet. In fact, many critics see the multiple prizes garnered at the Oscar, BAFTA and Goya ceremonies as individual accomplishments, dismissing the notion that Mexico now has a healthy film industry.

As "Pan's Labyrinth" director del Toro puts it: "It's ridiculously difficult (to make a film in Mexico)." Del Toro's close friend, "Children of Men" helmer Alfonso Cuaron, says it would be a stretch to say Mexico has a film industry since so few directors can actually make a living off filmmaking.

For many years, the biggest challenge facing the Mexican film industry was production, or rather the lack thereof. In 2002, Mexico put out a mere 14 features. Yet production volume has increased: Last year, the nation produced 64 pictures.

Now, the major obstacle is distribution. Despite the rise in production, only 33 films had commercial releases last year, according to state-run financing entity Imcine.

Simply put, most domestic pictures find it awfully difficult to compete in a market where Hollywood fare reigns supreme. Mexican movies took in only 4.7% of total boxoffice receipts last year.

Of those films fortunate enough to land distribution deals, it's make or break at the boxoffice. Alejandro Ramirez, head of Mexico's largest theater chain, Cinepolis, revealed in a recent report that about 85% of a film's total revenue is recouped at the boxoffice. In other words, if a film bombs in Mexican theaters, the windows to recoup investments are considerably reduced when it goes to home video and television.

"In other countries, for example in the United States, the distribution windows are much more equitable," says Marina Stavenhagen, newly appointed director at Imcine. "In Mexico, the television broadcasters pay next to nothing for films."

Additionally, Mexico's rampant piracy takes a huge bite out of home video sales.

Making matters even more difficult, producers here usually get about a 13% take on boxoffice receipts, compared with 51% for exhibitors and 21% for distributors after they invest in promotion and advertising. The remaining 15% goes to taxes, according to a breakdown provided by Imcine.

"With few exceptions, most producers here don't recoup their investments," Stavenhagen says.

The good news is that Mexico recently enacted a law that allows producers to redirect part of their income tax payments into film production. Imcine says the new tax incentive will significantly boost production volume, perhaps to about 80 features this year.

More important, it will open doors for Mexico's new generation of filmmakers. Del Toro says the biggest tragedy of contemporary Mexican cinema "is all the voices that go unheard."

Among those who will certainly be heard on the Croisette this year is Carlos Reygadas, whose latest film "Silent Light" will be competing for the Palme d'Or. Reygadas, who has been a Cannes darling since his first feature "Japan" won special mention for the Golden Camera in 2002, has had much more success in Europe than in Mexico. In the International Critics Week main lineup, Cannes officials selected Ernesto Contreras' dark comedy "Blue Eyelids." Winner of best Ibero-American picture at the recent Guadalajara Film Festival, "Eyelids" tells a rather twisted love story that develops between two strangers.

"What is amazing is the new generation is totally fearless," says Cuaron. "The transition is already happening and there is going to be a boom of young Mexican filmmakers."

After Cuaron saw Fernando Eimbcke's feature debut "Duck Season" at Cannes in 2004, he was so impressed that he decided to board the film as producer. He later helped line up a distribution deal in the U.S. with Warner Independent Pictures.

Longtime friends Cuaron, del Toro and Inarritu, who spend most of their time living and working abroad, recently visited Mexico to demand more support for the film industry. During their stay, they met with President Felipe Calderon, lawmakers, exhibitors and television network executives.

They urged Congress to provide more legislative support for the industry to level the playing field for local producers. They also recommended that Mexico's powerful television duopoly, Televisa and TV Azteca, should be obligated to take an active role in film production and distribution, as some networks do in Europe.

Their visit had an immediate impact, drawing the attention of national and foreign media. The important thing now, says Imcine's Stavenhagen, is to follow through on their proposals. "They (the directors) did what that had to do, now the ball is on our court."


"XXY"

ARGENTINA

Filmmakers in Argentina know a thing or two about perseverance. In 2002, a crippling economic crisis nearly brought film production to a standstill. In the midst of the economic collapse, the government was forced to freeze bank accounts, drawing the ire of many people. Needless to say, at a time when everything was spiraling out of control, the beleaguered film industry took a back seat to the larger issues at hand.

The Argentine film industry has since recovered. Last year, Argentina released 74 features, making it one of Latin America's top nations in terms of production volume.

Yet for many filmmakers, the struggle continues.

"Things are much worse than they seem," says director-producer Daniel Burman. "There's still high inflation, which implies extraordinary costs."

Coming from Burman, one of the nation's top helmers, that certainly means something. Burman has directed several award-winning pictures, including "Lost Embrace" and "Family Law," which IFC First Take picked up last year for U.S. distribution. He was also co-producer on Walter Salles' biopic "The Motorcycle Diaries."

Burman is one of numerous contemporary Argentine filmmakers showing tremendous talent. Another rising star was Fabian Bielinsky, director of "The Aura" and "Nine Queens," but Bielinsky's last year died of a heart attack.

Other notable figures include Juan Jose Campanella, who helmed the Oscar-nominated comedy "Son of the Bride," and Carlos Sorin, who gained fame for his popular minimalist tales like "El Perro" and "Minimal Stories."

Industry insiders say it is perplexing that Argentine cinema has such strong international appeal while it fails to draw large audiences at home. Film critic Julia Montesoro points out that the boxoffice situation has gradually improved over the years, yet it hardly paints a rosy picture for domestic releases. Locally produced films cornered an estimated 10% market share last year, but Hollywood fare raked in about 80% of the nation's boxoffice receipts.

"Argentina's international presence is very important," she says, "but the most fundamental thing is conquering the internal market."

Montesoro believes Argentine cinema is undergoing a transformation of sorts as it shifts away from minimalist storytelling and seeks to produce more commercially viable movies. In many ways, the minimalist approach of working with low budgets and using non-actors makes sense in a nation where financing is so scarce. Yet Montesoro says audiences want to see more diversity.

Burman agrees, saying very few films are produced with midrange budgets.

Argentina has several films that will participate at Cannes this year. Ana Katz's "La Novia Errante" was added to the Un Certain Regard sidebar, and the Argentina-France-Spain co-production "XXY" is one of seven feature films included in the International Critics' Week sidebar. "XXY" director Lucia Puenzo is the daughter of celebrated filmmaker Luis Puenzo, whose drama "La Historia Official" won an Oscar for best foreign language film in 1986. Critics' Week also will have a special screening of Pablo Fendrik's "El Asaltante."

Jorge Alvarez, president of Argentina's state-run national film institute, says the agency is looking to expand co-productions with other nations. This year, he will be traveling to China to negotiate a co-production agreement between the two nations. He emphasizes that it would be the first such deal between China and a Latin American nation. Argentina also is in co-production talks with India and is in the process of closing a deal with Germany.

Elsewhere, Alvarez is pushing for Argentina's broadcast television networks to become involved in film production and distribution, based on models in some European nations.

He acknowledges that he has his work cut out for him, particularly as the institute seeks to create more accessible distribution opportunities for local product.
"The industry needs to mature a lot in order for us to be able to talk about an actual film industry in our country," he says.

As the government and key players move forward to improve the situation, Alvarez feels confident that as long as Argentina continues to produce quality films, the industry will solidify.

Fortunately, Argentina has come a long way since the economic crisis. Banks now offer credit lines to producers, something that would have been unthinkable just several years back.

The truth is, Argentina, Mexico and Brazil are experiencing similar circumstances. Film production quality is improving and output is increasing. Now, producers are just trying to figure out ways to get more screen time so they can enjoy a bigger piece of the pie.

BRAZIL

When the military regime in Brazil fell in the mid-1980s, things were looking pretty bleak for Brazilian cinema. State-financed production plunged and new filmmakers were wondering where to turn. At that time, a relatively unknown director named Walter Salles was working on his first television project, a four-part documentary series about Japan. Another newcomer, Fernando Meirelles, also was working on a documentary.

The situation improved in the 1990s when Brazil established a new government film agency.

Salles went on to direct "Central Station," a small picture that picked up an Oscar nomination for best foreign language film. Later, he helmed the acclaimed Che Guevara biopic "The Motorcycle Diaries" and a U.S. remake of the Japanese horror film, "Dark Water."

Meirelles was well on his way to success after the release of his surprising boxoffice hit, "City of God," an urban drama that unfolds in the slums of Rio de Janeiro. Several years later, he won international acclaim for his Oscar-winning drama "The Constant Gardener."

When people talk about the comeback of Brazilian cinema, they point to skilled directors like Salles and Meirelles. In 2003, a year after "City of God" hit screens, Brazil had a mere 27 releases; last year, it had 73.

Alberto Flaksman, head of international affairs at national film agency Ancine, has seen the highs and lows during his 30-year career in the industry and he now says with great pride that Brazil's cinema novo is finding larger audiences at home and abroad.

Granted, Hollywood films take in the lion's share of boxoffice business in Brazil, as in most Latin American territories, yet Brazilian product manages to capture about an 11% to 15% market share, according to Ancine. While that may not sound like much, it is considerably higher than Mexico, for example, which had a 4.7% market share last year.

Brazil had slightly more than 100 million admissions last year, placing it second behind Mexico in Latin America. Industry sources estimate overall boxoffice admissions fell about 3%, compared with 2005. Since most theaters are concentrated in the densely populated cities of Sao Paulo and Rio de Janeiro, many Brazilians living outside those areas simply do not have access to cinemas.

Flaksman says Brazil sorely needs more theater development to pull in stronger admissions.

"We only have 2,100 screens for 180 million people," he points out. "So
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