The president of GM's operations in Brazil and the Mercosur countries said it is GM's biggest investment since the onset of the global financial crisis.
Jaime Ardila says about 50 percent of the money will come directly from GM Brazil while the rest will be borrowed.
One new small car and one medium-sized car will be developed at the Gravatai plant in southern Brazil and are expected to be in production by 2012.
Ardila says Wednesday GM Brazil has avoided the problems of its parent unit in the U.S. because of strong demand in Latin America's largest economy.
GM sold 580,000 vehicles in Brazil in 2008 - its most ever.
GM emerged from bankruptcy protection last week, with CEO Fritz Henderson announcing thefor the automaker.
But GM, whose 40 days under court supervision was far shorter than anyone predicted, faces the worst auto sales slump in a quarter-century.
The company plans to cut 20 percent of its salaried U.S. workforce by the end of the year, including around 35 percent of it's executive employees.
The revamped carmaker will focus on improving customer relations. The company is launching a "Tell Fritz" Web site to allow owners and the public to share their concerns with senior management, and Henderson plans to go out on the road every month.
Henderson also said GM will partner with eBay in California to allow consumers to bid on vehicles just as they would in a typical eBay auction. They could also choose a "Buy it Now" option in an experiment to make car shopping easier. Dealers would still distribute the cars.
"As a culture, General Motors needs to be prepared to experiment and adjust," he said.