Rising exports and a rebounding domestic economy led Brazilian car makers, headed by General Motors, Fiat and Volkswagen, to increase production 20% in 2004 to 2.2 million vehicles, according to the country's auto industry association.

Citing data from the Brazilian motor vehicle manufacturers association, the Associated Press (AP) said domestic sales rose 10.5% to 1.6 million vehicles as the economy grew 5% and interest rate cuts during the first half of the year helped boost sales. An aggressive export drive boosted overseas sales nearly 52%, to $8.3 billion.

According to AP, the association is forecasting production will be 2.3 million vehicles in 2005 - the more modest pace will be driven by slower economic growth, estimated at 3.5% for 2005, and higher interest rates - they rose in the last half of 2004.

Alberto de Oliveira, an economist for the Brazilian unit of Banif Investment Bank, told the Associated Press that auto makers will be forced to keep prices competitive against a backdrop of rising steel prices.