Domestic sales of motor vehicles in Brazil dropped 1.1% in the first quarter of 2003 from year-ago levels due to high interest rates, but strong exports boosted production 10.5%, Reuters reported.

According to the news agency, Brazil's National Association of Vehicle Manufacturers (Anfavea) said on Monday about 332,400 new vehicles, including cars, trucks and buses, had been registered between January and March, while 444,500 units had been produced.

Exports, helped by weakness in the Brazilian currency, the real, against the dollar following a 35% depreciation in 2002, soared 43.8% to $1.1 billion, Reuters noted.

But as high interest rates after months of hikes took their toll on the economy, cars sales, an important economic indicator in Brazil, painted a gloomy picture, Reuters said. In March alone, registration of new vehicles, including imports, slumped 17.2% year-on-year and 13% from February. Even output demonstrated sharp declines -- 6.9% and 7.3%, respectively.

"The consumer is cautious. I wouldn't say that we are in a crisis, but we do not see any type of recovery in the market in the short run," Anfavea President Ricardo Carvalho told Reuters.

Nevertheless, Reuters noted, Anfavea is sticking to its forecast of selling 1.5 million cars, buses and trucks in 2003, a 1% increase over the 1.49 million sold last year but well short of the 1.6 million sold in 2001.