The idea that the Brazilian economy was strong enough to face the global financial and economic crisis has been proved wrong. The most visible effect was the recent, sudden domestic auto market weakness with noticeable falls of 25% both month on month and year on year in November to just 178,000 sales.

Production (exports included) of 194,900 units marked the first drop below 200,000 since December 2006.

The reasons were much the same as elsewhere: tight credit rules at commercial banks, higher used car depreciation and, of course, a general lack of consumer confidence spurred by news from abroad.

Former Anfavea president and retired Mercedes-Benz human resources director Luiz Scheuer told business newspaper Gazeta Mercantil "it was shameful that automakers were knocking on the government's door for help following recent recent high sales and profits".

"They did not save cash and are now passing the hat," he added.

So far the only government help has been a release of funds from Bank of Brazil to automakers' banks to free up credit offers to consumers at market rates of interest.

The commercial banks had been resisting making loans even when backed by the central bank's boosted liquidity but have loosened the grip this month with a consequent increase in new car demand.

Some analysts are forecasting this month's domestic sales may top 190,000 vehicles.

Scheuer's comments upset the auto industry for not reflecting reality. Current Anfavea president and Mercedes-Benz legal director Jackson Schneider retorted: "All moves to restore the sales pace are welcome. Automakers should not be ashamed of helping the consumer to obtain financing. The government support is not for the industry but for the consumer."

Paulo Skaf, president of the mighty Industry Federation of São Paulo State, a consistent critic of the federal government, said there was no alternative to avoid the deepening crisis.

Fernando Calmon

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