After investing billions only to watch domestic sales tumble, car makers in Brazil are hoping to double exports to an annual $US8 billion over the next two to three years, Dow Jones Newswires reported.
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“We’re expecting (exports) to hit $8 billion by 2005 or 2006,” Ricardo Carvalho, the head of Brazil’s biggest motor industry lobby, told Dow Jones Newswires on Monday.
This year alone, exports are expected to jump 20% after hitting $4 billion in 2002, thanks largely to a sharp drop in Brazil’s currency and a freshly inked trade deal with Mexico, the report said.
Exports surged 42% and brought in $2.4 billion over the first six months of the year, but still only accounted for a quarter of all sales. Domestic sales, meantime, slumped more than 8% between January and June, Dow Jones added.
The news agency said Brazil’s car makers are relying on the government to forge further trade deals, especially with South Africa and the European Union), in order to meet their $8 billion target, Carvalho reportedly said at a car export forum also attended by Brazil’s trade minister Fernando Furlan.
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By GlobalDataBut the government, which last week trimmed an industry tax by 3% to help car makers revive sales, is showing signs of impatience with the struggling sector, Dow Jones noted.
“Despite all the noise we’re hearing from the industry… what happened is the sector made an error in its forecasts,” Furlan reportedly said, blaming languishing domestic sales on too-high lending rates, a lack of credit and falling real incomes. The trade minister called car makers to task for failing to trim output from last year, Dow Jones said.
According to the news agency, Furlan nonetheless indicated that the government, too, is hoping exports will solve the problems of the vehicle manufacturing sector, which invested $27 billion to expand capacity over the past eight years only to watch nearly half that capacity sit idle.
“There’s no specific government incentive plan for the sector, but we’re betting tax reform will promote the complete removal of taxes on exports,” he reportedly said, referring to a tax reform proposal that markets hope will be approved by Congress before mid-term election campaigns get under way next year.
Dow Jones noted that domestic car sales, meantime, are expected to fall to about 1.4 million vehicles this year, down from a peak of two million in the late 1990s.
