Exports are top of the agenda for Luiz Moan, the new president of Anfavea, the lobby group for Brazil’s auto industry. He wants to see a foreign sales recovery by 2017 as his tenure’s legacy.
Brazil is the world’s fourth largest auto market but only its seventh biggest producer.
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Under the new Inovar-Auto automotive regime, hefty investments in research and innovation are being rewarded, but there are no clear objectives for reviving exports. But Moan is looking at changing that.
Increasing exports boosts production and economies of scale making volume-sensitive technologies, such as safety and convenience electronic technology more viable and also boosts quality.
To have product priced sensibly abroad depends on the Brazilian real exchange rate. Back in 2005, when it was quite favourable, nearly 900,000 units (CBU and CKD), or 35% of the year’s output, were shipped to other countries. Last year, the export tally was just 470,000, or 14% of production.
The new goal for five years from now is to export 1m vehicles, 20% of production. By then the split should be: 5m domestic sales, 5m produced, 1m exported and 1m imports.
Last year, Brazil imported 795,000 vehicles, 70% more than exported. Currency devaluation would boost exports and slow imports but sweep “Brazil cost” under the carpet.
On the other hand, a weak real would increase the cost of sophisticated imported components used in locally made vehicles.
There are a number of ongoing suggestions to boost exports: simplifying the customs processes, changes in legislation and investment in port infrastructure.
Slashing the direct or invisible tax burden within the long production chain would cut FOB prices by almost 9%. For decades the country has been unable to get rid of ’embedded’ taxes in exported products, a factor in the lack of competitiveness itself.
