Despite promotions and advertising, data from manufacturers showed car sales in Brazil dropped again in August, Reuters reported.

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Brazil’s National Association of Vehicle Manufacturers, Anfavea, said 100,800 cars, trucks, and buses were sold in August, 11.3% less than in July and more than 20% less than in the same month last year, the report said.

Reuters noted that the drop came after the centre-left government’s small cut in the tax rate on industrial products, known locally as the IPI, failed to cause a drop in the price of vehicles in showrooms across Latin America’s biggest nation.

“There were expectations of a big reduction in prices, and that, allied with a drop in purchasing power, made customers more cautious,” Anfavea president Ricardo Carvalho told Reuters, adding: “We hope the situation improves in September.”

The news agency noted that the motor industry in Brazil is viewed as a solid guide to the state of the economy in general and added that car makers have had a hard time since the Central Bank raised its main lending rate to 26.5% at the start of the year to combat inflation following a severe depreciation of the local currency, the real, in 2002.

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The stratospheric rates put the brakes on the economy and led to a drop in demand for vehicles, which in turn forced car makers to cut production and lay off hundreds of workers, Reuters added, noting that, although interest rates have dropped 4.5% since June, car sales in the first eight months of the year were still nearly 10% lower than they were over the same period in 2002.

According to Reuters, Carvalho said Anfavea was sticking to its prediction of a 5% drop in sales in 2003 following the IPI tax cut, which lasts until the end of November. Sales dropped 7.1% in 2002 to 1.49 million vehicles, the report said.

Analysts told Reuters the arrival of new models on the market may also help give the market a jump start but some say Anfavea’s prediction may be optimistic.

“September and October will be decisive for improving the (annual) projection, but I think they (sales) will be between 10 and 15% lower than last year,” Edgard Viana, a consultant on the vehicle market at AT Kearney, told the news agency.