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March 15, 2010

BRAZIL: Tax spat may halt GM Brazil Malibu imports

Brazil and the US have until 8 April to reach agreement over a long-running tax dispute and avoid a tariff rise on American products including cars.

Brazil and the US have until 8 April to reach agreement over a long-running tax dispute and avoid a tariff rise on American products including cars.

The tax ‘retaliation’ was authorised by the WTO following Brazil’s complaints about subsidies made available to American cotton producers despite not being permitted under international trade rules. This spat has now dragged on for over eight years.

Should the tax be imposed on automobiles – one of 102 affected products – import duty on US sourced products would rise from 35% to 50%. The WTO has cleared sanctions of up to US$829m yearly, including services and patents.

Visiting Brazil last month, Tim Lee, the new chief of GM’s international operations outside Europe, confirmed the Camaro would be imported this year as one of four new model launches planned by the Brazilian subsidiary for 2010.

“I hope the two countries manage to solve the impasse without imposing new taxes”, said Lee.

Though the Canadian-built Camaro would, in fact, not be affected, no GM official would comment directly on that. But imports of the US-built Malibu are expected as well, and in much higher volume than the Camaro.

Though not mentioning Chevrolet’s medium-large sedan directly, Jaime Ardila, the GM Brazil and Mercosur operations CEO, said: “If the tax rises, we will be forced to abandon prospects of importing any vehicle from the US.”

Lee also predicted that, within 10 years, Brazil was likely to become the third largest world market behind only China and the US.

He added: “This country alone accounts for 20% of GM’s international operations’ sales. Of the 16 models currently being designed in São Caetano do Sul (São Paulo state) for future launch, 75% may be sold in several countries.”

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