Ford plans to raise car prices in Brazil by up to 5% next year to compensate for higher labour costs and more expensive car parts, a Reuters report said.

The increases will follow a tough year for car companies in Brazil, where the market has stagnated as a mix of high interest rates and rising unemployment has kept consumers away from showrooms, the report added, noting that Brazil's main motor industry group, Anfavea, is expecting car sales to decline 7% this year over 2002.

Seeking to give the industry a boost, the government gave automakers a tax cut in mid-August under an agreement that they not raise prices until next year or lay off workers until February 2004, Reuters said.

"We're going to have an important increase in January that could be between 3% and 5%, and that's not counting the rise in the price of steel, which went up last year," Ford's president for South America, Antonio Maciel Neto, reportedly said.

According to Reuters, Maciel said the price increases were necessary after the company raised salaries of car industry workers by 18% this year and due to a rise in the price of raw materials, including steel.

Other car makers in Brazil have also said they plan to hike prices in 2004, the report noted.

Reuters said that, unlike other car companies in Brazil, which have seen their market share decline during the economic downturn, Ford has been gaining ground.

Maciel reportedly said he expected Ford to turn a profit in Brazil in 2004, when it expects to increase its market share 1% to 13% - it is currently fourth in sales behind Fiat, General Motors and Volkswagen.

Ford plans to add another shift at its Camacari factory in the state of Bahia by mid-year to help it keep up with the pace of growing demand at home and abroad, Maciel told Reuters.

According to Reuters, Ford expects Brazilian car sales for all companies to jump 7% to 14% next year and also forecasts its exports rising up to 25% in 2004 - it exports about 30% of its Brazilian production, mostly to other countries in Latin America.