São Paulo – This Thursday (4th), the president of the National Association of Vehicle Manufacturers (Anfavea, in the Portuguese acronym), Cledorvino Belini, stated that the lowering of the Tax on Industrialized Goods (IPI) for automakers, announced by the federal government, is “timely.” At a press conference held in São Paulo to disclose the industry’s results in July, Belini claimed that the lower tax burden will help to keep industries in the country. He announced an 8.6% increase in sales from January to July this year when compared with the same period of 2010.
To the president of the Anfavea, who is also the president of Fiat Brazil, the lower tax burden should help the auto industry to invest in innovation. He underscored, however, that the government has not yet decided how or on which occasions the tax will be lowered. The tax reduction is part of a new industrial policy issued this week by the president Dilma Rousseff.
“Initially it should boost technological innovation, leverage Brazilian engineering and automotive intelligence, in order to create a competitive situation in the industry and thus add domestic product from Brazilian suppliers. This is the first step, which is better than doing nothing. We reckon this is the first step for Brazil to recover its competitiveness,” said the executive.
The new policy, dubbed Brasil Maior (Larger Brazil), provides for the awarding of incentives to the national industry and special benefits to some industries. In the auto industry, the main benefit is the lowering of the IPI charged on the production chain of companies that increase the rate of national content in their products, raise their investment and innovate. The tax breaks may reach up to 25%, i.e., the maximum rate applied to the industry. The tax, however, will not be passed on to consumers and should not lead to lower automobile prices, because the government should demand investment from the automakers in return.
Last Wednesday (3rd) in São Paulo, however, the minister of Development, Industry and Foreign Trade asserted that Brasil Maior plan’s tax incentives will necessarily have to result in lower prices to consumers. “We will not award incentives so that they will turn to profit,” said Pimentel.
Once established, the plan, according to the Anfavea president, will help the country to domestically manufacture parts and products that it still imports. The initiative, said he, will not halt imports, but should reduce them. He also claimed that the program will prevent the industry from exiting the country, and will even help boost Brazilian automobile exports.
Even though they are still low when compared with the industry’s expectations, exports are on the rise. In July this year, according to Anfavea figures, Brazil exported 46,500 vehicles, including automobiles, light commercial vehicles, trucks and buses. In July 2010, sales reached 38,700, and in July 2009, 25,400. In June this year, the industry exported 36,600 automobiles. In spite of the month-on-month sales increase of nearly 10,000 autos, Belini stated that exports remain “stable.”
Domestic sales keep climbing. In July, 306,200 vehicles were licensed in Brazil, 0.6% more than in June, when a total of 304,300 automobiles, light trucks, trucks and buses were licensed. In July 2010, 302,300 vehicles were licensed, 1.3% less than in July this year. In the whole of 2011, 2.04 million vehicles were sold in the country, as against 1.88 million from January to July 2010. Year-to-date, sales have been 8.6% higher than in the same period of 2010.
The president of the Anfavea stated that the organization has maintained its domestic sales projection at 5% for this year. “The international scenario is unfavourable and we are yet to learn what the consequences of this crisis will be. The global macroeconomic environment is suffering from contagion and we would rather keep our projections to ourselves,” said Belini.
*Translated by Gabriel Pomerancblum
