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Brazil Industry Falls 1.7%, Car Sales Drop 26%

Industrial production in Brazil fell in October as the global financial meltdown sent shock waves through Latin America's largest economy, the government said Tuesday, November 2. It was the largest drop since December 2006.

Industrial production slid 1.7% for the month compared to September, according to the statistics agency, known as IBGE. The hardest hit sectors were the chemicals industry, petroleum and ethanol production and machinery and equipment manufacturing.

Brazil automakers also suffered a 26% decline in November sales, continuing a trend that started last month as credit costs increase, according to the National Vehicle Dealership Association, Fenabrave.

The IBGE report said that industrial production for October expanded 0.8% over the same month last year.

Economists predict that Brazil's economy will expand 2.8% next year, down from forecasts of about 4% before the financial crisis hit. Analysts believe the economy will expand 5.2% this year.

Finance Minister Guido Mantega insisted Tuesday that Brazil is not headed toward a recession, but acknowledged Brazil's recently booming economy has been decelerating due to the global economic crisis.

He said that Brazilian economic growth would be less than 3% next year, but did not offer a more precise figure.

Fenabrave said that sales in November totaled 166,279 units compared with 224,744 units in October and 225,750 units in November of 2007.

Fenabrave's numbers serve as a sign of things to come this Thursday when the Brazilian Motor Vehicle Manufacturers Association, or Anfavea, releases its month-ending sales figures. Anfavea data is considered the benchmark for the industry.

Brazilian car sales had been rising all year but quickly reversed course in late September when banks raised interest rates and shortened term payments for new and used car loans. Banks have been more cautious about bringing on new loans in response to the ongoing global credit crisis.

Nevertheless, 2008 will be a banner year for the top three international automakers in Brazil: Volkswagen AG, Fiat SpA and General Motors Corp. (GM). Sales this year have reached 2.4 million units which is 17.8% above the same period last year, according to Fenabrave.

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