Following September’s fall, which affected all of the Brazilian industry production, car sales in Brazil dropped 10% in October compared to the previous month, according to Fenabrave, the country’s dealers association. The decline is turning warning lights on for the global auto industry.
Brazilian dealers sold 280.608 vehicles in October, 7.4% less than the same month a year ago and 19% less than forecasted by Fenabrave since slower production was also helped by a calendar month with several national holidays.
In September Brazilian industrial production was down precisely because auto manufacturers faced with growing inventories temporarily closed down some plants or gave vacations to workers.
The latest data show that the Brazilian economy is rapidly contracting after having expanded 7.5% last year, the highest in over two decades. Analysts have estimated the economy could grow a modest 3.3% in 2011, but could also decline further.
The deceleration news comes when the main European corporations that have grown globally propped by the Brazilian market are facing a tough competition from Asian rivals plus the fact the government is demanding new investments if they wish to avoid higher taxes beginning December.
Brazil with a population of 190 million and a 25% surge of the middle class in the last decade has become a crucial market for all global automakers. Among the corporations in Brazil are Italy’s Fiat, Germany’s Volkswagen and Mercedes Benz, the US General Motors and Ford.
Fiat kept the leadership of the market in October having sold 57.000 units, equivalent to 21.7% followed by Volkswagen with 53.300 units; GM totaled 49.800 and Ford, 22.700.
There’s a growing feeling among Brazilian economists that Brazil must balance its trade relation with China, the country’s leading commercial partner and not allow an anti-Chinese sentiment among manufacturers to spoil relations with Beijing, said economists in São Paulo.
“Brazil does not make much out of this association, but China makes a lot more out of it,” said Matias Spektor, professor at the Getúlio Vargas Foundation during a conference on Brazil’s aspirations to become a global power.
Bilateral trade in the last decade has increased 2.300% but while Brazil provides raw materials, China floods the Brazilian market with cheap shoes, clothing, electronics, cars and motorcycles.
Spektor believes that the United States can help Brazil reach a more solid position when it comes to negotiations with Beijing.
“The US and Brazil are potential allies, Washington can help Brazil sit at the table and negotiate with Beijing a more balanced position”, added the economist.
To feed its growing appetite for food and minerals China, in recent years has consolidated relations with Latin America, particularly with the very rich Brazil.
But with the flood of manufactured goods from China, local manufacturers are loosing competitiveness which generates a strong anti-China feeling, warns Spektor.
“Many Brazilian manufacturers understand that China offers many opportunities, we must strengthen Brazilian business people,” said Charles Tang, president of the Brazil-China Commerce and Industry Chamber.
Tang said China is not responsible for the high costs faced by Brazilian manufacturers to produce and which make them uncompetitive vis-à-vis those imported from China.
In the first nine months of 2011, Brazil-China trade reached 57.6 billion dollars, above the 56 billion for the same period a year ago, according to official data.
The conference organized by the Brazilian association of information technology and communications, Brasscom, and The Economist has convened experts to assess how Brazil can become a world power by 2022.