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Despite Crisis, Brazil’s Auto Industry Should Grow 5% This Year

Expanding domestic consumption of vehicles as a priority in a long-term industrial policy for the automobile industry is an item of consensus among union leaders, automobile manufacturers, and the federal government’s Brazilian Industrial Development Agency (ABDI).

The predicament is how to achieve this goal. Industrial policy was the topic of proceedings during the second day of the Latin American Conference on the Automobile Industry, organized by the International Federation of Metallurgical Workers (Fitim).


For the director of the ABDI, Mário Salerno, the main challenges facing the Brazilian automobile industry are: to expand demand in the country and in Latin America; to seek consolidation as a center of production and projects; and to try to satisfy market niches, such as popular models, 4X4s, and compacts.


“Brazil is under competitive pressure from countries that offer products made with cheap labor – such as China – and countries that are based on innovation and product differentiation – such as Germany,” Salerno explains.


He points out that investment in innovation and product differentiation has a positive impact on salaries, employment, export growth, and profits.


According to Salerno, the average salary in companies that innovate and differentiate is three times higher, as shown in a study by the Institute of Applied Economic Research (Ipea).


The president of the National Association of Automobile Manufacturers (Anfavea), Rogélio Golfarb, says that the Brazilian automobile industry is experiencing a cost crisis, driven by increases in the prices of inputs, such as steel, non-ferrous metals, and plastics; a heavy tax burden; high interest rates, and lower returns.


Despite these factors, which spell a loss in the industry’s ability to compete, the Anfavea predicts that 1.650 million vehicles will be produced this year, 5% more than in 2004.


According to Golfarb, this growth is sustained by exports, benefitted by the exchange rate depreciation that began in 1999 and started to show results in 2001.


At the conference, which brings together union representatives from nine countries, the participants discussed their concern about the migration of investments to Eastern Europe and the countries of Asia, especially China.


ABr – www.radiobras.gov.br

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