Cheap Dollar Does Not Deter Brazilian Bus Maker Marcopolo from Exporting

Brazil's Marcopolo bus Exports by Marcopolo grew 33% in the first half of this year as against the same period last year. The percentage refers to foreign sales by the bus maker from its units in Brazil. The company shipped abroad, according to the balance sheet disclosed last week, a total of 1,278 buses from January to June this year, against 959 units in the same months in 2007.

"We are delivering vehicles to the traditional markets despite the sacrifice in profit margins," stated the Investor Relations director at Marcopolo, Carlos Zignani, regarding exports. The appreciation of the Brazilian currency as against the dollar has been making sales harder.

If the company's production abroad is also taken into account, the foreign market absorbed 3,750 vehicles made by the company in the first half, against 2,939 in the same period in 2007.

Marcopolo also has factories in Portugal, Colombia, Argentina, Mexico, India, Russia and South Africa. In the first half of this year, the company established a joint venture with company GB Auto, in Egypt, in which it should have 49% participation.

According to Zignani, Marcopolo exports to the Arab market were practically null in the first half of the year, mainly due to the loss of ground to international competitors, like Turkey and Egypt, due to the depreciation of the Brazilian real against the dollar.

The partnership with GB Auto should permit the company's return to the Arab market. Marcopolo is currently helping the Egyptian company to transfer its operations from Cairo to Suez. When the new factory is operating, the Brazilian company will begin using its technology to produce buses under its own brand in the Arab country, as well as under the GB Auto brand. This should take place in the second half of next year.

Although the domestic market had important weight in the company's performance in the second half, the volume produced by the organisation has grown both in Brazil and abroad. Marcopolo produced a total of 10,240 vehicles in all of its units.

There was 28% growth over the first half of 2007, when production totalled 7,990 vehicles. Production abroad grew 24.8%, from 1,980 units to 2,472, and in Brazil it expanded 29.2%, from 6,010 buses to 7,769.

According to Zignani, the better performance in Brazil than abroad was mainly due to the fact that the domestic market is heated. "The Brazilian economy is doing well," he says. He mentions as factors favoring sales of buses in the country the ease for financing and length of vehicle purchase contract, making the environment appropriate for investment.

"And buses are investment," he says. With every 50 people who get a job, the purchase of a new bus for their transportation becomes necessary. The growth of tourism also generates high demand for buses.

Another measure that has been favoring the sector in Brazil is the federal government decision of standardizing buses used for the school transportation in rural areas in the country.

The city halls that adhere to the program have ease for financing and tax breaks. In a tender last year, of the 2,600 buses purchased, 1,900 were made by Marcopolo. They should be delivered by November this year.



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