SAO PAULO, Brazil -- This country's 10 principal automakers, driven to the wall last year by the collapse of their biggest export market and economic slowdown at home, are pinning their hopes for 2003 on the development of overseas markets.
According to preliminary figures from the Brazilian automakers' association, ANFAVEA, industry production slipped 2 percent last year to an estimated 1.78 million units. But sales to dealers plummeted 7.1 percent to 1.49 million units, while retail sales fell 6.5 percent, to 1.5 million units.
The declines, which put the industry back to 2000 levels of sales and output, have been felt industrywide.
"The problems are just the same for everyone," said Marco Antonio Lage, the marketing director of Fiat Automoveis SA.
Those problems include the lingering effects of a 2001 energy crisis; a devaluation of the local currency, the Real; a credit crunch with soaring interest rates; and the collapse of demand in Argentina, a vital customer for Brazilian-produced cars and trucks.
Argentina, where new-vehicle sales plunged last year to an estimated 80,000 or less from 182,000 in 2001 and a peak of 500,000 in 1994, accounted for 50 percent of Brazil's automotive exports just five years ago. That share fell to just 7 percent, or 26,000 units, last year, a 57 percent drop from 2001.
High interest rates, which were raised in December to 25.5 percent by the nation's central bank, also have weighed heavily on the industry. New-car loans here carry an annual interest rate as high as 50 percent, an effective deterrent to credit sales.
The sales tax on vehicles - 33 percent - also is a drag on sales, the industry group complains.
Exports are one potential bright spot on the industry's horizon.
According to ANFAVEA, the recent signing of trade agreements with Mexico and Chile could yield 900,000 additional vehicle exports from Brazil over the next four years.
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New market: Mexico
Shipments to Mexico, which had been chugging along at about 10,000 a year, surged to 90,000 last year after import tariffs there were slashed to 8 percent from 23 percent, the trade group said. Shipments are expected to top 140,000 a year after tariffs fall to zero next year, rising to more than 200,000 a year in subsequent years.
Shipments to Chile, which has been importing between 12,000 and 15,000 Brazilian vehicles annually, are expected to rise to at least 50,000 a year, the association said.
Agreements with China and India also are being negotiated, it said. Coupled with a recent decision by Volkswagen AG to source 30,000 Brazilian-produced subcompacts a year for sale in China, the trade group said, vehicle exports this year should rise 10.3 percent to 450,000 units.
Including components, the value of the industry's exports should rise 20 percent this year to some $4.8 billion, ANFAVEA said.
On the domestic front, the industry group's predictions are more modest. Production is forecast to rise 6 percent, while sales increase 1 percent.
Ricardo Carvalho, president of the trade group, said, "With no real prospect of a significant cut in interest rates, we are banking on a large increase in exports and the search for new markets to carry the industry through this year."