Car Sales in Brazil Fall for First Time Since 1999

Brazil is the 6th largest manufacturer of cars in the world

Because of a tightening of credit due to the international financial crisis, new car sales in Brazil fell for the first time in nine years in October, the national car-makers association Anfavez said Nov. 6.

Last month saw Brazilian-made and imported car sales drop 1.3% compared to September, to 239,000 vehicles. Compared to October 2007, the decline was 11%, Anfavea president Jackson Schneider said.

He noted that manufacturers had cut production slightly last month to tackle the abrupt downturn.

The association still forecast 2008 would overall be a good year for car sales in the country, Latin America's biggest economy, with a projected three million new cars sold, 24% more than for last year. Others in the industry calculated a lower figure. Jerome Stoll, head of Renault Brazil, said last week that he thought the figure would be closer to 2.75 million cars sold this year. And 2009 "will be a tough year" with any upturn being seen only in the second half, he said.

Brazil's once-booming car manufacturing sector has been hit hard by the worsening of the financial crisis over the past two months. South Korea's Kia Motors has frozen plans to build its first factory in Brazil because of the turbulence, an executive, Jose Luiz Gandini, said. General Motors, Fiat, Honda and Volkswagen, all of which have plants operating in the country, have put a total 15,000 of their workers on leave to slow down production.

Brazil is the 6th biggest manufacturer of cars in the world, and the biggest in Latin America.

Sales have skyrocketed since 2003, under the policies of President Luiz Incacio Lula da Silva and an explosion in easy consumer credit that lasted up to the sudden collapse of U.S. financial institutions in September this year. Now, interest rates on repayments have risen as the government tried to rein in inflation, and lenders have cut the duration of loan periods. Car-makers have tried to soften the blow somewhat, using their own financing arms to extend loans to customers with relatively low interest rates.

"The most negative effects will have passed within six months," the head of Ford Brazil, Marco Antonio Oliveira, predicted. "We must not create a crisis where none exists. What there is, is a credit problem at this time," he said.

Copyright Agence France-Presse, 2008

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