MercoPress. South Atlantic News Agency

Tax cuts and lower rates help record car sales in Brazil during August: 400.00 units

Cledorvino Belini, Fiat’s president in Latin America and current head of the Brazilian carmakers association, Anfavea

Brazil car sales rose to a record 400,000 units in August as tax cuts and lower borrowing costs spur consumer spending. Fiat, the country’s biggest automaker, said that tax cuts that took effect in May and were extended last week through October spurred industry sales of cars and light vehicles last month.

The Italian automaker, citing preliminary figures, said in a statement that it sold about 100.000 units in August as its production in Brazil reached the highest level in 36 years.

A rebound in car sales, after inventories accumulated at the start of the year while consumers held back on purchases, is boosting the outlook for Brazil’s economy.

President Dilma Rousseff’s government last week extended for several months tax breaks on cars and appliances, and the central bank reduced borrowing costs to a record low, in a bid to boost flagging growth that was an annualized 1.64% in the second quarter. The government has also sought to shield manufacturers from cheaper imports by weakening the Real, which has declined 8.1% this year.

“This package of measures transmitted optimism to the Brazilian consumer, who reacted positively” Cledorvino Belini, Fiat’s president in Latin America and current head of the Brazilian carmakers association, known as Anfavea, said in the statement.

Anfavea declined to comment ahead of its Sept. 6 press conference to disclose August sales figures, though Finance Minister Guido Mantega said last week that he too expected a record month for car sales.

Car sales surged to 364,196 in July from 257,887 in April, after the tax cuts allowed companies including Ford and Fiat to exhaust inventories. The previous monthly record for car sales was set in December 2010, when the industry licensed 381,552 vehicles.

“In the automobile industry, results in the first two quarters were weak, growth was negative,” Mantega told reporters in Brasilia on Aug. 31. “But in the third quarter we are going to have very favorable results, very strong growth.”

Asian automakers have been targeting the world’s biggest emerging market after China for investment after Rousseff last year raised import levies on foreign-made vehicles, making it harder to tap into rising demand for cars by the country’s expanding middle class. Hyundai Motor Co. is set to open this month its first Brazilian assembly line outside Sao Paulo.