brazil_cars250The Brazilian government is looking at liberalising its trade in finished vehicles and automotive parts with Argentina and Mexico. The announcement, which was broken in a Reuters news report last week, marks a major shift away from Brazil’s protectionist trade policy and may be triggered by the fact that the car sector there has had three years of declining sales. The drops in 2015 were particularly dramatic.

Light vehicles sales and production were down by 25.59% compared to 2014 (according to Fenabrave – the National Federation of Automotive Distributors), and heavy commercial vehicles sales fell by around 40%.

Previously, Brazil has imposed heavy import taxes. Back in 2011 the government raised that to 30% on finished vehicle imports. The industrial production tax (IPI) also raised taxes to between 37% and 55% for carmakers who did not meet localisation targets. The rises were driven in part by the appreciation of the Brazilian real at the time. Since then the real has depreciated, down 33% last year, according to analysts.

The Reuters report quoted trade minister Armando Monteiro, who said that Brazil needed to move towards free trade, and that the country’s competitive automotive industry would benefit from the deals that would be achieved with a more liberal policy.

Monteiro said the government's priority was to rework a bilateral automotive deal with Argentina that expires in late June, and advance talks to expand overall trade with Mexico.

Brazil saw a 116% jump in exports in January compared to the same month last year, according to the Ministry of Development, Industry and Foreign Trade (MDIC). However, that figure amounts to 29,000 vehicles. The government said that ‘surge’ was in part down to recent international automotive agreements it has signed, including with Argentina and Mexico, which saw respective increases of 164% and 101%. Exports to Colombia increased by 400%.

According to figures from industry body Anfavea, vehicle production in Brazil grew slightly by 1.6% month-over-month to 145,000 cars and trucks in January 2016, while sales dropped sharply by almost 40%, to 155,000.