Table of Contents

Table of Contents

BRAZIL’S AUTOMOTIVE INDUSTRY A report by Pat Shaw 1 2 TABLE OF CONTENTS Subject Page PROLOGUE 5 - Brazil : Land of Plenty - The importance of Brazil‟s automotive sector - About this report POLITICAL & ECONOMIC INDICATORS 9 - The political background - General economic indicators - Automotive industry trends - Local business sentiment - Labour and the unions LIGHT VEHICLE MANUFACTURING IN BRAZIL 16 - Market trends and characteristics - The major car makers - Design engineering in Brazil - New-energy vehicles in Brazil - Light commercial vehicles in Brazil COMMERCIAL VEHICLE MANUFACTURING IN BRAZIL 30 - Market trends and characteristics - The major truck makers - The coach and bus bodybuilders COMPONENT MANUFACTURING IN BRAZIL 36 - Market trends and characteristics - Case Study : The Global Manufacturer - Case Study : The Domestic Manufacturer - A note on the Brazilian aftermarket - Business opportunities in the component sector INTERNATIONAL RELATIONS & INVESTMENT IN BRAZIL 43 - Mercosur - USA - European Union - Asia - Foreign investment in Brazil 3 LOGISTICS, CUSTOMS REGULATIONS & INFRASTRUCTURE 49 - Infrastructure - International Transportation - Customs Duties APPENDIX I : DOING BUSINESS IN BRAZIL 52 APPENDIX II : ACKNOWLEDGEMENTS 56 APPENDIX III : USEFUL CONTACTS 58 APPENDIX IV : SELECTED AUTOMOTIVE EXHIBITIONS & EVENTS IN BRAZIL 60 4 PROLOGUE BRAZIL : A LAND OF PLENTY “They’ve an awful lot of………..well, most things in Brazil” Back in 1960, Frank Sinatra was crooning about the abundance of coffee in Brazil. But the Brazil of the early C21st is a country with a lot to offer. Geographically, Brazil is the fifth largest country in the world, covering over 3.3 million square miles. This makes it bigger than the whole of Western and Central Europe, and the largest territory in the Southern Hemisphere. Within its borders, Brazil enjoys an abundance of natural resources. It has more arable land than any other country, and accounts for almost 14% of the world‟s total reserves of drinking water. This profusion of water also offers plentiful hydro-electric power. Proven oil and gas reserves are also growing. Brazil has been self-sufficient in oil since 2006, and new offshore discoveries hold out the prospect of substantial future exports. Brazil also ranks No 5 in the world for size of population, with around 190 million citizens. This figure places it some way behind China and India but comfortably ahead of Russia, the fourth member of the BRIC grouping. Whilst there is still considerable poverty in Brazil, the 30 million people moving upwards into socio-economic classes A, B and C is a firm indicator of increasing wealth and spending power. Conveniently, from a business perspective, 75% of that purchasing power is concentrated in the south and south-eastern states. Sadly, Brazilian bureaucracy can seem to match the country‟s natural features, in both size and diversity. This presents considerable challenges to business. One multi-national vehicle maker reported that they had a team of 33 staff employing on tax issues in Brazil, whilst in their European head office the same work was handled by just three people ! Overall, the tax burden in Brazil is reckoned to equate to 38% of GDP. International trade is also hampered by historically high import duties and slow customs clearance procedures. Brazil ranked a lowly 87th in a recent World Economic Forum listing of “countries most open for trade” and her share of world exports/imports lags behind that of other BRIC countries. 5 In the automotive sector, Brazil also offers scale and variety. Its vehicle parc is the tenth largest in the world, and contains a diverse range of vehicles of American, European and Japanese parentage, to which interesting local variants have been added. Currently, China and Brazil are the two brightest lights in the global auto industry. Meanwhile, of course, Brazil is still the world‟s top coffee producer – over 40 million bags in 2008 ! THE IMPORTANCE OF BRAZIL’S AUTOMOTIVE SECTOR Curiously, the automotive sector does not appear among the Brazilian government‟s six key industries, through which it is planned to drive exports and economic growth. Foreign ownership of the major manufacturers may be the reason why it is rated behind the aviation, meat, metal-working, mining, paper/pulp and petroleum industries in government priorities. Nevertheless, the sector accounts for almost one quarter of the country‟s manufacturing GDP, and is a substantial source of both foreign investment and local employment. Internationally, Brazil already enjoys a prominent position in the global league tables. In 2008, total vehicle production reached 3.22 million, making Brazil the sixth largest producer in the world. It is by far the largest automaker in the Southern Hemisphere. Despite the general economic malaise, and a sharp downturn in vehicle sales in many international markets, Brazilian production fell by only 1% in 2009. This is a testament to the strength of the domestic market which grew by 11.4% to 3.14 million, enabling the local industry to weather a collapse in export sales. Overseas shipments, as reported for the first nine months of 2009, dropped by 43% percent, with the truck sector particularly badly effected. The resilience of Brazil‟s domestic auto market has certainly attracted global attention, but it has also posed some new challenges. The local component sector seems to be struggling to match current levels of demand. In 2008, Brazil became a nett importer of automotive components for the first time in five years. Vehicle development programmes for the Brazilian market also face the conundrum of matching engineering solutions to local tastes and cost expectations. 6 ABOUT THIS REPORT Recognising the fact that Brazil is currently one of the “bright spots” for the global motor industry and at the same time remains a country with limited business and cultural ties to the UK, SMMT has undertaken this study to offer UK-based companies a clearer view of the Brazilian automotive sector, the conditions under which it operates, the opportunities which it may offer, and the sources of help/information that may be available. The report is based upon a series of interviews conducted in Brazil in late 2009, and supported by supplementary desk research. The figures quoted are accurate at that time. By its very nature, the report can present only general advice and information. However, during its compilation, SMMT developed contacts with a range of key players in Brazil, both inside and outside the automotive industry, who may be able to assist with specific questions and enquiries. Whilst every care has been taken to ensure the accuracy of the report, SMMT cannot accept any responsibility or legal liability for the accuracy, completeness or value of the information that it contains. 7 Brazil’s automotive industry is heavily concentrated in the south and south-eastern states of Sao Paulo, Minas Gerais, Rio de Janeiro, Parana and Rio Grande do Sul 8 POLITICAL & ECONOMIC INDICATORS THE POLITICAL BACKGROUND The economic data for C21st Brazil is in stark contrast to the depressing figures posted for most of the preceding decades. This turnaround, instigated by the plano real fiscal reforms of President Cardoso, co-incides with – and is largely attributable to – a period of stable democratic government. It is a balance that most Brazilians are eager to maintain. When Luiz Inacio Lula de Silva, founder of the left-wing Workers‟ Party, won the presidential election in 2002, many feared a return to political and economic instability. But today there is widespread agreement – even amongst automotive executives who personally remember him as the radical leader of the Metalworkers‟ Union – that “Lula” has steered a moderate course, largely adhering to the policies of his predecessor. A new president will be elected in 2010. Whilst many Brazilians appear unenthusiastic about the potential candidates, there is a general expectation that whoever comes to power will continue with the economic strategy which has performed well for the past fifteen years. GENERAL ECONOMIC INDICATORS Brazil has successfully weathered the global financial crisis of 2008/9. A combination of a closely regulated banking sector (banks operating inside Brazil have long been required to lodge compulsory deposits with the central exchequer), a growing domestic economy, strong commodity prices and substantial currency reserves has proved sufficiently robust to sustain economic expansion. Official figures project a further 5% growth in 2010. Inflation In 2009, inflation ran at slightly below 5%, and is expected to fall further in 2010. In the last five years, the rate has remained consistently below 8% - a remarkable achievement for a country which 9 was recording 800% inflation as recently as 1994. Brazil out-performs the overall inflation rate for Latin America. GDP For the last five years Brazil has sustained a steady rate of GDP growth, ranging between 3.2% - 5.7%. In the first quarter of 2009, the rate briefly turned negative, but positive growth was restored by the end of the year, and current estimates for 2010 indicate an increase of 3.5% – 5%. Brazil‟s national per capita GDP of $10,200 is still lower than several of her Latin American neighbours. However, the countrywide figure obscures the much greater wealth of the south and south eastern regions that account for 75% of overall spending power. Share of GDP, by state Sao Paulo Rio de Janeiro Minas Gerais Rio Grande do Sul Parana Bahia Santa Catarina Distrito Federal Other 19 States Exchange rates The Real, adopted as the official currency as recently as 1994, has attained a level of stability to which its seven C20th predecessors could never aspire. In recent years, the Real has appreciated steadily against the major international currencies. The movement against Sterling has been particularly sharp, with a 43% fluctuation over the last five years, whilst the US Dollar and the Euro have both lost around one third of their relative value.

View Full Text

Details

  • File Type
    pdf
  • Upload Time
    -
  • Content Languages
    English
  • Upload User
    Anonymous/Not logged-in
  • File Pages
    60 Page
  • File Size
    -

Download

Channel Download Status
Express Download Enable

Copyright

We respect the copyrights and intellectual property rights of all users. All uploaded documents are either original works of the uploader or authorized works of the rightful owners.

  • Not to be reproduced or distributed without explicit permission.
  • Not used for commercial purposes outside of approved use cases.
  • Not used to infringe on the rights of the original creators.
  • If you believe any content infringes your copyright, please contact us immediately.

Support

For help with questions, suggestions, or problems, please contact us