April 8, 2012 / 9:58 PM / 7 years ago

Brazil not planning new incentives for automakers

SAO PAULO (Reuters) - Brazil has no plans to offer further incentives for automakers, but the government does not rule out taking steps to boost the competitiveness of other industries, Trade and Industry Minister Fernando Pimentel said in an interview published on Sunday.

Pimentel told O Estado de Sao Paulo newspaper that the Brazilian government wants to encourage automakers to invest more heavily in innovation to meet surging demand in the world’s fourth biggest auto market.

“The industry already has many incentives. I don’t see the need to touch that,” he said.

Brazil last week announced a battery of tax breaks and subsidized credit to help struggling manufacturers and speed up the country’s fragile economic recovery. Critics say those measures are just short-term solutions and don’t address underlying problems such as a heavy tax burden, bureaucracy and lack of investment.

Under recently adopted measures for the auto industry, carmakers will be offered tax cuts in exchange for further investment in research and development.

“Bring over here the engineering, production, research and innovation departments. We want products conceived in Brazil. We have the capacity to produce,” Pimentel told Estado.

He also said Brazil is ready to help other industries regain competitiveness and mentioned pharmaceuticals, chemicals, appliances and fertilizers as sectors that are on the government’s radar.

President Dilma Rousseff said domestic demand is key for the BRICS nation to resume vigorous economic growth after a disappointing 2.7 percent expansion in 2011, down sharply from 7.5 percent growth in 2011.

“The world is showing that whoever has the demand, controls the supply ... And we have a market of almost 200 million Brazilians. We have the ball. That is why people want to invest here, sell their cars here. Why would we give up that power?,” Pimentel said.

Brazil, a key market for global automakers such as Ford, Fiat and General Motors, last year sharply raised taxes on imported cars in an attempt to encourage local production.

Last month, Brazil also imposed quotas on auto imports from Mexico, prompting criticism of what many see as a surge in protectionism.

Rousseff has accused rich countries of unleashing a “tsunami” of cheap capital that is propping up Brazil’s currency and leading to a flood of imports while making the country’s exports less competitive.

Pimentel rejected the charges of protectionism. He said Brazil is playing by the rules and could not be challenged at the World Trade Organization.

“There are always going to be people complaining and gritting their teeth ... but nobody is going to open a panel against us.”

Reporting by Esteban Israel; Editing by Bernard Orr

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