According to Reuters article published on May 25, 2023, Brazil's government on Thursday disclosed a pack of initiatives aimed at boosting local industry, with a special focus on the automotive sector as it tries to modernize its fleet and reduce vehicle prices for consumers.
The measures, including tax cuts and additional state-backed funding, were announced after a meeting of government officials with business leaders in Brasilia, where they discussed ways to re-industrialize Latin America's largest economy.
Vice President Geraldo Alckmin said that state development bank BNDES would provide 4 billion reais ($799.47 million) in dollar-denominated financing for local industry, while federal taxes levied on some cars would be reduced.
He said the government must make an effort to bring down the so-called "Brazil Cost" of doing business in the country, adding that foreign exchange rates were now "competitive" while interest rate futures were ticking down.
"Our fleet is getting old and the industry is facing a hard time due to lack of credit," said the vice president, who is also President Luiz Inacio Lula da Silva's minister of development, industry and trade.
He noted that along with the additional credit provided by BNDES for all industry, the government would also lower the PIS and COFINS federal taxes levied on vehicles of up to 120,000 reais to reduce their final price and boost sales.
Discounts would reach as much as 10.79%, he said, leading the head of automakers association Anfavea to estimate Brazil will likely be able to sell vehicles below the key psychological level of 60,000 reais.
"The smaller and more affordable the car, the greater the tax cuts," Alckmin said, adding that low-polluting vehicles would be prioritized in the fresh government stimulus.
Compact cars such as the Renault Kwid and the Fiat Mobi are among the cheapest in Brazil at the moment, but both are sold above the 60,000-real mark.
($1 = 5.0033 reais)
