Brazil Announces Easing of Protectionism in Auto Industry

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – After being criticized by the World Trade Organization (WTO) for infringing free trade laws with the fiscal incentives given to the automotive sector, the Brazilian government announced on Tuesday (April 18th) that it would be discussing measures to reduce domestic production protection.

“We can no longer discriminate between domestic and foreign producers and, I believe, the new Brazilian automotive policy will not do continue with this discrimination,” said Secretary of Development and Industrial Competitiveness of the Ministry of Industry, Foreign Trade and Services, Igor Calvet speaking to reporters during the announcement of the new automotive industry policy.

Dubbed ‘Rota 2030’ (Route 2030), the new program is expected to replace Inovar-Auto starting January 2018 and to run for thirteen years, according to officials. According to Calvet, the current Inovar-Auto program has been criticized by foreign entities as showing ‘exacerbated protectionism’.

“This excessively protectionist view, of protecting the Brazilian market at all costs, is being altered. We will open this discussion with importers and domestic producers, but in our view the competition of imported vehicles, the exposure of domestic producers to competition, will be healthy and important for an end to exacerbated protectionism,” Calvet concluded.

The official however did state that the opening up of the market to foreign products would not necessarily mean a reduction in the final price of the vehicles. “In Brazil, prices depend on a series of variables, such as tax issues, logistical difficulties and labor issues,” noted the secretary.

Nonetheless, the announcement was seen as a step forward by Luiz Gandini, president of the Brazilian Association of Importers and Manufacturers of Automotive Vehicles (ABEIFA). “These new discussions will allow the country to move faster to regaining economic growth.”

Adding, “In our industry, what we need is predictability. The IPI [tax over industrialized products] jumped from 25 percent to 55 percent. The same thing happened with other taxes. It’s impossible to plan with these changes,” Gandini was quoted by a government news source.