2012.08.06 18:09:01 Brazil Auto Manufacturers Hold to 5% Sales-Growth Forecast

SAO PAULO--A surge in domestic sales in July has raised hopes among
Brazil's motor-vehicle manufacturers for a solid second-half
performance, with the industry's trade group holding to its 2012
forecast of a 5% rise in overall sales.

At a news conference Monday, the president of the National Motor
Vehicle Manufacturers Association, Cledorvino Belini, said, "The
Brazilian economy is going to post solid growth in the second half of
the year. Interest rates will continue to decline, and credit will
continue to expand."

Earlier Monday, the association released July sales figures for motor
vehicles. Although the year-to-date figure for sales of 2.081 million
units was up only 1.8% from the same period of 2011, July showed a
stunning 18.9% rise over July of 2011, to 364,196 units.

Brazil's economy posted anemic growth of just 0.8% in the first
quarter of 2012 against the first quarter of 2011. According to
economists, second-quarter growth wasn't much better, although the
second half of the year could produce a rebound.

Brazil's central bank systematically has been reducing its Selic base
interest rate since last year, when the rate peaked at 12.5%. The rate
now stands at 8.0%, with more cuts likely. Traditionally, more than
half of auto sales in Brazil are accompanied by consumer loans.

Brazil's government, meanwhile, has sought to aid the auto industry
specifically with reductions in excise taxes.

Mr. Belini said, "The gains for sales in July were due in great part
to the reduction in taxes."

The tax breaks, however, are due to expire on Aug. 31. Finance
Minister Guido Mantega said last week the government isn't favorably
disposed to renew the tax advantage after that date.

Mr. Belini said, "Although the government has shown signs to the
contrary, it would be extremely useful to renew the tax cuts."

The association is forecasting a 2% rise in motor-vehicle production
this year and a 3% decline in exports, Mr. Belini said. Exports are
likely to fall because of a global economic slowdown. Production will
lag the growth in sales as dealers gradually sell off inventories
created during the first half of the year, when sales were slow.

Inventories were equal to 27 days worth of demand as of July, down
from 29 days as of June, Mr. Belini said.


Write to Rogerio Jelmayer at rogerio.jelmayer@dowjones.com


(END) Dow Jones Newswires

August 06, 2012 12:09 ET (16:09 GMT)