Brazilian Automobile Industry and the future Industrial Policy

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Résumé:

The continuous growth of the Brazilian automotive industry comes to an end. According to ANFAVEA (2016), Brazil produced 2.45 million automotive vehicles in 2015, which marks a decrease of approximately 35% from its historical production of 3.74 million vehicles in 2013 (see Figure 1). The Brazilian automotive industrial park currently consists of 31 OEMs, 600 auto parts companies and 5,500 dealerships. In total, there are 65 industrial units with production capacity of 4.5 million vehicles. The majority of this capacity expansion was realized due to positive market forecast expected to reach 6 million vehicles sales in 2020 and also the recent established INOVAR-AUTO Policy (in place from 2013 until 2017), which required additional local production steps as well higher local sourcing to avoid additional taxes (Ibusuki et al, 2015). The main objective of the INOVAR-AUTO Policy was to improve the trade balance of Brazilian automotive industry which showed a strong deficit.
The introduction of INOVAR-AUTO has triggered strong political and economic changes within the Brazilian automotive industry. This incentivized government program is motivating major investments in the expansion, modernization, and creation of new factories; enhancing energy efficiency, technology and innovation; and increasing local content of auto part industries (Pascoal et al, 2014). But now with the strong depression of Brazilian national economy and the retraction of local sales demand, ANFAVEA started a strong lobby to increase export volumes aiming to utilize the open production capacity and also leveraging the local currency depreciation of more than 40% in 2015. Mercosur FTA among Brazil, Argentina, Paraguay, Uruguay and Venezuela will play a key role on it due to trade block bilateral agreements. Mercosur started discussions with NAFTA and EU but this will take time as NAFTA is more interested in the new TPP (Trans-Pacific Partnership) Agreement and EU is still struggling to normalize its own trade block avoiding former members to leave it.
This research objective focus on Industrial Policy Improvement to strengthen the local industry considering also the end of INOVAR-AUTO in close 2017 and on-going discussions for an INOVAR-AUTO Phase 2 from 2018 onwards.