Brazil hopes to steer automotive growth with tax cuts image

Brazil on Monday unveiled a series of tax and credit incentives aimed at boosting auto sales in its latest attempt to restore a lost economic boom.

The global economic and financial crisis “creates problems for emerging markets as a whole,” said Finance Minister Guido Mantega at a news conference. “It requires a redoubling of efforts to maintain a reasonable level of economic growth.”

The so-called IOF tax on consumer credit will fall to 1.5 percent, the level it was at the start of 2011, from the current 2.5 percent, Mantega said.

“We have to push back against the effect of the crisis,” Mantega told reporters in Brasilia.

In conjunction with these tax cuts, banks have committed to extend and ease financing for vehicle purchases and automobile manufactured have promised to cut sales prices and not lay off any workers through the end of August, Mantega said.

The plan is expected to benefit some of the world’s largest automakers that have operations in the country, including Italy’s Fiat SpA , Germany’s Volkswagen AGand U.S.-based General Motors Co and Ford Motor Co .

Total sales in April fell 10.8% compared to last year and sales of cars and light commercial vehicles were down 10.4%. Total sales reached 257,885 units, down 14.2% from March, and sales of cars and light commercial vehicles were down 13.8% from March.