SAO PAULO - New taxes and interest rates have hurt Brazil's car market. They were adopted to fight currency speculators.
Sales dropped 60 percent in the first week of the new measures.
Silvano Valentino, president of industry association Anfavea, said car manufacturers are extremely worried.
Ford Motor Co. closed its assembly plant in Sao Bernardo do Campo on 14 November. It will reopen for 10 days in December, then close again for Christmas. Union officials agreed to the closure rather than face layoffs. The shutdown will cost Ford 16,500 units of production.
Volkswagen had 18,700 cars in inventory. It stopped production on Mondays and Fridays. BMW said its investments in a Land Rover plant and a joint-venture engine plant with Chrysler would proceed on schedule. Volvo spokesman Carlos Morassutti said Volvo is re-evaluating its planned investment of $400 million in new products and an enlargement of its engine plant.
The state of Rio Grande do Sul is reviewing its proposed arrangement with Ford for a new plant there.
German shock absorber and clutch maker Sachs Automoveis will proceed with its $200 million investment in new plants over the next two years. President Julio Caspari said he is confident the government will reduce interest rates before 1 January.
Brazil raised interest rates to 43 percent, and raised income taxes and the tax on cars.
Government finance ministers were reacting to a fall in stock market prices, following currency speculation. The measures did not immediately encourage investors, but they did discourage buyers.
'We were expecting a tax reform, hoping for lower vehicle taxes,' said Valentino. 'We'll now have to live with an inverse situation, which will cause irreparable damages to the market.'
The president of Brazil's supplier organization, Paulo Roberto Butori, said he thought the sales decline would level off at about 15 percent below October levels. The 500 member companies of Sindipecas are investing $1.8 billion in Brazil this year and had plans to invest $8 billion more by 2000.
'A 15 percent loss would in itself be reason enough for firings,' Butori said, 'but to us, the very high interest rates are what really is worse.'