Brazil has launched a stimulus package worth more than $10bn to revive its struggling automotive industry and help return the stagnating economy to its former impressive levels of growth.

Finance Minister Guido Mantega said the measures should help revive an economy that has been stagnant since mid-2011, while also providing protection from the debt crisis in the euro zone.

“If the crisis gets worse, if they don’t fix the problems in Greece, it will be certainly difficult for us to reach a 4.5 percent growth rate this year,” Mantega told reporters.

“But Brazil is in a position to react to the crisis and keep growing – I wouldn’t say at 4.5 percent, but to grow more than the 2.7 percent we had last year.”

Guido Mantega announced late on Monday a reduction in the IPI industrial tax on vehicles and IOF tax for individual borrowers. The central bank also agreed to free up some 18 billion reais ($8.8 billion) in bank deposit requirements to boost car financing.

The plan is expected to benefit Italy’s Fiat, Germany’s Volkswagen and U.S.-based General Motors and Ford Motor.

“We want Brazil to remain among the largest players in the global auto industry,” Mantega said.

Sales in Brazil’s key car industry have fallen particularly sharply as rising defaults have prompted banks to restrict credit, pushing stock build-ups to their highest levels since the onset of the financial crisis in 2008. Vehicle sales fell 14.2 per cent in April from March, according to the national automakers’ association Anfavea.

Source: Reuters, FT
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