Automotive Manufacterers in Brazil

Media Review

The two publications that I reviewed focused on the automotive manufacturers moving production to Brazil. The incentive of them moving production to Brazil is that Brazil's auto market is the fourth largest market in the world and it could possibly offset the falling demand in the United States. Also by producing in Brazil, they can avoid the increased tax on imported vehicles set by Brazilian government last year.

One of the articles focused on the Jaguar Land Rover (JLR) company opening a factory in Brazil, by a Brazilian source. It highlighted how JLR's CEO, Ralph Speth, made decision to manufacture in Brazil. A big part that weighed on his decision to move to Brazil was to avoid the industrial product tax (IPI) that has been recently imposed by the Brazilian government. Also moving to Brazil, where the demand is growing stronger, offsets the falling demand in normally stronger markets, like the US and Europe.

In the second article, it outlined how GM is experiencing difficulties with labor unions and strikes due to the possibility of having to lay off almost 1000 workers. In this article from an American source indicates that although Brazil is the fourth largest auto market, that they experienced a decline in sales compared to last year which is why they feel the need to lay off employees. They feel that this decline is because the tax cuts which allowed banks to finance auto loans more easily are set to expire soon and will result in a bigger decline in sales. The purpose of those tax cuts and the IPI was to encourage auto makers to cater to the Brazilian economy by producing domestically, however the challenge will be for Brazil to decide to extend these tax cuts to keep encouraging business or let them expire and incur the impact that could have on employment levels.

I feel that these two articles are relevant to the class in that they illustrate that there are many benefits