Brasilia – Brazil's government announced a 30 percent hike in taxes levied on vehicles imported from outside Mercosur, as well as on automobiles produced within the South American trade bloc that do not meet a series of requirements.
Finance Minister Guido Mantega said at a press conference Thursday that the measure encompasses automobiles, tractors, buses, trucks and light commercial vehicles and will be in effect through the end of 2012.
Automakers producing in Brazil who invest in technological innovation and who perform most of their processes on national soil, including stamping, painting and the manufacturing of engines, transmissions, clutches and other parts, will be exempt from the tax hike.
Brazil's Development, Industry and Foreign Trade Ministry has given companies 60 days to comply with the standards and thereby avoid the higher tax rate.
Speaking at a press conference, Mantega noted that Brazil is the world's fifth-largest automobile market and the seventh-biggest automaker and said the government is not going to allow the country to lose its place as a manufacturer.
"Our goal is to maintain employment in Brazil, which is what will guarantee continued investment growth," the finance minister said.
Following the tax hike, automobiles with engine displacement of up to 1,000 cubic centimeters (61 cubic inches) will be subject to an IPI tax on industrial goods of 37 percent, up from a current rate of 7 percent.
For automobiles with engine displacement of between, 1,000-2,000 cc, the IPI will be between 41-43 percent, Mantega said.
Vehicle imports between January and August rose 34 percent relative to the previous year to 530,998 units, according to the most recent figures from Brazil's Anfavea national automakers' association.
The tax hike comes as Brazil struggles to help industries cope with the effects of a strong currency, including a flood of cheap imported goods.