Way to go Dilma!!!

Another well written article from wjwoodward, with facts that point out what is going on in this great country.   I can buy a new Toyota Corolla in the USA for less than I can by a 1997 used Toyota Corolla here.   The one advantage I see here is the ability to get Flex cars, those that use both gasoline and ethanol.

Where is this so-called "Asian Invasion" that Brazilian car makers are whining about? Just in their minds, for sure!

The COMBINED sales of the top ten imported vehicles for 2011 until the end of October was 95,045 units according to official figures.

At the same time EACH of the top six national cars sold many more units. VW Gol - 244,893 units, Fiat Uno - 226,287 units, GM Celta - 121,560 units, GM Corsa Sedan - 104,294 units, Fiat Strada - 99,522 units and VW Fox/CrossFox - 99,005 units.

Their combined sales for the same period were 895,561 units or almost 10 times greater than the top ten imports. Yet these "crybabies" want even further protectionist regulations and increased tariffs and taxes to virtually eliminate what little foreign competition really exists in this country.

If the same situation existed in North America both the American and Canadian governments would not be knuckling under to the car makers' demands, instead they would be invoking their anti-monopoly and anti-price fixing laws in order to protect consumers. Pity that the consumer is the last thing on the mind of Brazilian politicians.

For all intents and purposes Brazil is already a "closed market" as far as car sales goes and these greedy SOBs are wanting the government to close it entirely. What's the matter, aren't the top four auto makers in Brazil satisfied with the advantage they already have in the market? And they've got the nerve to talk about "level playing fields"...GIVE ME A BREAK!

And about jobs - most of these foreign manufacturers had plans of constructing plants or already have plants in South America. Their network of dealerships also provides a great many jobs throughout Brazil, all of which are now very much in jeopardy. Once again I repeat.... WAY TO GO DILMA!!!

So just what makes cars so damn expensive in Brazil anyway? Obviously one of the biggest villains is the overwhelming tax burden. The consumer pays IPI a tax imposed on all industrialized goods, which depending on the car can range from 27 to 37 percent of the total price. Then there is the ICMS which is a furhter tax imposed on the transportation of goods - YIKES it isn't enough they zing you on the product itself, but also getting it from the factory to you. On top of that COFINS and PIS which are social taxes. This is why the same car you buy manufactured here in Brazil costs R$ 56,210 but is exported to Mexico and sells there for only R$ 25,800. To better understand how this swindle works read on....


The following is a translation of an excerpt of an article written by Leandro Roque which appears on the Ludwig von Mises Institute Brasil website.

The Honda City is a good example of what happens to the price of the car in Brazil. Made in Sumaré in the interior of São Paulo, in Mexico it is sold for R$ 25,800 (LX version). This price includes freight, of R$ 3500, and profit for the dealership at around R$ 2000. There remains, therefore R$ 20 300.

Adding the costs of taxes and distribution to R$ 20 300, we have R$ 16,413.32 of tax burden (29.2%) and R$ 3,979.66 profit margin for the dealers (10%). The total is R$ 40,692.00. Whereas in the R$ 20,300 billed to Mexico the automaker already has its margin of profit, "Profit Brazil" (additional) is R $ 15,518.00: R $ 56,210.00 (price sold in Brazil) minus R$ 40,692.00.

Is it possible that the automaker makes an additional profit of $ 15,500 on a car like this? What does Honda say about it? Nothing. When consulted, the automaker says only the company "does not talk about it."

The journalist makes a jumble with numbers, it's all very confusing. I'll try to clarify a little what he wrote.

The Honda City comes out of the automaker in Sumaré  for R$ 20,300. The dealership sells the Mexican car for R$ 25,800. The R$ 5,500 difference is explained by the price of Mexican freight paid by the dealership and its profit margin.

Until that point, everything is all right. However, it gets more complicated when we discover that the same car that comes out of the factory for R$ 20,300 is sold by dealers to consumers in Brazil for R$ 56,210. What explains this increase?

To understand this process, before cursing the car makers of being "greedy" for wanting bigger profits (everyone knows that only others are greedy, we never are), one must look at the tax burden in Brazil.

The subject is extremely boring and I do not intend to go into detail here. Suffice it to say only that, for example, the IPI is on the price of the vehicle that the automaker will sell to Brazilian dealers, but not for Mexican dealers, as the IPI does not apply to exported products. The same occurs with the ICMS, which does not focus on industrial products for export. COFINS is calculated on the gross revenue of the automaker, the same happens with the PIS.

Thus, using their own data in the report, we have the following sequence:

Prices

Factory price: R$ 20,300

Price to dealer: R$ 52,231.22

Dealership price for the end consumer: R$ 56,210



Profits

Automaker's Profit: R$ 15,518.00

Dealership's Profit: R$ 3,979.66



Tax burden: R$ 16,413.22



Note that the tax burden is greater than the profit of the manufacturer and more than 4 times greater than the dealership's profit. Interestingly, Brazilians condemn the automaker's profit, which is at least offering them a tangible asset, and give a free pass to the rake-off by the government, which in turn gives them two types of roads: those with tolls and those with potholes.