| BUSINESSWEEK ONLINE : OCTOBER 23, 2000 ISSUE | ||||||||
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| INTERNATIONAL -- LATIN AMERICAN COVER STORY
Brazil Shows How Much It Loves Carmakers (int'l edition) When Ford Motor Co.'s new $1.9 billion car plant opens in the Brazilian state of Bahia next September, the municipality of Camacari will feel the difference. About 95% of the 5,000 jobs at the plant will go to locals. Then there's the boost the factory will provide to nearby businesses. ''Local GDP will go up 10 percentage points,'' says Luc de Ferran, director of manufacturing operations at Ford South America. A prize worth winning--but Bahia won it at a cost. Neither the government nor Ford will reveal the exact value of the incentives that helped bring the plant to Bahia. But it is known that federal tax breaks alone add up to $100 million a year for 10 years. Ford also got cheap loans from Brazil's Development Bank, while Bahia offered tax breaks, free land and infrastructure. FACTORY-SPOTTING. Brazil's auto boom is built in part on such largesse. Since the mid-1990s, state governments have been fighting a ''fiscal war'' to attract investment. Sometimes the rivalry borders on the absurd: Officials from Bahia recently infuriated their colleagues in Sao Paulo by spotting congestion-bound factories from a helicopter and inviting them to move north. A new federal law to limit state spending may help curb excesses, which have benefited carmakers immensely. Incentives play a role in more than 20 auto projects announced since 1996. Rio de Janeiro state paid for 34% of the cost of Peugeot Citroen's new $600 million factory at Porto Velho. Parana state cut a similar deal with Renault. Most auto makers maintain such lures do not weigh heavily in their investment decisions. ''Every country in the world sets competitive conditions to attract the auto industry,'' says Ford's de Ferran. Thomas Schmall, manager of Volkswagen's new Audi plant in Parana state, is more frank: ''Of course, the ultimate reason was the incentives.'' He stresses, however, that VW was also drawn to Parana by the quality of its workforce. The irony is that Brazil may be paying for something it can get for free. Its huge domestic market and low wages are incentive enough for foreign carmakers. ''The investments would have come here in any case,'' says Glauco Arbix, an auto industry specialist at the University of Sao Paulo. ''This is public money that could be going to schools and hospitals.'' If foreign car companies are the big winners in Brazil's fiscal war, the biggest losers may be the country's taxpayers. By Jonathan Wheatley in Sao Paulo _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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