The economic instability creates uncertainty for the investors in the automotive sector in Brazil

There is still the bad news for the country of Brazil. A few days ago the multinational General Motors Company offered statements on the possibility of reconsidering the investment of 1.6 billion dollars that was planned for this year in the country of Brazil, if in the country the situation does not improve. The statements were made ​​by the company president Dan Ammann, who assessed the current situation as uncertain as the 5 (five) world producer of the cars and is in the worst recession for 25 (twenty five) years.

“I expect to see the political and the economic developments in the next six (6) to twelve (12) months, which could allow us to cling to our investment plan,” Dan Ammann told the newspaper Estado from Sao Paulo.

Until the year of 2019, the General Motors Company estimated a total investment of 1.600 million of dollars in the technology and the products. But the new considerations are made ​​after seeing the impact of the recession on the market that has declined 29.3 percent the production of the trucks and the cars and a reduction in sales of 38.8 percent, the lowest level since 9 (nine) years ago. Although so far it is too early to decide whether any American multinational closed the five (5) plants operating in the country of Brazil, a deadline for notice the stability to make viable the investments are proposed.

The economic instability creates uncertainty for the investors in the automotive sector in Brazil2

The General Motors Company has not taken definitive measures affecting the Brazilian market, but other companies with investments in the same category as the Fiat Company and the Volkswagen Companydid.The GermanVolkswagen and the Italian Fiat announced the introduction of a system of rotating affecting an income of 75 (seventy five) percent of the factory workers of the company in Córdoba and whose production is destined to the country of Brazil.The measure was taken due to the decrease in the consumption of the Brazilian market for which produced 17.785 units, 30.6% less compared to the same month of the year of 2015 and 49.5% from the month of December, which has meant the worst start to a year since the year of 2007.

The fears of the General Motors executives are fine unfounded, if you also consider the numbers of all industrial activity in the country of Brazil it fell 8.8 percent in the year of 2015. The decline also affected the employment in the sector, as the hours worked fell to 10 (ten) to 3 (three) percent.The industrial GDP slid 3.9% in those three (3) months and the retail sales decreased 2% (two). The services fell 5.7% (five point seven). According to a report recently released by the firm that assesses the global economic Standard & Poor’s, the poor performance of the economy is more about the domestic politics than with the international situation, affected by the slowdown of the Chinese economy and the low oil prices.

The international agency downgraded on Wednesday for the second time the Brazilian sovereign rating from BB + to BB, leading to a high speculative grade investments in the foreign currency. Judging the economic contraction for this year it will be no less than 3% (three) of GDP accompanied by a clear risk in the fiscal policies. The worst risk that the economy of the South American giant is again facing the same conditions that in the year of 1995 and the year of 2005, between B + and BB- rating on the sovereign rating.

IThe economic instability creates uncertainty for the investors in the automotive sector in Braziln the year of 2015, due to the rising food prices and the transport fares, the country of Brazil recorded the highest annual inflation in 12 (twelve) years and a severe recession which consisted in more than 1.5 million jobs, 42.5 percent more than in the year of 2014, according from the data of the Brazilian Institute of Geography and Statistics (IBGE).

 

The industry, with 608.000 job positions eliminated was the most impacted sector and Sao Paulo was the city that led this statistic. For now it projected a decline in the country of Brazil that returned to the employment of the population, only 28.000 in the public sector layoffs have occurred during the first two (2) months of this year, while in the private sector have been 23.000 layoffs especially in the construction companies and the metallurgy, who inevitably have been affected by the fatal investment and the falling of the oil prices.

A dramatic number of employment positions were lost in the month of January of this year, the inflation rates also add to 1.27%, which rose to 10.71% year rate, which scored its worst result since the year of 2003. According to the information provided by the Brazilian Institute of Geography and Statistics (IBGE), in the month of January the inflation was of 0.31 percentage points higher than that registered in the month of December. The Beverage segment and the transport sector were the ones who had more impact on the index, which closed the year of 2015 at 10.67%. It’s only been two (2) months of this year of 2016 and the economic situation in the country of Brazil does not seem encouraging for the people and for the vigilant investors the scene as the General Motors Company.

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