The Brazilian government withdrew support from a proposal to limit auto imports to authorized dealers only, throwing the door wide open to this country's modest but growing auto import market.
Economic ministry officials responsible for the project said last week they would not make the effort to rewrite their proposed regulation to bar auto imports by unauthorized dealers.Government lawyers examining the proposal warned that the current version would allow factory-authorized importers to create a cartel, flying in the face of the government's aim to open the country to international sales and competition.
Without a major revision, the proposal cannot be approved.
Brazilian automakers are hardly threatened, with or without a ban on "gray market" entries through this country's slowly opening door to imports. Since outright import bans were replaced by duties two years ago, duties on automobiles have fallen to 50 percent from 80 percent of the home country retail price.
Nevertheless, Brazil's recessive economy is doing more than the stiff tariffs to keep out auto imports.
Between January 1991 and July this year, Brazil imported 37,000 autos. That included 27,500 cheap Russian copies of 1970s Fiats brought in by authorized dealers, 4,100 by other authorized importer-dealers and 5,400 imported by independents or individuals, according to the Brazilian association of automotive importers, which represents 18 factory-authorized importers.
During the same 19 months, Brazilian automakers sold 1.17 million vehicles here.
With support flagging for the exclusionary proposal, factory-authorized importers who had backed the idea announced they were prepared to negotiate.
There is need for a formula "that will let the serious dealers work," said Emilio Julianelli, Aveiva president.
He said independent importer-dealers should be required to pay taxes, provide guarantees, give technical assistance and have a stock of spare parts on hand.
Roberto Lima, president of the independent importers association, Abraciva, recalled that the federal consumer code already makes a guarantee mandatory.
A ministry spokesman said measures should be taken to prohibit the frauds sometimes inflicted by unscrupulous free-lance importers and auto dealers, but not at the expense of the market opening.
"The proposed regulation would have been "like handing the old fair- trade-law issue over to the manufacturers without a fight," said one independent dealer with experience in both the United States and Brazil.
So-called fair-trade laws proposed for U.S. markets in the 1960s would have
closed down discount houses by making it unlawful to sell at anything other than factory-set prices, he explained. The defeat of those laws, however, has allowed the discount industry to mushroom in the United States.