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Brazil Vehicle Sales Fall by Most in a Year as Defaults Rise

Brazilian vehicle sales fell the most in more than a year in April, as default rates rose on auto loans, strengthening the government’s case for stimulus measures to boost growth.

Sales fell 10.8 percent from a year earlier, the biggest drop since March 2011, led by falling sales at Hyundai Motor Co. (005380), General Motors Co. (GM) and PSA Peugeot Citroen (UG), according to a report released today by the Brazilian carmakers’ association Anfavea.

“As the credit market tightens, the availability of loans isn’t there,” said Jon Sederstrom, director of research firm J.D. Power & Associates in Sao Paulo. “People simply can’t afford to buy cars in the same numbers that they could previously.”

The default rate on auto loans rose to 5.7 percent in March, from 3 percent a year earlier, according to the central bank. Policy makers have cut the benchmark Selic rate 3.5 percentage points to 9 percent since August, more than any other policy maker in the Group of 20 Nations, to try to revive growth in Latin America’s largest economy.

Hyundai sales fell 26.3 percent from a year earlier, while General Motors declined 23.2 percent, and Peugeot slid 21.9 percent. Nissan Motor Co. (7201) saw sales rise 170 percent over the same period. Brazil’s motor industry is dominated by Wolfsburg, Germany-based Volkswagen, Turin, Italy’s Fiat and Detroit-based GM, which control about two-thirds of the market between them.

The weakness of car sales is evidence that the economy may be decelerating, said Jankiel Santos, chief economist at Espirito Santo Investment Bank in Sao Paulo. Traders are wagering that the central bank will cut the Selic rate to as low as 8 percent by October, according to Bloomberg forecasts based on interest rate futures contracts.

“It reinforces the perspective on an extension of the monetary easing cycle,” Santos said in a telephone interview.

Vehicle production fell 7.5 percent in April from a year earlier, while exports fell 0.5 percent.

In the minutes to its April policy meeting, the central bank signaled that it may continue to cut the Selic rate “with parsimony.”

To contact the reporter on this story: Matthew Bristow in Brasilia at mbristow5@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.

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