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  February 26th, 2016 | Written by

GM May Reconsider Brazil Investment Plans

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  • GM’s confidence in Brazil has been seriously eroded by a deep recession and political uncertainty.
  • GM exec: Brazil needs reforms to its tax, labor and regulatory laws because it is “terribly uncompetitive.”
  • GM, one of Brazil’s major foreign private-sector investors, may reevaluate its investment strategy in the country.

Despite some media reports to the contrary, auto maker General Motors Co. has reaffirmed reports that it will reconsider plans for new investment in Brazil if the economic and political situation does not improve.

GM announced last year that it plans to invest $1.62 billion in new products and technology in Brazil over the next three years, but, business confidence there has been seriously eroded by the worst recession in more than a quarter century and political uncertainty fueled by an ongoing effort to impeach President Dilma Rouseff.

Barry Engle, GM president for South America, said in a recent interview with a major newspaper in Sao Paulo and quoted by Reuters, that Brazil needs changes in fiscal policy and reforms to its tax, labor and regulatory laws because it is “terribly uncompetitive.”

In the same interview, GM CEO Dan Ammann said that, “I hope to see political and economic advances in the next six to 12 months, which would allow us to stick to our investment plan,” adding that GM continues to view Brazil as a market with great potential in the long run, but “a big change” is needed to reach that potential,

But, if the GM chief’s hopes aren’t fulfilled, the company, one of Brazil’s major foreign private-sector investors, “will re-evaluate” its investment strategy.

“The important question is to know when we will see the stability that allows us to continue investing,” Ammann said. “We are worried because the environment is unstable and the outlook is uncertain for the next few years.”

Brazil, suggested Ammann, would do well to follow the example of Argentina, where last November’s election of President Mauricio Macri has been credited with inaugurating a shift to business-friendly government policies that are restoring investor confidence in that country.

Argentina showed how the situation can quickly change with the right leadership of the economy,” said Ammann.