SAO PAULO -- Brazil’s January vehicle production rose 3.5% over year-ago to 126,600 units from 122,300, and climbed 16.2% compared with December.

Sales, however, fell 8.9% to 113,500 units, compared with 124,600 in January 2001. Of vehicles sold in January, 76% were entry-level subcompacts with 1.0L engines.

Brazil’s car exports remained relatively stable at 18,300 units, compared with 18,400 in the prior-year period, a 0.4% change. Inventory levels increased to 149,300 units from 142,900 in January 2001.

Ricardo Carvalho, president of the National Assn. of Automotive Vehicles (Anfavea) considers the drop in demand a seasonal phenomenon. He says January generally is a weak sales month. Even so, sales from manufacturers to dealers represented the third-best January since 1957.

“The ideal is to have a 30-day inventory, but in recent months the average has been higher,” Carvalho says. Says Hugo Maia, president of the National Federation of Vehicle Dealers (Fenabrave): “The problem is (sales) promotional campaigns are becoming a routine and the consumer is beginning to get tired of them.”

Carvalho expects sales this year to increase 3%, production 5% and exports 10%. The goal, he says, is to achieve $4.5 billion in exports, but this will depend on bilateral agreements, with Mexico, the European Union and Argentina. Brazil’s southern neighbor has experienced an 88% drop in vehicle sales because consumers have been unable to withdraw their money from the banks.

Additionally, the Brazilian government plans to exact fines from Argentina for its failure to comply with the rules of the Mercosur automotive trade pact agreement in force. Brazil last year imported $600 million more in cars than it exported to Argentina.

According to the trade pact agreement, there should be a balance of payments in the automotive sector. If a manufacturer sells $100 million worth of vehicles to Argentina, it would import between $90 million and $110 million. Within these limits, there is no tariff.

Companies that exceed this percentage must pay 70% tax under the Common External Tariff agreement. Four Brazilian vehicle makers, in principle, may be subject to pay the fine: Ford Motor Co., PSA Peugeot Citroen, Toyota Motor Corp. and Scania AB. Anfavea, however is trying to suspend the fine.