May 8, 2019 / 1:33 PM / 2 months ago

Argentina raises tax rebate for Mercosur auto exports as market stalls

BUENOS AIRES, May 8 (Reuters) - Argentina will give its auto exporters a larger tax rebate to help stimulate the flagging local sector that has been hit hard by a consumption slump and economic crisis in Latin America’s No. 3 economy.

The country’s ministry of labor and production said on Wednesday that it would raise tax refunds to 6.5 percent from 2 percent for auto exports to the Mercosur bloc that includes major trade partners Brazil, Paraguay and Uruguay.

The move should help bolster autos exports which have dropped 11.4 percent so far this year, according to data from the local Association of Automotive Makers (ADEFA). Brazil is the top overseas buyer of Argentine-made cars.

Argentine Minister of production and labor Dante Sica said the move should help “exports recover their dynamism and rev up an increase in the production of units planned for 2019”.

The new higher tax refund for Mercosur exports - which was only lowered as recently as last year - will come into effect from May 9, the ministry said. Auto exports outside the trade bloc already receive the 6.5 percent rebate.

Argentina’s car market has been hit hard by an economic crisis that has whipped the country since the middle of 2018, with high inflation and a tumbling peso currency pushing the nation into recession and draining people’s spending power.

ADEFA data show that Argentina car production dropped over 30 percent in the first four months of the year to around 107,000 vehicles. The ministry said that 60 percent of local production is exported, with most of that going to Mercosur.

Argentina President Mauricio Macri, facing a rising political challenge ahead of national elections in October, is trying to revive growth to help bolster his popularity with hard-hit and increasingly wary votes.

The automotive sector is one of country’s top exporters and a major job creator, employing around 60,000 people last year.

Reporting by Adam Jourdan and Walter Bianchi Editing by Susan thomas

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