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SAO PAULO, Nov 11 (Reuters) - The Sao Paulo state government said on Tuesday it would extend a 4 billion reais ($1.8 billion) credit line to the automotive industry to help it ride out the current financial crisis, which is putting the brakes on Brazil’s economy.
The state’s finance secretariat said in a statement that the money would be lent by state-controlled bank Banco Nossa Caixa BNCA3.SA, which will offer loans with maturities of up to 18 months to vehicle financing units.
Sales of new cars and trucks in Brazil slumped 11 percent in October, hurt by a severe retraction in the availability of credit due to the global financial crisis.
The slowdown follows three years of torrid growth in Brazil’s auto market, which has benefited from a credit boom that helped fuel a surge in consumption. But the availability of credit has evaporated in the last two months, threatening to derail one of the fastest-growing industries in Brazil.
The federal government has also instructed state-run Banco do Brasil (BBAS3.SA) to make a available a total of 4 billion reais so that vehicle financing units can increase lending and spur sales.
Brazil has become a crucial market for global automakers such as Italy’s Fiat FIA.MI, Germany’s Volkswagen AG (VOWG.DE) and U.S.-based General Motors Corp (GM.N) and Ford Motor Co (F.N). Asian and French manufacturers are also relying increasingly on the Brazilian market to compensate for a slowdown in sales at home.
The recent slump in sales has prompted several automakers to cut back on production by reducing shifts and ordering factory workers to take periods of paid leave so as to avoid building up costly inventories. (Reporting by Alberto Alerigi Jr., Writing by Todd Benson; Editing by Maureen Bavdek)