OREANDA-NEWS. August 16, 2012. Japanese auto giant Toyota inaugurated a USD 600 million plant in the southeast Brazilian state of Sao Paulo its third in the country, with an initial aim of producing 70,000 cars a year.

The facility, located 91 km west of Sao Paulo in Sorocaba, will begin producing Etios compact cars in September.

According to Brazilian Industry and Foreign Trade Minister Fernando Pimentel, the Sorocaba plant, billed as environmentally friendly and employing 1,500 workers, amounted to a vote of confidence from Toyota “in the strength of the Brazilian economy and the Brazilian auto market”.

Toyota President Toyoda announced after talks with President Dilma Rousseff in Brasilia that the automaker also planned to invest USD 495 million to build an engine plant in Porto Feliz, 20 miles from Sorocaba.

The swift development of the Brazilian auto industry is a result of the drastic measures of the Government of Brazil, in the promotion of the so-called policy of "Big Brazil" to support the auto industry in the country.

It will be recalled that just two years ago, steps to stimulate the auto companies and investors to develop innovative projects in the country were started, instead of encouraging imports.

Last September the government raised the taxes on imported cars by 30 percentage points, to between 37 and 55 per cent, in response to surging imports. The rise, which took effect in December, hit producers that do not yet produce locally, while leaving cars made in Mexico and Mercosur eligible to enter the country duty-free.

As a result, South Korea's Hyundai, Japan Nissan, Fiat, Toyota and China Chery and Jac started building factories. At the same time, Ford, VW and PSA Peugeot Citroen continued to expand existing plants in Brazil.

Analysts estimate that in 2011-2016 Brazil will receive a USD 25 billion investment only in the automotive industry itself, not including the development of the industrialization of the suppliers of spare parts and accessories, as well as other industries in the country, which will cooperate their plans and programs with automakers.

In order to further support of the auto industry, the Government of Brazil introduced quotas regime for a period of 3 years on imports of cars from Mexico.

Analysts believe that with a proper implementation of this policy it may help domestic auto industry in Brazil to raise their stakes in the game and for export to other markets.