Instead, they are buying stripped-down entry level vehicles with weak security features in models like the Volkswagen Gol, Fiat Palio and the Chevrolet Celta.

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Since its launch, the Palio has given Fiat the lead over Volkswagen in the Brazilian market, which accounts for 70% of all South American car sales.

ECONOMIST: Car making in Italy

Thus Fiat makes a version of the Palio at Cordoba in Argentina to export to Brazil, instead of at its huge Betim complex, sacrificing potential economies of scale.

ECONOMIST: Making cars in Latin America

Both French companies are following in the footsteps of Fiat, which sells one in five of its cars in Brazil, where it first launched the Palio, a rugged but stylish small car that will soon be produced in India and North Africa too.

ECONOMIST: European cars: Coups and coupés | The

During 1994-95, Fiat sent 290 workers and engineers from Betim to Turin to set up a pilot production line for the Palio and build a prototype.

ECONOMIST: A car is born