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SAO PAULO, March 3 (Reuters) - Automobile sales in Brazil this year are expected to post their biggest drop in 16 years, national dealership association Fenabrave said on Tuesday, underscoring the depths of an industry crisis that has triggered layoffs and trade tensions.
New registrations are expected to fall 10 percent from a year earlier and could reach their lowest level since 2009, Fenabrave said, following steep drops in January and February. Earlier this year, Fenabrave had forecast a 0.5 percent sales drop in 2015.
Brazilian consumer and business confidence is crumbling as rising interest rates and accelerating inflation squeeze household budgets, choking off one of the few sources of economic growth in recent years.
Sales of cars, trucks and buses tumbled 28 percent in February from January, Fenabrave reported on Tuesday. January sales had plunged 31 percent from December.
President Dilma Rousseff has also rolled back tax breaks that she extended to the auto industry in 2012, when flagging exports and domestic demand first raised concerns of layoffs.
Despite the government lifeline through the end of last year, Brazil's auto sales slid 7 percent and production fell 15 percent in 2014, leading carmakers to cut payrolls by 7 percent. Exports plunged 41 percent to their lowest level since 1999.
Startled by a growing trade deficit, Brazilian officials are pushing to reopen an accord with Mexico, which is on track to open up bilateral auto trade between the countries this month.
Two sources familiar with the negotiations said on Monday the countries may agree in the coming weeks to extend current caps on bilateral trade, although they are still at odds over whether the quotas should rise or fall.
Brazil is one of the world's five biggest auto markets, with major operations run by Fiat Chrysler Automobiles NV , Volkswagen AG, General Motors Co and Ford Motor Co. (Reporting by Brad Haynes; Additional reporting by Alberto Alerigi Jr.; Editing by Chris Reese)