Venezuelans enjoy free highways and dirt-cheap gas, but are struggling to buy cars as production falters thanks to a lack of foreign currency to pay for imported parts.
Car assembly plants are facing their worst year in the oil-rich nation, producing five times fewer units than last year due to the lack of imported supplies amid an economic crisis that began last year.
Most economic experts blame the South American country’s problems on a decade of rigid currency and price controls, as well rising debt, dependence on imports and stagnant economic growth.
Photo: AFP
Since February, four of the nation’s seven assembly plants — owned by Chrysler Group LLC, Ford Motor Co, Iveco SpA and Toyota Corp — have gradually stopped production.
Foreign carmakers in Venezuela must go through a complex bureaucratic process to obtain US dollars and the government only provides the currency at the official rate of 6.3 bolivars per greenback to importers of designated priority goods such as food and medical supplies. Others who need US dollars to pay overseas bills have to buy them at a higher rate at government-run auctions.
Many companies have complained that Caracas is not providing them with enough hard currency. The currency controls in place since 2003 have led to shortages of a wide range of basic goods and fueled an inflation rate hovering at just less than 60 percent.
So far this year, government data show that the auto sector has received less than 1 percent of foreign exchanges granted to importers. Consequently, auto production saw a sharp drop of 82.6 percent so far this year compared with last year, according to the Venezuelan Automotive Chamber.
A total of 104,000 units were produced in 2012; that number fell to 72,000 units last year and by the first quarter of this year, had fallen further to 3,990 — The industry has been halved in five years.
Faced with this crisis, Venezuelan President Nicolas Maduro’s government this week summoned local representatives of Chrysler, Ford, General Motors Co and Toyota to address their factories’ currency settlements, estimated at almost US$2.8 billion.
Although the government said General Motors would not close its plants this year, union leaders have said the company’s two factories would stop production this month because they had no input.
Dealerships across the board have almost no units to sell and many only keep their doors open to provide maintenance services. Customers often have to wait a year to get the car they ordered.
In recent years, the middle and upper classes have turned to buying cars as a way to hedge against inflation, which sits at four times the interest rate on bank deposits.
Yet as demand exceeds supply, many resort to the used car market, where vehicles are more expensive than new ones, whose prices are controlled by the government.
A new Mitsubishi Lancer from this year costs 458,000 bolivars (US$45,800 at the official rate or US$6,500 on the black market) while a used, 2012 version of the same model costs about 1.3 million bolivars. A middle-class family would need an average of four years of income to buy the second-hand Mitsubishi.
Workers are especially worried about the decline in production.
“We could lose our jobs. We are the ones who are suffering the most,” said Christian Pereira, the head of national auto workers’ union FUTAAC.
Venezuela’s vehicle assembly sector employs about 11,000 people directly and 100,000 indirectly, accounting for nearly 1 percent of private-sector jobs.
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