Ward's Automotive International / August 15, 1996
By Larry Luxner
Rapid price hikes in the wake of Venezuela's bolívar devaluation have forced sales of passenger cars and light trucks down 40% in the first half of 1996, compared to the same period a year earlier.
Total sales from January to June came to just 22,756 units -- meaning the industry's 60,000-unit goal probably won't be met this year. General Motors maintained its domination of the market, with 25.2% of the total, followed by Ford (20.7%), Toyota (15.2%) and Fiat (14.0%). Exports during the first half of 1996 also dropped, to 6,641 units (compared with 9,435 units for the first half of 1995).
"The lowest-priced car on the market at this time costs around four full yearly salaries of a mid-level white-collar employee," notes the U.S. Embassy in Caracas. "While financing plans covering 48 months are available, existing interest rates of above 45% would still make such a purchase almost impossible for most buyers. This situation has caused the prices of used cars to go up dramatically. A five-year-old car costing half a million bolívares a year ago can now cost easily a million and a half."
On July 8, Venezuela's Central Bank imposed a sliding parity band between the two currencies. The arrangement -- designed to help control inflation -- allows the bolivar to move within 7.5% of its current value of 470 to $1 before the Central Bank intervenes in exchange markets. The move came two months after the lifting of all exchange controls, and four days before final IMF approval of a 12-month standby credit of $1.4 billion to support President Rafael Caldera's 1996-97 economic program.
Meanwhile, the Caldera government says GDP will stop slipping during the fourth quarter, and will grow by 4% in 1997. Other statistics are less rosy. A new report finds that eight in 10 Venezuelans live in poverty, while another survey says the country's 62% inflation rate -- combined with cuts in government subsidies, higher taxes and rising gas prices -- has forced 91% of respondents to stop buying at least one basic food staple since April.
Despite the slowdown, some see a bright future for the oil-rich country which, although it's no longer the wealthiest South American nation on a per-capita income basis, still boasts the continent's cheapest gasoline prices. In May, Chrysler Motors announced it would begin building Neons at a $50 million plant in Carabobo. The factory already produces Jeep Cherokees and Grand Cherokees for the Venezuelan market.