Cash shortages stun Venezuela auto industry
May 11, 2014, 12:00 am TWN
CARACAS--Venezuelans, who enjoy free highways and dirt-cheap gas, are struggling to buy cars as production falters thanks to a lack of foreign currency to pay for imported parts.
Vehicle assembly plants are facing their worst year in the oil-rich OPEC nation, producing five times fewer vehicles 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.
Four of the seven assembly plants in the country — owned by Chrysler, Ford, Iveco and Toyota — have gradually stopped production since February.
Foreign carmakers must go through a complex bureaucratic process to obtain dollars.
Venezuela is only providing the U.S. currency at the official rate of 6.3 bolivars to the dollar to importers of designated priority goods such as food and medical supplies.
Others who need 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 necessities, and fueled an inflation rate hovering just under 60 percent.
So far this year, government data shows that the auto sector has received less than one percent of foreign exchanges granted to importers, at a time of high inflation, and shortages of food and medicine.
Huge Drop in Production
Consequently, auto production saw a sharp drop of 82.6 percent so far this year compared to 2013, according to Venezuela's Automotive Chamber.
A total of 104,000 units were produced in 2012. Last year that number fell to 72,000 units and, during the first quarter of 2014, only 3,990 were produced.