State's meddling alters Venezuelan automotive market
Ever since automotive policies are in effect, production has fallen 39.6%
A few years ago, President Hugo Chávez scoffed at "how sad" it is that most young professionals think of getting a new car as soon as they graduate. "That is part of the poison brimming from the old society," argued Chávez.
On January 21, hundreds of customers gathered outside state company Suministros Industriales Venezolanos (Suvinca) to get their hands on one of the 9,400 Chery vehicles imported by that organization. "We want cars!" chanted the crowd as an official assured them that no more vehicles were available.
Private dealers face similar scenarios. Waiting lists for a Chevrolet, Ford or Toyota model may extend for over six months.
Government-party representative Elvis Amoroso has dusted off a draft law initially brought to light in 2009 in an attempt to put an end to distortion within the automotive sector.
The automotive industry and its dealers worry that new laws like those proposed by Amoroso would actually make a bad situation worse. Conversely, they warn that state intervention has been one of the causes for distortion.
According to data published by the Venezuelan Automotive Chamber, Cavenez, in 2012 a total of 104,083 vehicles were assembled in the country. This represents only 40.97% of the installed capacity of the seven privately owned companies.
Last year's result is not isolated. In fact, a retrospective view of production shows that from 2007 to 2012 production plunged 39.6%, falling from 172,418 assembled units to only 104,000 in 2012.
This slump in domestic production, however, coincides with the 2008 implementation of "automotive policies," a series of regulations created by the government to "strengthen" the industry.
"Why do they put a stranglehold on the industry by making access to foreign currency sluggish? Why would delivery of non-production certificates or permits for Imported Vehicle-Assembly Materials undergo such delays? Why would imports be shut down?" asked a top director of an assembly company, who opted to remain anonymous as a result of the hassles his organization has faced since the launch of automotive policies.
The state's role
In addition to restrictions faced by assembly companies, the government has also shut down imports for a few years now by limiting them to trade agreements entered into with allied countries, such as China or Ecuador.
Those 9,400 Chery cars, imported by Suvinca, make the state the largest importer for that particular market, not taking into account transactions made by other state organizations. Makes like Nissan, Honda, Renault or Fiat, to name a few, have had to face years without being able to obtain permits or only receiving marginal amounts to meet domestic demand.
Nevertheless, neither those cars nor those produced by state-owned assembly companies like Venirauto and Corporación ZGT (responsible for assembling Chery cars in Venezuela) have translated into consumer satisfaction.
Poor production levels and limited imports have widened the gap between actual supply and demand. In 2012, 130,533 cars were sold, only 52% of the 250,000 experts believe the Venezuelan market requires.
No irregularities acknowledged
The void between supply and demand has given way to market distortions and has turned vehicles into investment assets.
Amoroso has accused automotive companies of running mafias perpetrating all sorts of illegal transactions. Nevertheless, Ford Motor de Venezuela issued a statement indicating that it sells vehicles "only" through its formal dealer network and that it conducts its business "in accordance with" consumer protection laws.
In addition, the company warned that it "does not offer new or low-mileage" cars through its employees or third parties "other than its dealers."
Translated by Félix Rojas Alva
According to inner surveys performed by the Venezuelan Association of Metallurgical and Mining Industries (AIMM), where 160 metallurgic companies were taken into consideration, 90% of the companies members of this association are "distressed because of their existence or survival in the short term," stated Manuel Eseverri, president of this association.