The private industry is beginning to show signs of economic reactivation despite the forecasts by some sectors. Automobile assembly and sale is at present one of the most thriving activities in Venezuela, with a sales record of over 87,000 units between January and September this year, after overcoming the 2003 crisis generated by the oil strike, the decrease in oil incomes, and the impact of currency exchange control that initially restricted the sale of foreign currency within the local market.

Since the application of the Family Vehicle policy in 2000, which allows the purchase of several vehicle models without Tax on Aggregated Value payments, as well as their manufacture with some tax benefits to import vehicle parts, the local market expanded significantly. In 2001, vehicle sales totaled 216,977 units. In 2002 the market contracted to only 128,623 units sold. By 2003, as a result of the oil strike and the economic crisis of the first semester, only 63,726 cars were sold.

Nevertheless, the Venezuelan Automobile Industry Chamber (Cavenez) indicates that the sector expects to reach the 120,000 unit sales mark achieved in 2002.With the increase in public spending, the normal issue of foreign currency for the sector (Cadivi, the national Commission for Currency Administration issues around 70 million U$ per day for the local economy), and the economic recovery driven by the rise in oil prices, these businessmen believe that motor vehicle sales will surpass 150,000 units, and eventually, the 200,000 mark of vehicles sold in 2001.

Between January and September of this year, companies and car dealers managed to sell 87,396 units, a 103.19% growth in relation to the 40,013 vehicles sold in 2003. Last month, a total of 12,595 units were sold The commercialization of national vehicles reached a total of 71,219 units, a 126.98% increase in relation to the 31,377 cars sold in 2003. Imported cars totaled only 6,873 between January and September of this year, a 25.37% drop compared to the 9,210 vehicles imported and sold in the local market, while importers of the Andean sub-region sold a total of 9,304 units, a 283.51% growth in relation to the 2,426 purchased in 2003. This increase has generated a greater commercial flow with the counties of the Andean Community of Nations.

Exports have also recovered significantly by 25.58% as they rose from 4,641 units (January-September, 2003) to 5,828 in the first 9 months of 2004.

Governmental Support

In order to reinforce the reactivation of the automobile industry, the government decided to create a new plan. It decreed the extension, for three years, of the Family Vehicle Program, which offers the benefit of tax (IVA, Tax on Aggregated Value) exemption for the assembly, importation, or sale of the Family Vehicle 2000 to the consumer.

The new 2004 program requires the subscription of new agreements between the government (National Integrated Tax and Customs Administration Service, and the Ministries of Finance and Production) and the private commercial sector (the banking system, the automobile assemblers, and the chambers of the private sector); the publication of other resolutions indicating the requirements for the manufacture and commercialization of the units, and research that determines the sales expectations and the profitability of the measure. The governmental Institute for the Defense of the Consumer and the User was incorporated to the program in order to achieve better coordination and avoid allegations of fraud against clients.

This measure also includes new regulations, varying from the number of models (two per assembling plant) that can be commercialized with exemption from IVA, to the type of vehicle (synchronic, automatic, 4, 3, or 5 door cars, and other features ).

Published in Quantum N.37

Ana Teresa Peña