ECONOMY-ARGENTINA: Auto Industry Survives Crises

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Mar 10 1998 (IPS) - Automobile production in Argentina, in a slump last December because of the economic crisis in Asia and its impact on Brazil, recovered in the first two months of this year with output up 29 percent on the same period in 1997

Official industry figures noted the crisis in Southeast Asia and the subsequent fiscal adjustment in Brazil had caused production to slow to a standstill at the end of last year. Some workers were laid off others sent on early vacations to absorb the decline in demand.

But production lines rolled again in January and by the end of February, despite the fact the financial storm in Asia had not completely dissipated, officials were talking of output topping 480,000 units by the end of 1998.

The Association of Automobile Plants of Argentina maintains that this dynamism is based on the stability of prices in the internal market, the possibilities offered by the southern common market, MERCOSUR, the regulatory market that governs the activity and commercial openness – an additional attraction for investment.

The automobile industry emerged as one of the most dynamic sectors of the Argentine economy in the 1990s. In 1997, sales reached 8.5 billion dollars, accounting for 2.6 percent of the gross national product.

Although Argentina’s policies for stimulating foreign investment in the automobile sector are far from the advantages offered by Brazil, industrialists estimate that between 1990 and the year 2000 investments will have reached 5.5 billion dollars.

The take-off of this industry went parallel with economic stability. In 1991, when convertibility of currency was introduced was at 139,000 units. But in 1997, it grew to 446,000.

In 1995, the “tequila effect” of Mexico’s devaluation of the peso provoked a decline of 30 percent in production, from 408,700 units (1994) to 286, 000. Then, it began to recover: in 1996 some 313,152 vehicles were produced; in 1997 the number reached 446,000.

This year, an even greater growth is predicted, while negotiations continue in MERCOSUR on the establishment of a common automobile regime towards the next millennium, which could mean a new stimulus.

This way, while the automobile industry in industrialized countries like the United States, Japan and the members of the European Union, are thinking of strategies for overcoming the stagnation of their markets, South America is still undergoing an expansion of the activity.

Although there are some signs that the capacity for production is becoming greater than the demand, industrial circles remain optimistic in the short and medium terms, and are enthusiastic about their sector’s capacity for recovery.