By Tomas Sarmiento
CARACAS, Aug 30 (Reuters) - Automobile sales in Venezuela, traditionally a buoyant market, could fall by 35 percent this year due to political instability and the economic recession gripping the world's fifth largest oil exporter, a leading car industry executive told Reuters Friday.
Sales of automobiles in the first seven months of 2002 were down nearly 22 percent on the same period last year, at 91,267 units, according to the Venezuela Automobile Chamber (Cavenez), which groups most of the vehicle assembly companies operating in the South American country.
"Rising interest rates and the devaluation of the national currency have badly hit the automobile market," Cavenez Executive Director Roberto Madero said in an interview.
He added that, under these adverse conditions, automobile sales were expected to fall by 35 percent this year to around 140,000 units by end-December, compared with a record of 216,977 units sold in 2001. Last year's boom had followed sales of 145,306 units in 2000.
Madero said the current recession was forcing assembly plants to cut back their activities by reducing the length of shifts or halting production during some days of the week.
Continuing political confrontation between supporters and opponents of President Hugo Chavez, an outspoken, left-wing former paratrooper who survived a short-lived coup against him in April, was also inhibiting sales.
"If political conflict rises, this affects the market, and many people stop buying certain products," Madero said.
He blamed the drop in sales partly on the slide in value of the local bolivar currency, which has depreciated more than 46 percent against the U.S. dollar since the start of the year.
With an average 60 percent of the components of vehicles assembled in Venezuela were imported, the impact of the currency depreciation on automobile sales is particularly heavy.
The local currency closed Friday at 1,415.5 bolivars to the dollar, compared with 758 bolivars at the end of last year.
SHRINKING ECONOMY, HIGH INTEREST RATES
The other factor limiting automobile purchases was the high level of interest rates, Madero added.
Credit financing rates for automobile purchases were below 25 percent last year. But they had more than doubled this year following a decision by Chavez's government in mid-February to float the bolivar and seek to control inflation through interest rates.
"Around 70 percent of vehicle sales, or even a little more, involve credit," Madero said. In the case of trucks, buses and mini-vans, the figure was higher, more than 95 percent.
The slump in automobile sales came against the background of a shrinking Venezuelan economy, which contracted nearly 10 percent in the second quarter of 2002.
The government, while predicting some improvement in the second half of the year, has said it expects the oil-reliant economy will contract 3.0 percent to 3.5 percent over the whole of 2002.
The automobile assembly companies affiliated to Cavenez are DaimlerChrysler de Venezuela , Iveco Venezuela, Ford Motor Co. , General Motors de Venezuela , Mack de Venezuela, MMC Automotriz (Mitsubishi) and Toyota de Venezuela .
The chamber's figures also include non-affiliated companies like Mazda , Renault and Volkswagen .
Venezuela's automobile industry represents accumulated investment of some $3 billion and contributes around 5 percent of the country's annual gross domestic product.
Madero said, however, that the local vehicle assembly units of large international corporations were careful to make a distinction between economic conditions and political factors.
He said they had a "less contaminated" vision of local politics than other nationally-owned industries.
The government and assembly firms were currently negotiating a program of state purchases of locally-assembled vehicles.