Venezuela used cars out-price new

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http://news.bbc.co.uk/2/hi/americas/8028865.stm

At times, Venezuela is a place where the world seems to work in reverse. Take cars, for example.

The waiting list for a new car in Venezuela can last up to two years, so now every car that rolls out of a showroom immediately increases in value, making a used car more expensive than a new one.

"A year ago my car cost me 54,000 bolivars (around $25,115) and I can already sell it for over 65,000 ($30,230)," says a happy Hernando Camacho, who drives a Renault Clio.

Leopoldo Montesinos, a taxi driver in Caracas, is not so impressed.

"Yes, but what's the point of my old car being worth more money if I only have to pay much, much more the next time I want to change it?" he complains. "If this one breaks down, I won't be able to afford another."

In a local car dealership, Castellana Motors, the phone never stops ringing. Customers are keen to befriend the manager or sales agent in the hope that they might avoid the long waiting list for a new car.

"We don't have to chase customers any more," says manager Oscar Gonzalez.

"Instead they come looking for us - even during the current economic crisis.

"For 10 years now, we have had more demand than supply of cars. So people often buy a car and immediately sell it off for a quick profit."

Starved market

The economic downturn does not seem to have affected demand for cars in Venezuela as it has in other parts of the world.

Many Venezuelans view buying a car as a more secure investment than keeping their savings in a bank, where they can be eaten away by an inflation rate that hit 30.9% in 2008.

Economic prosperity during the recent oil boom increased demand for cars to record levels in 2007.

But the sector has been unable to keep pace with demand, or reach its own production targets.

Making cars in Venezuela is not easy. In order to import new parts, you need a regular source of foreign currency, something which is tightly controlled by the government.

The Venezuelan Automobile Chamber of Commerce (Cavenez) warns that national car production could soon come to a near standstill.

Economic policies

Last year the government implemented several measures to stimulate the motor industry, limiting imports and promoting the sale of cars assembled in the country.

But Cavenez complains that union conflicts and long delays in getting dollars at the official exchange rate from the Commission for Currency Administration (Cadivi) is killing a sector whose sales of new cars dropped by 44.8% in 2008.

Since 2003, Venezuela has fixed a limit on the amount of foreign currency that people and companies can have at the official exchange of 2.15 bolivars to the dollar. This year the government has progressively reduced these allowances in "non priority sectors".

Although the President of Cadivi, Manuel Barroso, said that the government will help the car sector, Cavenez says the necessary foreign currency is running low.

"If we don't have dollars to import spare parts, we can't produce anything. This situation can last another 200 days at most, and then it will become impossible to deal with our suppliers without credit," says Cavenez president Enrique Gonzalez.

As a result, says Mr Gonzalez, the industry's debt with its international suppliers has risen to some $671m (£449m).

According to the Cadivi website, the amount of foreign currency provided by the government dropped from $207m (£138m) a day in 2007 to $137m (£91m) a day in February 2009.

"That is an important economic restriction and one which has heavily affected the auto industry", says Jose Manuel Puente of the Institute of Higher Administration Studies (Iesa) in Caracas.

He added that the drop in oil prices has affected the whole Venezuelan economy.

As such, Venezuela looks set to remain a country of contradictions, a place where petrol is cheaper than water and where your car increases in value as it gets older.