In Venezuela Your New Car Increases In Value!
The economy of the international car industry continues to throw up stark differences across the globe. In Europe, things are looking pretty grim but the UK is doing exceptionally well. General Motors is seeing great performance in the US but is struggling in Europe.
The economy of the international car industry continues to throw up stark differences across the globe. In Europe, things are looking pretty grim but the UK is doing exceptionally well. General Motors is seeing great performance in the US but is struggling in Europe. There is one country however where the economics of buying a car is so complex that it seems to defy all logic. That country is Venezuela. Indeed, due to some odd financial policies of the country's socialist President, Hugo Chavez, Venezuela may be the only country in the world where a car's value actually increases as soon as you drive it out of the showroom.
When we buy a new car, we all know that we have to take a deep breath then swallow the fact that our car will lose a big chunk of its value the moment we drive away from the dealership. In Venezuela however, drivers have an altogether different experience. Take the example of a Ford Explorer SUV. A brand new model will cost around $30,000 in the showroom. Drive it around the corner however and there will be a queue of people waiting to take it off your hands for around $60,000. Doubling your money in a single day sounds too good to be true. There must be a catch and there is.
The catch is scarcity. The government in Venezuela is trying to prevent what they call 'capital flight'. That is when wealthier people change their money into a harder currency like the US dollar to shield their wealth against the inflation experienced by the Venezuelan Bolivar. To stop this, the government has put strict limitations on the amount of dollars any individual or indeed company can buy and that is a problem for car imports which are paid for in dollars.
Car dealers do not have enough dollars to buy the cars to satisfy demand and new cars in Venezuela showrooms are scarcer than hen's teeth. Waiting lists have lengthened to the point where it is almost impossible to find a new car and corruption is spreading through the system. Ordinary law-abiding people might find that they never quite make it to the top of the list as less scrupulous dealers take bribes from people to jump the queue. There was a little method in the government's madness. The idea behind the currency regulations was to limit imports and boost domestic car production to protect jobs. Sadly no one remembered that all of the car parts have to be imported too and there are no dollars for them either. Domestic production has therefore slumped, aggravating the shortages.
Back to February 2013