BUENOS AIRES: Argentina's automobile industry must improve its competitiveness in the wake of Brazil's currency devaluation and look for new markets in Europe and the Pacific, the president of Fiat Argentina Cristiano Rattazzi said on Thursday.
Argentina and Brazil have made policy agreements over bilateral car trade in the last few years but the devaluation of the real has nevertheless hurt demand for Argentine products in Brazil and made Brazilian exports cheaper in other markets.
"We are in a situation similar to the end of the 1990s when Brazil devalued violently and we ended up totally lacking competitiveness with respect not only to Brazil but also to other countries," Rattazzi told Reuters on the sidelines of a conference hosted by IDEA, Argentina's Business Development Institute.
"Clearly we need to re-examine our competitiveness, because we likely cannot live with it as it is. We need to return to the world, and strike a deal with the Pacific area or Europe or both," he said.
Argentine car production dropped 8.3 percent in September compared with the same month a year ago due to a 27.3 percent plunge in exports, the ADEFA automobile association said.
Argentina and Brazil have made policy agreements over bilateral car trade but the devaluation of the real has hurt demand for Argentine products in Brazil and made Brazilian exports cheaper in other markets.
Brazilian demand for Argentine cars is down more than 30 percent in 2015 compared with the previous year, ADEFA said.
Rattazzi said Argentina's car industry was also struggling with high inflation. Economists estimate that consumer prices are rising about 25 percent annually.
"Inflation is a drug in the system and we have to battle it hard to end it," he said. Meanwhile, a drop in production means car factories are likely to continue to suspend workers, Rattazzi said.
"The suspensions at carmakers will depend on the relationship with Brazil but there will certainly be some (new) suspensions," he said.
Argentina holds a presidential election on Oct 25, after eight years of interventionist policies by incumbent Cristina Fernandez that have sparked rampant inflation.