Argentina's Warped Peso Means Cars Are Half Price-If You Have Dollars

Argentina's Warped Peso Means Cars Are Half Price-If You Have Dollars

11:26 - Argentina's car dealers - used to selling at sky-high prices due to steep taxes - are getting a boost from the gap between official and informal values of the country's peso, which is halving the sticker price for buyers with dollars.

It works like this: A Ford Ka's list price, for example, is 822,870 pesos, or around $12,100 using an official rate around 68 pesos per dollar. However, via unofficial channels buyers can get 112 pesos per dollar, bringing the price closer to $7,000.

That is more in line with what the price should be, said Willie Dietrich whose Dietrich Group dealership sells Ford and Volkswagen brands, suggesting a silver lining for at least some firms hit by the coronavirus and a nationwide lockdown.

"People today are interested in the price of cars because they have the real price. The market is wise," said Dietrich. Taxes represent around 55% of the retail cost of cars in Argentina, with an extra amount normally levied against "high-end" vehicles, Dietrich said.

His networks of dealerships has been operating at limited capacity since the lockdown began in March, but he said there had been more activity than expected.

"We've had many people coming in to make enquiries. And in the two days we opened, we had perhaps seven to eight people in each branch. In a time of economic uncertainty and a pandemic, that's a lot," he said.

Argentina's peso is being held artificially high by strict currency controls, even as fears over the economy and demand for dollars drives unofficial rates to record lows. The country faces a deepening recession and is locked in negotiations with creditors to restructure around $65 billion in foreign debt.

Ricardo Salomé, president of the Argentine Association of Automotive Dealers, told Reuters some high-end cars were getting help from the peso gap.

"There are models that have already disappeared from the market because they've been sold out. They were worth $60,000 or $70,000 and today are available at half the price," he said.

It is cold comfort for most dealers, however. Argentina's retail auto sales to consumers plunged 83.3% in April versus a year earlier and production is down to zero.

The peso's large gap to unofficial rates also leaves it in danger of sharp depreciation and the government has been tightening loopholes to buy dollars.

Salomé said Argentina's auto sales for the year were likely to be around 220,000 units, less than half of 2019 when 460,000 cars were sold.

"This (trend) alone is not enough to cover the fundamental costs of the dealers. We have human resources for a market of 750,000 units. Now we have an idle capacity of 70%." es un sitio web oficial del Gobierno Argentino