Argentina's auto production will likely fall 8 percent this year due to poor demand from neighbouring Brazil before showing modest improvements in 2017, an executive with Fiat Chrysler Automobiles said on Thursday. Cristiano Rattazzi, President of Fiat Chrysler Automobiles in Argentina, told Reuters a recession in Argentina's top trading partner would hit exports and offset optimism over pro-business reforms from President Mauricio Macri.
Rattazzi's comments come after data last week showed local vehicle production fell 20 percent in September compared with the same period the prior year. In 2015, Argentina produced 543,467 vehicles, with exports falling 31.3 percent from the previous year, according to the Association of Automobile Manufacturers (Adefa). "I'm optimistic about the future, and green shoots are appearing in many sectors in Argentina," Rattazzi said while attending an annual gathering of Argentine businesses. "Production will end this year below 500,000 units, but expectations are for output to exceed that number in 2017."
Around half of smaller vehicles produced in Argentina are shipped to Brazil, which fell into recession last year and like Argentina is expected to return to growth in 2017. Rattazzi said the industry should look toward markets such as Mexico and the European Union, adding that he supported a trade deal between the EU and regional trade bloc Mercosur, which Argentina expects within two years.
Macri's center-right government, which took office in December, has implemented a number of reforms, including eliminating capital controls and export taxes on agricultural products, to try to restore economic growth and tame inflation. The tough economic scenario has led to layoffs in the automotive sector this year. "Inflation is the biggest disruption to the country and a veritable disaster for the poor," Rattazzi said. "I applaud the policies seeking to lower it."
Annual inflation in Argentina is expected to be 39.6 percent in 2016, according to a central bank poll of economists, above a government official's outlook for 35 percent to 36 percent. Economists expect 20 percent inflation in 2017, higher than the government forecast for 17 percent.