Uruguay and Paraguay:
Economic Conditions
Over the last decade, the economy of Paraguay grew at an average of 5%; higher than its neighbors, Brazil, Argentina, and Uruguay. However, the Paraguayan economy continues to be very volatile, according to the World Bank.
In 2015 and 2016, economic growth in Paraguay has fallen to 3% due to the decline in international commodity prices and adverse weather conditions, which directly affects the value of Paraguayan exports, in particular soybean and beef.
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Likewise, the economy of neighboring Uruguay is contracting because of its proximity to the much larger economies of Argentina and Brazil, both of which are experiencing economic slowdowns, which has impacted the Uruguayan peso.
“There has been an appreciation of the dollar against the Uruguayan peso. This has caused a decreased competitiveness for GM against other OEMs such as Suzuki, Renault, Fiat, and VW,” said Marcelo Tezoto, South America fleet sales development manager for GM. “The depreciation of the peso has also resulted in a decrease in the value of commodities exported from Uruguay.”
Automotive industry sales have been declining for the past 13 consecutive months as of the end of the 1Q 2016.
Another key factor for decreased fleet sales has been the government decision to purchase fewer vehicles.
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Fuel Price Trends
The average price per liter for gasoline in Uruguay for August 2016 was US$1.48. There has been a slight increase in fuel prices related to higher revenues by ANCAP (Administración Nacional de Combustibles, Alcoholes y Portland), a state-owned company in Uruguay. ANCAP is involved in the production of petroleum products, Portland cement, and alcoholic beverages.
“At the same time, the country’s energy matrix is changing by incorporating ethanol fuels. Also, diesel is always taxed higher than other fuels,” said Tezoto.
In Paraguay, the average price per liter of gasoline in August 2016 was US$1.05.
Fleet Market Conditions
In Uruguay and Paraguay, current vehicle acquisition trends of the types of vehicles acquired is focused on the sale of NB and HB cars. The main incentive employed by OEMs is a percent discount off the list price.
Strongest Vocational Segment
The strongest vocational segments for fleet vehicle sales are multinational companies, such as Unilever, Coca-Cola, and Gillette. Another key vocational segment for fleet sales is the utility industry, which primarily acquires pickups and vans.
Used-Vehicle Market Trends
Current macroeconomic trends are influencing vehicle depreciation rates in Uruguay and Paraguay.
“The region is currently observing a slowing economy, which marks a more pronounced downward trend in the used-vehicle market. The resale market is saturated and several market players are not buying used vehicles due to the large inventory of unsold used vehicles,” said Tezoto.
Forecast for 2016
“In 2016, we expect a drop in fleet sales in the Uruguay and Paraguay markets due to a slowdown in their economies. Comparing 2015 with the same period in 2014, there was a 20% drop in the fleet markets in these two countries,” said Tezoto.
