The new president of GM Colombia, Paul Ross, says the European Commission report that accuses the Colombian differential VAT rate on imported cars of breaching the GATT agreement is right, but the government should alter the situation only gradually, writes Juan Carlos Vargas.

Talking about the tax policy of the last six years, where imported cars up to 1,400 cc are taxed an additional 15 percent VAT, Ross said that, in order to preserve employment, GM Colmotores would team up with the other two local assemblers (Sofasa - Renault and Toyota- and Compañía Colombiana Automotriz - Mazda and Mitsubishi) to negotiate with the government for extra time in which to become more competitive.

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General Motors

Mr. Ross said GM was working on cutting around $US300 dollars per car in 'structural costs' over the next 12 months and another $US660 dollars per car by the end of 2002 on CKD costs if negotiations with source plants in Japan and Brazil and the local parts producers succeed.

"This cost-cutting exercise is intended to prepare us for the tax and tariffs agreement with Mexico becoming effective in 2007, and for the Americas Free Commerce Agreement becoming a reality", Ross said.

A senior source at CCA, who did not want to be identified, said Colombian car producers need time before the discriminatory tax is lifted.

"At the moment, the economies of Venezuela and Ecuador determine the state of the local industry," the source said.

"If you want to improve competitiveness you will need to increase market share in those countries and increase local sales volume, but in the present Colombian economy, there is no way to achieve the latter."

Colombian's minister of commerce has yet to comment on the EU report.

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