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.



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.

To view related research reports, please follow the links

automotive industry in Latin America: Mexico, Brazil and Argentina Forecasts
to 2005

world’s car manufacturers: A financial and operating review