VENEZUELA'S AUTO PARTS IMPORTS ARE EXPECTED TO PICK UP SPEED STRONGER ECONOMY IS DRIVING FORCE

VENEZUELA'S AUTO PARTS IMPORTS ARE EXPECTED TO PICK UP SPEED STRONGER ECONOMY IS DRIVING FORCE

Stuck in reverse for two years due to economic recession and stiff foreign exchange controls, Venezuela's imported auto parts market is beginning to

shift gears.

Economic turbulence, a decline in the real value of the nation's currency and rigid foreign exchange requirements imposed last year stunted the flow of auto parts and accessories imports into Venezuela. But as the South American nation's economy strengthens, foreign currency restrictions are loosened and pent-up demand grows, the market for foreign inputs will improve, auto industry analysts say.U.S. auto parts shipments to Venezuela of mainly diesel engine components, spark-ignition engine parts, audio receivers, brakes, bumpers and tires fell 12.8 percent in 1993 to $347 million, then dropped another 34 percent in 1994 to $229 million, according to the U.S. Department of Commerce. U.S. inputs account for about 70 percent of Venezuela's total auto parts imports.

Rob Ebbin, market research analyst at the Automotive Parts & Accessories Association in Bethesda, Md., and author of the AAPA's June report "The Venezuelan Market for Automotive Parts and Accessories," said U.S. auto parts exports could recover during the second half of 1995 or in early 1996 as total U.S. exports to Venezuela pick up.

"We're looking overall at a decline in 1995, but most of that probably occurred in the first half of the year. There may be an increase in exports in the second part of this year," Mr. Ebbin said.

He added that the country's economic crisis had helped fuel demand for auto parts especially among cash-strapped consumers. "People who can't afford new vehicles are holding onto existing ones and investing in replacement parts," he said.

The AAPA estimates Venezuelan manufacturers' shipments of parts and accessories will grow an average of 7 percent annually from 1995 to 2000.

Gabriel Mercado, technical director of Venezuela's National Chamber of Auto Parts Importers and Distributors, said sales of U.S. and other foreign inputs plummeted 50 percent in the second half of 1994, after the introduction in June that year of a complex registration and application system for companies wishing to obtain dollars to pay for imports. Imports should pick up soon under the government's new, less-stringent exchange policy, he said.

Julie Dykstra, a Venezuela analyst at Nomura Equity Research in New York, warned, however, that the loosening of currency controls would not greatly encourage imports. "They have made some changes, but getting money is still a laborious procedure," she said.

Despite the tedious import regulations, Venezuela holds good prospects for U.S. exporters, analysts say. Many Venezuelan consumers prefer - and are willing to pay a premium for - U.S.-made cars and parts, often considered better-made and more durable that domestically produced items. Most vehicles on the road in Venezuela are imported from the United States or are assembled locally by U.S. companies. U.S. auto parts makers such as Echlin, Gabriel, Goodyear, Loctite and No Sag Spring Co. have operations in Caracas.

Mr. Ebbin said the U.S. products' strong brand recognition and good reputation for quality would enable the United States to maintain its stronghold on the import market in the coming years. He also pointed to recent efforts among the Andean countries - Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela - to permit freer movement of goods through their borders as potential stimulators for U.S. exports within the region.

Mr. Ebbin warned, however, that the U.S. share of Venezuela's import market could shrink in the long term with the increasing presence of competitors from third-country competitors. "Korea and Eastern European companies will be particularly competitive at the low-end of the market," he said.

Mr. Mercado agreed that South Korean manufacturers could threaten U.S. business. "Their products are often comparable to U.S. items but lower operating costs make them less expensive. This could give them an edge over U.S. companies," he said.