Lifan Uruguay will resume exporting the Lifan 320 to Brazil

Lifan’s Model 320 on display at car show in China. Model 320’s are produced in Uruguay for the South American market.

For two years, Brazil has prevented Chinese automaker Lifan, which produces cars in Uruguay for the South American market, from exporting cars into the country. Lifan now has 2,000 vehicles sitting in Uruguay which were produced for sale in Brazil. After receiving special approval from Brazil, Lifan will resume exports with a shipment of 70 model 320 cars in the next few days.

Brazilian authorities solicited a series of documents from Lifan to certify that 35% of the parts in Lifan’s model 320 are Brazilian, a requirement of the special decree signed by Brazilian President Dilma Rousseff that lifted the ban which had blocked Lifan’s imports for the past two years.

Lifan will ship 70 of these cars from Uruguay to Brazil in the next few days. Lifan has not been allowed to ship into Brazil for the past two years.

Pablo Revetria, the head of Lifan Uruguay told the Uruguayan newspaper El Observador that Lifan has until October 29 to move the 320 and 620 model vehicles currently in Uruguay into Brazil.

Asked what Lifan would do if they were unable to export the cars to Brazil, Revetria explained that some cars could be sold on the Uruguayan market and Lifan is “very far along” in Venezuela’s import approval process. “When that process is completed we will be in place to move an important amount of stock”, Revetria said.

This Uruguayan Business Reports news article is a summarized translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay’s executive branch seeks a permanent ban on importing used cars

In the next few days Uruguay’s executive branch intends to send a bill establishing a “definite prohibition” on importing used vehicles to the parliament.

The upcoming bill is the result of analysis by an interministerial commission (led by the Economy Ministry with representatives from the ministries of Industry, Transportation, Public Works, Housing, and the National Road Safety Unit) created to make a final decision on used car imports. There has been a ban on used car imports into Uruguay since 1959 but it has to be extended every few months.

The commission acknowledged that Uruguayan consumers would benefit from used car imports, however it found concerns about security, environmental standards and harmonization within Mercosur (all members have banned used car imports except Paraguay) outweighed those benefits.

The commission was originally scheduled to announce their findings on May 1. The ban’s last extension, which Uruguay’s parliament approved in 2012, is due to expire on the August 30, 2013.

The new law would end the need for further extensions.

The 1959 decree required the ban be re-approved every six months. In 2005, the law was changed to allow the law to be reauthorized for up to four years.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El País. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Lifan reaches an agreement with Uruguayan manufacturer Effa to purchase factory in Uruguay

The Chinese auto giant finally reached an agreement with the Uruguayan auto manufacturer Effa Motors to acquire 100% of their manufacturing plant in Uruguay.

According to the CEO of Effa, Andrés Antoniux, they have already reached an agreement to sell the factory in Uruguay and are currently in performing due diligence which should be completed this month. When asked about the amount of the sale, the executive said there is a “confidentiality” agreement.

The Chinese automobile manufacturer Lifan will acquire 15 hectares that Effa owns along route 1, as well as 30,000 sqr meters of indoor space and more than 2,700 completed cars that the Uruguayan plant has in stock as a result of trade difficulties with Brazil. Effa was producing Lifan vehicles.

The group Effa is integrated in the majority of local capitals and regions. The principal shareholder is the Uruguayan entrepreneur Eduardo Effa.

Antoniux, Effa’s CEO, said that for now the Uruguayan business does not have other projects planned for auto manufacturing in Uruguay. “The truth is that is a tough feeling, because the vast majority of what we built here we built with 100% Uruguayan effort. Nevertheless, we understand that this [the sale] was the best alternative for continuing the project”, he explained.

Despite having some difficulties, Effa Motors group will continue production in Manaus, a the free trade zone within Brazil. El Observador has learned that the Lifan Industrial plant could begin to gradually resume operations later this month or early September. Today the plant has 250 workers who are on unemployment insurance.

The national industry director, Sebastián Torres, told El Observador yesterday that the Uruguayan government sent several documents that Brazil had requested to enable the reclassification of the company. With this reclassification, the business will be able to resume exports to Brazil under the automobile trade agreement between the two countries.

When Lifan announced their interest in investing in Uruguay they expected to invest more than $150 million USD. Lifan’s plans include investing in vehicle painting, transmission and motor assembly in order to produce new models for the whole region and comply with the minimum regional requirements for the automotive agreement with Brazil.

This Uruguay Business Reports news article is a translation of an article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Chery considers closing its plants in Uruguay because of Argentina’s import restrictions

Chery claims the plant has lost 4 million dollars this year.

With 81% of its employees now on unemployment insurance and losses reaching $4 million USD, the auto company Chery Socma is considering closing its assembly plant in Uruguay. The government has already scheduled a meeting to hear about the situation first hand.

“The Argentina tariffs and their refusal to grant access to the import quota for 4,000 [Uruguayan] vehicles into [Argentina]” (agreed upon in a free trade treaty) are the reasons that the directors of Chery Socma are evaluating closing, in the short-term, their factory in Uruguay.

It seems that the firm has exhausted its waiting time. “”We are [nearly] in August and they have released less than a third (1,250) of the quota” Daniel Villamarí, a Chery director told El País. The situation has paralyzed the business there is little chance that it will change. Wednesday afternoon the company’s partner in Argentina contacted his counterparts in Uruguay and told them that the firm’s situation “is unsustainable” and they should “discontinue production in Uruguay”.

According to Villamarín, this is not to say “[Chery] will retire from the market, because we sell Chinese [produced] cars also”. Given the situation and 300 employees placed on unemployment insurance since March, the company has not found a solution to the Argentinean problem.

The plant has been in trouble since the end of 2011. “Last year closed with bad numbers in red. We lost a ton of money, we exported around the clock and we have been suffering this for a long time” said the local director.

For Chery, the only solution is that Argentina “loosens and grants the quotas” and that they “honor and respect” pre-existing bilateral agreements.

The businessman challenged the Uruguayan government to get involved in the matter. According to Villamarin “the state is not taking the necessary steps to free this quota. The whole world protests, but they protest in the wrong place” he said.

For his part , the director of Industry, Sebastián Torres, told El Pais he will be on top of the situation and said that he will coordinate “a meeting between “Chery and the Economy Ministry next week to get all the details”. He confirmed that he will resume contact with his Argentinean counterparts to ask for the second third of the quota, “”we will ask again to them [the Argentinians] to free car exports”.

According to Torres, inside the Secretary of State they believe this protectionism, a product of the international crisis, “has come to stay; we have to realize this will continue for at least a year and a half. That is the logic that is driving us”, he said.

Despite Chery’s problems, the director of Industry told El Pais that the auto sector “is one of those that have grown the most compared to 2011”.

According to Ramón Cattáneo, the secretary for the Chamber of Automobile Industry (CIAU), the only way to end the problems in the sector is “for Argentina to free the quotas, but at this point in the year, it is difficult to believe that would happen, I don’t see any open door now”.

While Chery’s plant is the most affected since 60% of their exports go to Argentina, Cattáneo reported most plants are in a similar situation. Nordex laid off 110 workers from a plant that employees 350. Effa’s plant is paralyzed by the conflict with Brazil and its 300 employees have no work.

This Uruguay Business reports news article is a translation of an article that appeared in the Uruguayan newspaper El Pais. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.