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Cablegate: Venezuelan Auto Quota Could Cost Colombia

VZCZCXYZ0000
RR RUEHWEB

DE RUEHBO #0421 0321559
ZNR UUUUU ZZH
R 011559Z FEB 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 1191
INFO RUEHCV/AMEMBASSY CARACAS 9881
RUEHPE/AMEMBASSY LIMA 5867
RUEHZP/AMEMBASSY PANAMA 1156
RUEHQT/AMEMBASSY QUITO 6526

UNCLAS BOGOTA 000421

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EIND ETRD PREL ELAB ECON CO
SUBJECT: VENEZUELAN AUTO QUOTA COULD COST COLOMBIA
THOUSANDS OF JOBS

REF: BOGOTA 169

1. (SBU) SUMMARY: Local auto experts estimate Venezuela's
new auto import quota may cost Colombia 5,000 jobs in the
assembly sector. Colombian parts manufacturers serve to
benefit from the quota in anticipated increased sales to
Venezuelan assemblers. The GOC met with auto industry
officials to discuss ways to help affected workers, including
new training programs. Other suggestions include Colombia
reducing tariffs on imported auto parts or instituting its
own vehicle import quota. END SUMMARY.


Cost Could Reach 5,000 Jobs
---------------------------

2. (U) Venezuela's recently imposed vehicle import quota
will hurt Colombian auto assemblers (reftel). Colombian auto
industry experts calculate that Colombian car makers will lay
off 800 to 1,000 assembly line workers in addition to job
losses in related fields. Tulio Zuluaga, head of the
Colombian Auto Manufacturing Association, estimated that the
quota could ultimately lead to 5,000 lost jobs, and noted
that the industry needed a new strategy to increase exports
to other Latin American countries.

Possible Boost for Parts Industry
---------------------------------

3. (SBU) On the other hand, Nayib Neme, owner of the
largest auto parts manufacturing company in Colombia, does
not anticipate laying-off any of the 4,000 workers he
employs. Neme said that since the quota applies to all
countries that export cars to Venezuela, the increased demand
from Venezuelan car makers for auto parts will outweigh the
reduced Colombian demand. Neme, who already supplies parts
to Venezuela, said he may soon need to hire more workers.
Neme noted that smaller Colombian auto parts companies may
have trouble operating in the Venezuelan market due to
increased delays in receiving payment from Venezuelan
importers; whereas they used to pay invoices in 30 days,
delays now reach 90 days and may soon extend to 120 days.

Colombia Considers Strategies to Reduce Quota's Impact
--------------------------------------------- ---------

4. (U) GOC and auto industry officials met to discuss ways
to help affected auto workers. President Uribe announced
support for assistance to workers as well as efforts to
expand export markets for the industry, stating that the
choices were either "to cry (about the quotas) or work to
move forward." Although the GOC does not have a concrete
plan in place yet, the Ministry of Social Protection,
National Training Center and Bank of Opportunities are
looking at programs to train laid-off workers in new areas.

5. (SBU) Conservative Party Senator Omar Yepez suggested
reducing tariffs on imported auto parts in order to stimulate
demand for cars by reducing their cost. However, Yepez's
proposal would do little to stem the loss of jobs in the auto
part manufacturing industry, and could even exacerbate it.
Neme called the proposal "absurd" and counter-productive.
Guillermo Ochoa, President of the autoworkers union, proposed
raising tariffs rather than lowering them. Ochoa said
Colombia should institute its own vehicle import quota to
boost demand for domestically produced cars and avoid more
job cuts.
Brownfield

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