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Inflation worries Toyota Argentina

Thu Apr 3, 2008 11:27am EDT

Reporter's Notebook

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By Kevin Gray

BUENOS AIRES (Reuters) - High inflation in Argentina is "worrying" Toyota's local unit but the company is optimistic that concerns over energy shortages will ease in the medium term, the firm's president said on Thursday.

Investors are concerned about inflation and energy shortages in Argentina, where the red-hot economy has grown 8 percent a year for five years straight after a 2001-02 economic crisis.

The official inflation rate was 8.5 percent last year, but private estimates put the figure at more than twice that. Economists, opposition politicians and some government statisticians accuse the government of fudging the numbers.

"For us, inflation is a worrying issue," said Anibal Borderes, president of Toyota Argentina, the local affiliate of Toyota Motor Co (7203.T: Quote, Profile, Research, Stock Buzz).

"I think it could be a key factor for anyone looking to export," he told the Reuters Latin America Investment Summit in Buenos Aires.

Last year, energy shortages forced Argentina to ration power supplies to factories. Power supplies are tight in Latin America's No. 3 economy due to rapid economic growth and years of slack investment to increase output.

Analysts say Argentina's energy problems largely stem from a decision to freeze utility rates during the country's economic crisis to avoid inflationary pressures.

Rates for residential users have remained mostly unchanged since then, with fees only rising for industrial users.

But Borderes said he thought government projects would boost energy supplies in the next few years.

"Energy supplies worry us too, but ... there are plans in place to increase supplies and I expect they will begin to show results," he said.

Toyota Argentina produces nearly 70,000 high-end pickup trucks in the country. More than 75 percent are exported, mainly to Latin American markets.

(For summit blog: summitnotebook.reuters.com/)

(Additional reporting by Jorge Otaola and Walter Bianchi; editing by Dave Zimmerman)

 
 
 
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