• Widespread auto part shortages in Venezuela impacting cargo movement

    24 October 2018

    The nationwide cargo transportation paralysis due to material shortages that have swept throughout Venezuela is starting to impact supply chain operations in the country. Current industry estimates place the total number of heavy transportation vehicles throughout Venezuela at 800,000, of which, according to the National Council of Commerce and Services (Consecomercio), 60% are lacking essential parts.

    The material shortages can be attributed to the persistent hyperinflation in Venezuela. For example, a refurbished tire before the revaluation of the Venezuelan bolivar would have cost USD 130 on the black market and nearly USD 250 for a new tire. Based on the foreign exchange trends between the bolivar soberano and the US dollar, the price for new tires is anticipated to have tripled since the currency’s introduction on August 20. The shortages are further compounded by producer shutdowns, where the prevailing economic conditions have impeded the ability of some Venezuela-based producers of parts, such as Pirelli tires and ChemChina, to operate.

    The issue has been especially pronounced in the northern and the central regions of the country, where unimpeded logistics operation is essential for the transportation of mineral and hydrocarbon goods from the south and the Esequibo region in the north to seaports such as El Jose, or international airports such as the Simon Bolivar International Airport in Maiquetia. At a recent Consecomercio executive meeting in Puerto Cabello, officials highlighted that such part shortages are impacting exports from that city.

    Locales affected in particular include the capital region comprising Caracas and Miranda, Carabobo, host to auto assembly and fuel processing facilities partnered with PDVSA, Guarico, Apure, Trujillo, Yaracuy, and Lara, home of Venezuela’s steel industry. Consecomercio anticipates that the current state of the parts shortage is anticipated to at least impact the holiday season shipping, which may extend through the end of Q4. However, Consecomercio’s estimation is that the impacts of this disruption will dwarf those of the past years.

    Aside from inflation, obtaining new parts and tires is also dependent on domestic production capacity, which has been compromised since January, having reportedly fallen 75.5% since 2017. This has been triggered by manpower shortages as well as government restrictions on the work week designed to control resource expenditure in light of the economic crisis. Moreover, an inability to obtain raw materials like rubber and eventually transport it to manufacturing facilities has impeded the ability of producers to replenish the domestic market. While there has not been industrial action at a national level since May related to the shortages, any further deterioration in the trade situation due to prevailing economic conditions may change this.

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