-- Argentines are buying cars in record-breaking numbers this year, but not necessarily because they're burning to drive. With currency markets uncertain and inflation expected to reach 30 percent in 2011, Argentines are trying to find places to park their savings.
"Those who can buy property, but those who can't buy cars," said Hernan Valdez, who bought a new Peugot. He said many of his friends bought cars this year, too.
Fueled by record soy and corn harvests last year as well as strong Brazilian demand for Argentine-made cars and manufactured goods, Argentina is one of Latin America's fastest growing economies. Its GDP is forecast to grow between 7 and 9 percent this year. Yet Argentina also has Latin America's second highest inflation rate, next to Venezuela. The national statistics agency reports annual inflation at 11.1 percent (see chart above), but private analysts say Argentina's actual inflation rate is closer to 26 percent and set to increase with government spending ahead of next year's presidential election.
With banks only providing 8 percent annual interest rates, Argentines are turning to cars as virtual savings banks. In most places in the world, a new car depreciates in value as soon as it leaves the lot, but not in Argentina. For example, an Argentine consumer can buy a car for 50,000 pesos, use it for one year, and sell it the next year for almost the same price or more. In Europe or the United States, cars leave about 20 percent of their value when they leave the lot, said Hernan Dietrich, owner of one of Argentina's largest car dealerships.
"Here the loss is absorbed by inflation and the equation balances out," Dietrich said. "So many people have decided to buy a car if they don't have another way to save."