June 1, 2018 / 7:24 PM / a year ago

Volkswagen lowers 2018 car sales outlook in Argentina: executive

A Volkswagen logo is pictured during the Volkswagen Group's annual general meeting in Berlin, Germany, May 3, 2018. REUTERS/Axel Schmidt

BUENOS AIRES (Reuters) - Volkswagen (VOWG_p.DE) expects its car sales in Argentina to grow 5 percent in 2018, down from a previous estimate of 20 percent, regional Chief Executive Pablo Di Si said on Friday, citing the country’s high interest rates.

A sharply weakening peso in late April spurred Argentina’s central bank to make a series of emergency rate hikes culminating at 40 percent, the world’s highest, and effectively closing off credit for consumers.

The fact that sales are not expected to fall from 2017 is a positive sign, Di Si said in an interview on the sidelines of an event in Buenos Aires. He noted that a weaker currency was boosting exports to neighboring Brazil.

“Argentina will keep growing this year from last year, less than expected but there will be growth,” said Di Si, president of South America, Central America and the Caribbean, of Volkswagen’s car sales.

Vehicle manufacturing in Argentina rose 20.4 percent in the first four months of the year compared to the same period last year, according to carmakers association Adefa. Exports through April rose 31.4 percent in that period while sales rose 13.8 percent.

“We are consistently raising the volume of exports to Brazil,” said Di Si. “I have increased the production program from Argentina to Brazil twice this year.”

The peso has weakened 25.3 percent so far this year and is trading around 25 per dollar, benefiting exporters.

“At 25 we can export competitively, at 20 no,” said Cristiano Rattazzi, head of Fiat Chrysler Argentina, in a panel discussion.

Reporting by Eliana Raszewski; Writing by Caroline Stauffer; Editing by Richard Chang

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