The Venezuelan industry ministry has reportedly inked a "letter of intention for installation of a vehicle assembly plant" with French automaker Renault, according to Reuters. The automaker announced the move in a statement earlier this week, saying that it would "enable a feasibility study for local production of vehicles." Renault already has a manufacturing presence in the region, with plants in Argentina, Brazil, and Colombia, as well as six more in France. The move comes as Renault predicts a 30% jump in global vehicle markets by 2020, despite an ongoing slump in the European region.
Significance: While the move to boost production outside of Europe, which is becoming something of a toxic market for both production and sales in recent years due to struggling economies, massive overcapacity, and a complete political inability to close plants, choosing Venezuela as a manufacturing site is risky. Over the last several years, under the government of President Hugo Chavez, nationalisation of industries and facilities has proceeded apace with little regard for international property rights. What was once a promising market with an optimistic outlook has fallen to a mere trickle of its potential, and has stayed that way over the last several years. Renault may feel it has an opportunity to tap that underserved market, but as long as commerce occurs at the whim of the ruling party, Venezuelan investment remains one of the more high stakes bets in Latin America.
