BUENOS AIRES, Sept 12 (Reuters) - Car makers in Argentina have sufficient dollars to meet production and sales targets, the government said Friday, a day after General Motors announced it had suspended exports from Brazil to its Argentine unit due to a hard currency shortage.
Brazilian newspaper Valor on Thursday cited the U.S. automaker's president for South America, Jaime Ardila, as saying trade flows would normalise once Argentina resolved its sovereign debt crisis.
Argentina has tightened controls on imports since it defaulted on its debt in July and is restricting the amount of dollars available to importers in an attempt to protect its already thin foreign reserves.
The move by General Motors highlights how Argentina's capital controls are hampering big business as Latin America's No. 3 economy sinks deeper into recession.
"The flow of hard currency is guaranteed," Argentina's chief of cabinet, Jorge Capitanich, told reporters.
Following its July debt default, the South American country has locked horns with car manufacturers who have slowed down production in the face of weak domestic and regional demand and tough trade and currency controls.
The government last month offered Argentines cheap loans with which to buy small and medium-sized cars in an attempt to kick-start local demand. The plan fixes prices in a high inflation environment and the government has accused car-makers of taking stock off the market.
Tight controls on trade and the currency market have created imbalances in the economy, which tipped into recession in the first quarter of 2014 as the government grappled with a dollar liquidity crisis, falling exports and anaemic foreign investment.
Now the government is ramping up state interventions in the economy to try to prevent its latest debt default from triggering a balance of payments crisis. But its policies are battering business confidence and may deepen the recession.
General Motors produces 13 percent of cars manufactured in Argentina, according to the Association of Automotive Manufacturers. It competes in the local market with Ford, Honda, Toyota, Volkswagen, Peugeot and Renault.
General Motors runs production lines in Brazil and Argentina that produce different vehicle models.
The two countries are the main trading partners in the Mercosur customs union. A bilateral agreement establishing how many vehicles and spare parts can be traded duty-free was extended for one year in June. (Reporting by Alejandro Lifschitz and Richard Lough; Editing by Meredith Mazzilli)