The sector comprises three huge segments: video (TV’s, VCR’s, camcorders and laser-disc players), accounting for 55% of the total; audio (radios, car radios, radio-cassette players, laser-disc players, compact systems, digital tape players and system components – amplifiers, equalizers, etc.), with 30%; and sundry items (calculators, digital timepieces, electronic instruments), with 15%. The production of items with enormous sales potential – camcorders, VCR’s and laser equipment – is concentrated in Japan, followed by other developed countries and S. Korea, while output of the more traditional products is led by the USA, followed by S. Korea, Japan and the Southeast Asian nations.

In this context, the manufacturers’ only escape route will be to increase their nationalization indices (the ratio of locally-made components per product). However, since this will not happen overnight and the extra costs will almost certainly be passed on to retailers, one alternative would be to simply withdraw less profitable models. TV and VCR shipments to Mercosur and the Andean Community will also be jeopardized, given that many investments will be suspended, export financing will be extremely hard to come by and the punishing interest rates will continue to hammer retail sales, reducing producers’ profits. In addition, the markets in countries making up the two trade blocs are also suffering. As if this were not enough, DVD players have become substantially more expensive and with a much more restricted clientele, forcing manufacturers to trim output and/or import the products. The DVD film segment will also feel the pinch and sales are likely to drop from 1 million to 700,000. We expect a 28% slump in factory-gate sales in 1998, followed by a further decline of 19.0% next year.