Sebastien Loeb took advantage of a stoppage for Peugeot teammate Stephane Peterhansel to win Stage 8 and take the overall lead. However, a massive mudslide has forced the cancellation of the ninth stage.
Tuesday's section of the rally took in Argentina and Bolivia but was shortened by 73 kilometers (45 miles) after rainfall in the region in recent days. Despite the conditions, Loeb completed the 417-kilometer split route in 4 hours, 11 minutes and 2 seconds.
Defending champion Stephane Peterhansel initially led from the front and was quickest through the first two checkpoints but a brief stoppage allowed nine-time World Rally champion Loeb to pass him shortly before the neutralized zone between the two countries.
Loeb extended his lead as the drivers moved into Argentina, opening up a five-minute lead at one stage before a puncture cost him some time. He finished the stage 3 minutes and 35 seconds ahead of Peterhansel.
The French pair are now separated by just 98 seconds in the overall standings, with another Frenchman, Cyril Despres, more than 17 minutes off the lead.
Ninth stage scrapped
Wednesday's ninth stage was to have taken the drivers from Salta to Chilecito in Argentina's Jujuy province in the Andes, about 4,000 meters (13,000 feet) above sea level. However, a massive mudslide near the village of Volcan in northwestern Argentina has caused organizers to cancel the stage.