By: Bob Moser
May 23, 2013
SÃO PAULO, BRAZIL — Vast stretches of cheap, undeveloped land and ports free of the congestion that plagues southern Brazil are drawing major plastics companies to the northeastern states of Alagoas and Bahia to expand production.
Aggressive tax incentives and a focus on business-friendly policies have helped set these states apart in Brazil, executives say.
Braskem SA will invest more than BRL1 billion ($488 million) in projects in Bahia, state officials said outside Braskem's stand this week at Feiplastic in São Paulo. The company has six production plants in Bahia, and four in neighboring Alagoas.
Brazil currently ranks as the No. 6 country in the world for plastics industry sales, and Bahia is home to about 2.5 percent of the more than 11,500 plastics processing businesses in Brazil. The state government is actively trying to attract more companies, using Braskem's anchor status there and tax incentive offers that few Brazilian states can match.
BASF is currently investing BRL1.2 billion ($585.5 million) in a new facility in Bahia that should begin operations in 2014. The impact of the German multinational's arrival could spur development of more acrylics business in the state.
For the third consecutive edition of Feiplastic (formerly Brasilplast), Alagoas is the only Brazilian state to host a stand and attempt to woo plastics companies to move production there. The effort seems to have worked, as Alagoas has drawn around 20 mid-sized and large companies to relocate to the state or build new production facilities over the past six years.
With Braskem again serving as anchor, Alagoas has drawn producers of PVC tubing and connectors like Krona and Amanco to set up shop. Braskem has also helped encourage some major buyers of raw materials it produces in Alagoas to expand in the state.
Alagoas state government has been providing tax incentives and help in procuring financing for companies. State officials have been successful in part by establishing well-defined policy incentives for the industry that they ensure won't change every few years, as occurs in other Brazilian states.
São Paulo-based Multibrink, a producer of plastic toys and child-care goods, entered this year considering expansion in Brazil's northeast, with up to BRL90 million (US$43.9 million) to invest in a plant that would require 100,000 square meters.
"We've researched our options, and concluded that Alagoas is a good choice for investment in the northeast," said Cesar Vieira, Multibrink president. "With a policy of attractive incentives and the care we'll receive from the government of Alagoas, we were very excited to make an official proposal."
Brazilian multinational Grupo Tigre, a producer of PE and HDPE tubing for drainage, sanitation, telecom and agriculture, has already begun construction on a new plant in Alagoas that should start operations in September. Through a joint venture with American firm Advanced Drainage Systems Inc., Tigre-ADS will produce HDPE tubing lines for sanitation and drainage of up to 1,200 mm in diameter.