Trade deficit hampers growth in Brazil

Bob Moser
PLASTICS NEWS CORRESPONDENT

Published: June 7, 2013 12:37 pm ET
Updated: June 7, 2013 5:02 pm ET

Image By: Arthur Simoes José Ricardo Roriz Coelho

Related to this story

Topics Public Policy, South America, Government & Legislation

SÃO PAULO — A rebounding economy, millions of people striving to move from poverty into the middle class and key industries in need of more plastics than ever before should push the Brazilian industry forward in 2013. But growth will be limited by a seemingly insurmountable trade deficit.

The plastics processing sector is expecting a boost in production of 1 percent this year, with revenue growth of 6.6 percent above the 59 billion Brazilian reais ($28 billion) generated last year, according to the Brazilian Plastics Industry Association, Abiplast.

Growth of 3 percent in industry jobs and an investment level on par with 2012, of 2 billion reais ($935 million), are also expected by year's end.

Based on growth estimates of around 3 percent for Brazil's gross domestic product in 2013, Abiplast is projecting increases in plastics demand of 1 percent from the automotive sector, 4 percent from construction and 5 percent from food production.

"The improving standard of living for a significant proportion of the population, moving from the poorest classes to the middle class, is positively affecting the demand for packaging," Abiplast President José Ricardo Roriz Coelho said at the Feiplastic trade show, held May 20-24 in São Paulo.

"All of this will reflect well in the plastics industry," he said.

Through the first quarter of this year, Brazilian sales of converted plastics topped 15 billion reais, up 8 percent from the same period a year ago. Resin sales in the first quarter totaled about 2.9 billion pounds, up 5.6 percent from the prior year.

With confidence raised by the projections, Brazilian plastics processors have set aside an estimated 2 billion reais this year to invest in new equipment to help boost production over the next two years.

Long-term positioning

Brazilian plastics and resins producers should position the industry to capitalize on emerging demand for plastics in industries that will drive the nation's growth for the next century. Storage facilities for agricultural goods is one niche where Brazil's booming agribusiness continues to struggle, and plastics could quickly create products.

"In Brazil we lose 21 percent of everything we produce in the field, due to our failures in storage and transportation," Roriz Coelho said. "China has obtained high productivity utilizing plastic products in the agricultural field."

The multibillion-dollar potential of Brazil's pre-salt offshore oil and gas sector, where exploration is now underway and should continue for the next 100 years, is also crying out for plastics to replace metals susceptible to corrosion.

Officials from Brazil's National Development Bank (BNDES) were on hand at Feiplastic to tout their Proplastico program, which provides low-interest financing to companies of any size in the industry. BNDES loaned 1.6 billion reais to the Brazilian plastics industry in 2012.

Trade-deficit issues

The often-derided "Brazil cost" — a nasty cocktail of cumbersome taxes, limited workforce, bureaucracy and overwhelmed logistics — is regularly cited by plastics sector leaders as the primary impediment to Brazilian processors' and manufacturers' growth.

The country exported $1.3 billion in plastics for 2012, down 12 percent from 2011, while imports of processed plastics rose 6 percent year-on-year, to about $3.6 billion.

Brazil's trade-balance deficit in plastics rose 45 percent in 2012, to more than $2 billion. Through the first quarter of 2013, the plastics sector had a trade deficit of $598 million, with exports down 8 percent from the year prior.

"The Brazilian industry is strong, but we need the attention of authorities in order to devise public policies that will strengthen us — like reducing taxes, a more realistic exchange rate and low-interest credit available for industry," Roriz Coelho said.

"Nor can you give protection to one sector at the expense of another. In protecting domestic manufacturing, the government increased the import duties on some thermoplastic resins."


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Trade deficit hampers growth in Brazil

Bob Moser
PLASTICS NEWS CORRESPONDENT

Published: June 7, 2013 12:37 pm ET
Updated: June 7, 2013 5:02 pm ET

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