MONTERREY, MEXICO - Late last year, Jorge Rhi-Sausi put the finishing touches on a business plan for Bag Empaques Flexibles SA de CV, a fast-growing maker of polyethylene bags and film. It called for him to double the size of the business by June and rapidly expand a newly created network of franchise distributorships. Rhi-Sausi, owner and general director of the Monterrey firm, remembers well the date he finished the plan: Dec. 19.
The next day, the government devalued the peso. In weeks, materials bought in the United States, such as machinery, became 50-60 percent more expensive.
The devaluation was the second huge financial shock at Bag Empaques last year. Beginning late last summer, PE prices doubled. The cumulative effect of raw material inflation and currency devaluation resulted in a real struggle for Rhi-Sausi and his employees.
``I feel sad about this because the people in my company are working very hard,'' he said. ``It's not fair.''
Bag Empaques, with about 300 customers throughout northeastern Mexico, started business in 1990 as a maker of T-shirt and produce roll bags. It followed with products such as trash bags, liners, hospital bags and packing film. Sales were in the range of $2.5 million to $3 million last year.
Rhi-Sausi is sticking to his plan to double the business - revising the timeline to the end of this year - and he is actively developing a market for his products in supermarkets and convenience stores in Texas.
The export business will provide a source of dollar income, critical for purchasing U.S.-made resin. And, with the cheaper peso, Bag Empaques will be able to compete very favorably on price, Rhi-Sausi said.
He is proceeding with plans for ``Bag'' franchise stores. Two are open and another four are expected to start up this year.
Rhi-Sausi also is seeking a U.S. business partner who could provide working capital to upgrade equipment or finance an expansion into new film products he considers promising in Mexico.
For prospective U.S. partners, he said, the devaluation presents a good opportunity because the dollar buys more now. And the fundamental promise of the packaging market over the long term is still very good, he said.
``Those who don't want to risk an investment in Mexico, they're going to be out of it,'' he said.