MEXICO CITY — Ask Ben Propfe about the Mexican plastics economy and the director of plastics for machinery representative Interplast SA de CV replies with a bit of gallows humor about the country's banking system.
``For every 10 people that cross that line [into his trade show booth], 12 ask for credit,'' Propfe said. ``In general, the small and medium-sized companies can't do anything. They say they are interested but don't have the money'' because banks do not have any to lend.
Consider that a joke that hits too close to home. On the positive side, plastics officials say the industry, like much of the rest of the Mexican economy, is stronger than last year, with suggestions that it is getting better by the month.
But business still is not where it was before the 1994 peso devaluation, when the economy went into a tailspin, forcing about 800 of Mexico's 2,500 processors to shut down.
Today, there are 2,200 Mexican processors and industry sales are about $12 billion. But that is still down about 20 percent from before the crisis, according to Mexican trade association officials. About 95,000 people work in the industry, down from 120,000 before the devaluation, which some officials said was Mexico's worst in 60 years.
``Very few of our customers are producing at the level they were in '94,'' said Stuart Allen Cameron, director general of compounder A. Schulman Mexico SA de CV. The firm is spending $7.5 million to upgrade its facility in San Luis Potosi.
``The crisis is still here but it gets better month by month,'' he said.
The head of one of Mexico's main plastics trade associations, the Asociaci¢n Nacional de Industrias del Pl stico AC, or Anipac, agreed that the plastics industry has yet to fully recover from the crisis.
Anipac President Francesco Cecchetti, who is also technical director for cosmetics packaging processor TPI Mexicana SA de CV, cited several factors holding the industry back:
Credit from banks is too hard to get. The interest rate is about 32 percent and banks put too many conditions on getting loans, making it very difficult for smaller companies to get money to expand.
Low salaries have not kept up with inflation, eroding buying power and hurting domestic consumption. The inflation rate in 1995 was 52 percent, was 27 percent in 1996 and is estimated in 1997 to be 15-18 percent, according to a March 1997 report from the U.S. Embassy in Mexico.
Unofficial unemployment hovers at 25 percent.
Plentiful street vendors compete with the commercial economy.
Too many delivery trucks are robbed and their goods stolen.
One positive, most industry officials said, was the unprecedented elections in Mexico this summer that saw the country's longtime dominant political party, the Institutional Revolutionary Party, or PRI, lose control of one chamber of the legislature and the mayor's office in Mexico City.
``The political situation will be more balanced...and that will give Mexico a better situation for the future,'' Cecchetti said. ``Many people will be involved in decisions, and there will be more rational management of the economy.''
Processors in Mexico are on target to buy about $700 million in machines this year, up from $300 million in 1996 and $100 million in 1995, but still below the roughly $800 million sold in 1994, said Augustin Merlo, president of Anipac's machinery division. Individual companies offer similar figures.
Husky Injection Molding Systems Ltd. did almost $80 million in Mexican business from July 1994 to June 1995—before the crisis—but just above $20 million in each of the next two years. This year, it expects a little more than $30 million in sales, officials said.
Interplast reported sales of more than $20 million a year before the crisis, $6 million annually during the crisis and about $12 million a year now. And Ferrostaal Mexico SA de CV, which sells Battenfeld machines, reported selling about 28 machines in 1993 for $8 million, six machines for $1.5 million in 1996, and about 20 machines this year.
Still, economists project the Mexican plastics industry to grow 10-16 percent this year, fueled by exports that the cheap peso continues to make very attractive.
``The growth that we have seen in the last couple of years is coming from exports,'' said Armando Negrete, technical director of GE Plastics Mexico SA de CV.
Mexican plastic exports to the United States grew 20 percent a year between 1994 and 1996 — to $716 million — while imports from the United States rose just 11 percent a year — to $3.5 billion, according to U.S. Commerce Department figures. The biggest shipments included ABS, blinds, boxes and crates, acrylic sheet, and bottle-grade PET — even though it dropped sharply in 1996, U.S. figures indicate.
That export growth is fueling 34 percent growth among plastics maquiladoras, according to U.S. Embassy figures. Those plants are likely to be the second-biggest consumers of plastics equipment in Mexico, following the bottling and packaging manufac- turing sector, the report said. Ani- pac estimated maquiladoras account for $3 billion in sales, about one-fourth of Mexico's total.
Two of the three fastest-growing markets for plastics processing in Mexico are export-oriented — automotive and electronics, according to M¢nica Paloma Conde Ortiz, operations director of the Instituto Mexicano del Pl stico Industrial SC, or IMPI. The third is packaging, which is driven by domestic demand.
Bottling and packaging remains the biggest market in Mexico, accounting for more than 40 percent of local processing, according to IMPI and U.S. Embassy figures. Consumer goods ranked second, at 18 percent, and construction ranked third, at 15 percent.
The growth export markets of electronic and automotive accounted for just 4.8 and 2.5 percent, respectively, of Mexican processing, IMPI figures indicate. But interviews with several companies suggest they are playing an increasing role, especially from European companies setting up production in Mexico. Engel Machinery Inc. in York, Pa., said 75 percent of the injection molding machines it sells into Mexico go for automotive applications, while very few did five years ago. Engel set up a Mexican sales and service subsidiary last year, expects to double sales in a year, and is giving some preliminary thought to a manufacturing facility in Mexico for simple machines, said Kurt Fenske, vice president of sales and marketing for North America.
``You've got all the automotive companies setting up here,'' he said. ``It's the future. There is so much business here.''
Mexico also is negotiating bilateral trade deals with much of Central and South America that make it an attractive export spot for those markets, Schulman's Cameron said. Brazil remains a much larger market than Mexico, and has been booming while Mexico's recovery is slower, said Husky's Rodolfo Selem.
But there are plenty of signs of growth and renewed interest in Mexico. Battenfeld, for example, has upgraded Mexico from a C market, its worst, to a B market. Mexican machinery maker Beutelspacher SA de CV reports that sales are way up, and Arburg GmbH said sales are doubling year over year.
``It is on the rise again,'' said Arndt Pechthold, director of plastics and packaging for Ferrostaal Mexico. ``Mexico has a big future, a good outlook. A lot of international companies are investing in the automotive maquiladora industry.''