Two of Canada's export promotion offices have chosen the plastics industry as a priority for their efforts in Mexico: the Canadian Embassy's trade department in Mexico City, and Northstar Finance Inc., an export term-financing firm based near Vancouver, British Columbia.
Northstar supports Canadian exporters by offering affordable term financing to foreign buyers, such as companies in Mexico, where accessing credit is one of the manufacturing industry's major problems.
The firm brings together the export strengths of the Canadian federal government; the provincial governments of British Columbia and Ontario; and two major banks, the Royal Bank of Canada and the Bank of Montreal.
It offers financing for smaller loans, from C$100,000 to C$5 million (US$69,500 to US$3.4 million), with repayment terms between one to five years. This gives Northstar several advantages over other kinds of financing, the company said.
``We offer North American, not local rates, and compared to U.S. firms, we do not have withholding tax since we are government-backed,'' said Craig McKenzie, Northstar's executive vice president. Another advantage is that collateral such as real estate is not required — only the equipment being bought is pledged.
``For security, we don't use existing credit lines or equipment, but study the cash flow of the company; and if it can generate revenue, then we approve it,'' he added.
In an April 8 telephone interview from his Richmond, British Columbia, office, McKenzie explained that the company has backed 27 transactions in four years in Mexico, for plastics and other areas like metal-forming and paging systems.
When Northstar started, it studied several sectors and choose plastics as a key market. It has backed sales for six Canadian plastics companies, including GN Plastics, Husky Injection Molding Systems Ltd. and Berg Chilling Systems Inc.
The Canadian embassy office also is focused on small and midsize Mexican enterprises, dubbed SMEs. A lot of Mexican industry is SME, and this is ``the strength of the Canadian industry,'' said Jennifer Daubeny, the embassy's consul and trade commissioner in Guadalajara.
The role of the trade office staff is to act as the eyes and ears for companies just entering the Mexican market. But its trade staff has chosen five sectors as priority a few years ago, one of which was plastics.
``Priority areas are where something is happening, and where the embassy can make a difference,'' said Denis Thibault, the embassy's trade commissioner.
Plastics is not cited specifically as a top sector in the revised 1998 Trade Action Plan for Mexico, but one sector that was included, ``advanced manufacturing technology and industrial machinery,'' encompasses the plastics industry, Daubeny said.
The embassy aided in supplying lists of companies that already had some contact with Mexico for a meeting of Canadian business leaders in Mexico in January. The Team Canada mission included 400 Canadian business leaders and politicians.
The following deals were announced at that meeting:
Mould-Tek Industries Inc. agreed to contracts for materials-handling systems for three companies: Mexico City extruder Plasticos Rex, with a three-year contract for US$720,00; a US$10,695 contract with Mexico City's AMP de Mexico SA de CV; and a US$30,000 memorandum of understanding with Gillette de Mexico SA de CV.
Berg Chilling Systems Inc. of Scarborough, Ontario, penned a US$29,000 contract with Kimex SA de CV for its third mold dehumidifying system, and signed a memorandum of understanding with Cajaplex SA de CV to integrate a cooling system.
A manufacturer of stretch-wrap machinery, Wulftec International of Ayer's Cliff, Quebec, is setting up a joint venture with Tecnicos y Asesoria Industrial SA de CV of San Luis Potosi to install a plant in Mexico.
Northstar Trade Finance Inc. backed two loans for Mexican companies to buy Canadian equipment: Mexico City's Nutrigo bought thermoforming equipment from GN Plastics of Chester, Nova Scotia, and Kimex bought a plastics injection molding system from Husky of Bolton, Ontario. Northstar currently is arranging another loan for Kimex.
Behind the scenes, Team Canada participants worked on increasing other contacts. One example was GN Plastics, which signed on Ekonorm SA de CV as its local representative.
Ekonorm had represented a European thermoformer, but is very content to represent GN instead, since it is closer to Mexico and more active in the region, Ekonorm representative Norma Acevedo said in a telephone interview.
The chairman of Unique Mould Maker's Ltd., Werner J. Scheliga, said the Team Canada mission was his first visit to the Mexican market after several years. Unique recently has signed a cooperation agreement with Husky, where Unique will supply high-performance injection molds for caps and closures, while Husky will begin to withdraw from that part of the market.