BUENOS AIRES, ARGENTINA — Looking to tap into the Mercosul market, Royal Group Technologies Ltd. of Woodbridge, Ontario, has formed an association with an Argentine entrepreneur to make and sell modular housing systems in the region.
Named Royal Housing System Argentina Ltda. SA, the joint venture is 88 percent owned by Royal Group. Pedro Armando Boullhesen, a former Argentine senator who has been involved in construction for more than 20 years, owns the remaining 12 percent.
Boullhesen has worked with Vic De Zen, Royal's chairman and president, for more than five years to develop market opportunities in Argentina.
The Canadian firm supplied Argentina with the Royal Building System — as it calls its modular housing system — via import operations from 1992 until September 1997, when the company launched its local facility.
The 136,000-square-foot unit is located in La Plata, near Buenos Aires.
The US$23 million plant, built completely using Royal's products and technology, makes vinyl window profiles, window and door frames and 2- to 6-inch-thick extruded hollow vinyl panels and posts. The panels and posts fit together and can be filled with concrete during construction.
``We provide locally 80 percent of the material required by the Royal Building System,'' Boullhesen said in an April 6 interview at the firm's headquarters in Buenos Aires. Doors and optional items such as siding and polycarbonate shingles are available through imports.''
The Argentine plant employs 67 and has nine Amut extrusion lines. Four lines are dedicated to profiles and frames and five to panels and posts.
The panels and posts are coextruded using as much as 30 percent recycled PVC in its bodies, with the external layer made of a virgin compound that incorporates protection against ultraviolet light.
By June, the firm will add two more Amut coextrusion lines, doubling the current annual capacity to 17.6 million pounds of PVC resin.
The plant was designed to house 20 extrusion lines, totaling roughly 31 million pounds of capacity, and the company will invest US$27 million to US$30 million in the facility in the near future, Boullhesen said.
``That will be the limit of the unit, which was designed to supply Argentina, Uruguay, Paraguay and Chile. Brazil will be initially serviced from Argentina, but as soon as that market starts to present a stronger demand for Royal's products, it will require a plant of its own,'' he said.
Boullhesen said the firm is involved in a project with a construction company in Brazil, with the potential to sell 600 residences in the country, including houses and four-story apartment buildings.
In Argentina, Royal has supplied material for about 380 houses, 20 schools, three nursery schools and a hospital. The firm reported US$6 million in sales last year and expects to reach US$10 million in 1998.
``People are interested, but there's still a strong local culture for brick homes,'' said Bibiana Alvarez, an architect at Royal Argentina. ``They come to know our system and test it by punching the house walls we exhibit to be sure that the plastic will resist.''
Boullhesen said, ``The poor quality of industrialized building systems of the past has compromised the product's image in Argentina and also in Brazil. Now, we must convince customers that good options are available in the market, whereby architectural project designs are virtually limitless.''
Several factors influenced Royal's decision to choose Argentina as its first plant site in the Mercosul region, instead of Brazil, according to Boullhesen.
``Besides adapting to technological changes better than Brazilians, the Argentine population possesses a higher per-capita income, as well as better real estate financing conditions.''
In Latin America, Royal also has operations in Mexico and Colombia.