BUENOS AIRES, ARGENTINA — While some international observers fear Argentina's economy is overheating, the local plastics industry is already quite hot — and happy.
Resin consumption grew about 10 percent in 1997, to nearly 2.2 billion pounds, vs. 1.99 billion pounds the year before. The 1997 figure is three times more than in 1990, when demand totaled only 822 million pounds, according to estimates from the Argentine Plastics Industry Chamber (CAIP).
Also during the 1990-97 period, per-capita plastics consumption jumped from 25.6 pounds to 57.3 pounds, while the number of processors fell from 3,500 to 2,600 companies and the number of employees shrank from 37,000 to 30,000.
``This represents efficiency gains. We processed three times more resin with less companies and employees,'' said CAIP President Hector Mendez, who also is president of a local injection molder.
The International Monetary Fund recently advised the Argentine government to suppress the economy's growth. IMF fears that the country's trade deficit has grown to dangerous levels — it may reach $8 billion in 1998 — which may lead to a financial crisis.
However, for a good portion of plastics leaders present at the Argenpl s 98 show, held April 2-8 in Buenos Aires, there were no reasons to be alarmed. In fact, the climate was one of euphoria.
In the plastics processing arena, a sector in which more than 90 percent of companies are characterized as small or medium-size firms, with annual sales of about $30 million and possessing roughly 100 employees, the past few years have stood as a period of restructuring.
``We are witnessing the redimensioning of companies, mergers and acquisitions, even though a major portion of Argentina's plastics industry is still in the hands of local capital,'' Mendez said.
The packaging and auto parts sectors are flagged by analysts as the key areas for expanding the range of plastics applications in Argentina.
``We have seen the arrival of foreign supermarket chains such as Wal-Mart, Au Champ and Casino, providing for an increased penetration of plastics packaging, especially with regards to the use of PET in segments which were previously dominated by other materials,'' Mendez said. ``Additionally, investments on the part of local auto manufacturers such as General Motors, Chrysler, Fiat and others have had a decisive role in developing the local auto parts industry.''
The auto parts sector has seen some merger and acquisition activity, but to a lesser extent than that occurring recently in Brazil, he said.
``Since the automobile market in Argentina is not as large and explosive as Brazil's, interest on the part of multinational automakers is also not as significant,'' Mendez said. In 1997, about 450,000 new vehicles were sold in Argentina.
Oscar Groomes, president of the SÃo Paulo, Brazil-based GE Plastics South America, estimates that more than 50 percent of auto part processors in Argentina are still owned by local companies. But he believes this situation soon will change.
``Some companies are not going to make it. The joint venture process is very active and you will see some more partnering here very shortly, with some multinational Tier 1 suppliers making acquisitions or associations,'' he said from GE's booth at Argenpl s.
Groomes said Argentine automotive processors are not known for pioneering new plastics applications. Nonetheless, he said firms are studying alternative manufacturing processes that are better-suited for smaller production scales such as in Argentina.
In the meantime, plastics firms slowly are beginning to benefit from Argentine trade efforts.
According to Mendez, exports of plastics goods to Mercosul member countries increased from $2 million in 1986 to $115 million in 1996 and $172 million in 1997.
``For Argentina, the easy access to a larger economy such as Brazil's was very important,'' he said.
``The acquisition of capital goods and new technologies by the different economic sectors accounts for almost half of Argentina's trade deficit. We must wait for these investments to generate exports in order to change this trade deficit situation,'' Miguel Angel Cuervo, deputy secretary of industry, commerce and mining in Argentina, said during the Argenpl s opening ceremony.
In the domestic market, Argentina has an important factor in its favor.
``The country has the highest income per capita in Latin America, amounting to $8,600 in 1995,'' said Jose Luiz Bichuetti, general director at Arthur D. Little consulting office in Buenos Aires. In 1997, income per capita was about $8,800.
In 1997, the plastics processing sector totaled sales of $3.5 billion, representing 1.3 percent of the country's gross domestic product and 4.9 percent of the gross industrial product.
Argentina's plastics industry has benefited from a major restructuring of the nation's economy that started in the beginning of the decade by President Carlos Menen, who currently is serving his second presidential term.
The prescription has included privatizations, a currency stabilization process (US$1 equals 1 Argentine peso), and taming an inflation rate that once topped 2,314 percent, down to the current 0.2 percent.
Industry investments in equipment happened at an irregular pace, sometimes faster and other times slower, but never stopped. Machine imports for the plastics industry totaled $622 million between 1990-96 and probably achieved another $165 million in 1997, Mendez said.
Since Brussels, Belgium-based Solvay Group acquired the Argentine PVC maker Indupa SA in 1996, many changes have occurred among plastics processors from all sectors, said Heraldo Botelho, operations director at the Buenos Aires-based Solvay Indupa SA.
``In the beginning there were the small, local and private molders. Then, some of these companies evolved and eventually absorbed other firms, thus becoming medium sized-companies.
``Today, we see a large number of international players coming in and the possibility of business associations with Brazilian companies,'' he said.
``In summary, the small transformers will probably survive in specific niches, while the major companies will be multinational organizations.''