SAO PAULO, BRAZIL — The seventh edition of Brasilplast, the international plastic industry trade fair in SÃo Paulo, opened its doors March 8 under an atmosphere of uncertainty.
Unlike previous years, several top local authorities attended the opening ceremony—among them, Celso Lafer, the recently nominated development minister. The gala occurred just a few hours before the Brazilian government and the International Monetary Fund announced a revision of the a $41.5 billion loan agreement made to Brazil in late 1998.
``Like other industrial sectors in the country, Brazil's molding sector is experiencing a difficult time, working under a heavy tax load, market retraction, loss of profitability and killer interest rates,'' Merheg Cachum, president of the Brazilian molders association, Abiplast, said during his Brasilplast opening speech.
To restrict consumption, avoid inflation and protect the country's currency, the Central Bank of Brazil increased interest rates March 5 to 45 percent per year, from 39 percent.
``The main difference between the medicine and the poison is the dosage. The government's challenge is to try and find the right dosage,'' Lafer said.
After opening the trade show, he visited a few booths, asking exhibitors about their troubles, the level of imported components in their goods and the market.
The new IMF deal sets new goals for Brazil: 16.8 percent inflation for 1999, an $11 billion trade surplus, a 3.5-4 percent reduction in gross national product, an exchange rate of 1.7 real per U.S. dollar by December and an annual interest rate of 28.8 percent by the end of the year.
Jean Daniel Peter, president of Siresp, Brazil's resin-industry trade association, said Lafer's presence at Brasilplast'99 means the government is taking the industry seriously. Show organizers tried for years to get a high-level government official, without success.
``The plastics industry in Brazil was always seen as sort of a low-end business. Everybody takes it for granted,'' Peter said. ``But this has become a big event.''
Peter also is Union Carbide Corp.'s regional director of Latin America and South Africa.
Brasilplast had 500 Brazilian and 470 foreign exhibitors this year. Preliminary data estimates the number of visitors at 63,000.
Looking at the big economic picture in Brazil, Peter said, the country is doing a balancing act, using high interest rates to keep demand low and avoid a return to Brazil's hyperinflation of just five years ago. In 1994, Brazil's inflation was more than 800 percent.
High interest rates also have helped slow the torrent of money leaving the country.
``But that's a remedy that can't last too long or you kill the patient,'' Peter said.
Brazil must avoid a return to huge inflation, when everything — from wages to prices — was boosted frequently, he said.
Stability is key, Peter said. Fluctuations drove away foreign investment because potential investors knew the real was overvalued and simply waited for the inevitable devaluation.
Michael Ferlic, managing director of direct sales and service for Milacron Inc.'s SÃo Paulo arm, said the real's plunge has hit Milacron hard in Brazil. Prices for imported machines have doubled.
Milacron Equipamentos Pl sticos Ltda. opened in 1997.
Ferlic said he can live with a real valued at $1.60-$1.80.
``I can do business here at that rate,'' he said. ``But it must be stable and the economy has to grow. If the economy starts to grow, and companies sell more, I can sell high-tech machines here.''
At Brasilplast, Milacron was showing an all-electric Roboshot press and a Ferromatik Milacron high-speed model — machines that are not produced in Brazil.