BUENOS AIRES, ARGENTINA — After a difficult 1999, when sales fell 15-20 percent for a total of $4 billion, plastics processors in Argentina still cannot say 2000 will be a turnaround year. "I would like to believe that growth is resuming but still can't tell as of yet," said Hector Mendez, president of the Argentine plastics industry chamber, CAIP.
In his opinion, plastics processors sales may increase 3 or 4 percent this year, due to the "typical dynamics of the material" — the possibility of conquering new markets and replacing other raw materials.
The general opinion among resin makers and distributors is that plastics consumption may present a slight improvement this year, or repeat 1999 figures. In 1999, plastics processors converted 2.6 billion pounds of resin, vs. 2.4 billion pounds the year before.
"The plastics market in Argentina is one of the few that has not presented significant growth lately," said Telmo Hermida, vice president of Alta Plastica SA, a Buenos Aires-based resin distributor and compounder, which sold 430 million pounds of plastic materials in Argentina last year.
Between 1991 and 1997, Argentina's consumption per capita of plastics jumped from 25.5 to 76.2 pounds, but has remained stagnant at practically the same level since then.
The increase in resin production, with the launching of Dow Chemical Co.'s new polyethylene capacities in Bahia Blanca, is considered a favorable factor to boost the market in the near future.
"The increase in the supply of raw materials is always perceived as a strong stimulus in the plastics industry and Argentina is expected to return to growth within the next two to three years," said Luis Fernando Cassinelli, service manager at the Brazilian resin maker OPP Petroquimica SA.
1999 was the first time in recent history when packaging consumption dropped in Argentina, said Julian Zarate, marketing manager at the Argentine polystyrene producer PASA SA. "Supermarket sales fell 2.3 percent, meaning that people's incomes fell. They stopped buying essential goods such as food."
To reverse Argentina's recession, the newly elected government of President Fernando de la R£a, which took over in late 1999, increased income taxes and taxes on certain products such as alcoholic beverages and cigarettes.
Also, in order to restore economic stability, the Argentine government renegotiated its agreement with the International Monetary Fund early this year, obtaining a contingency loan to be used only in emergency situations and, in exchange, the country commits to reduce its fiscal deficit.
Brazil's devaluation of its currency, the real, deserves a chapter itself in the history of Argentina's current recession, said local industry leaders.
"It is true that the situation in Brazil affected the Argentine industry, however, it is also true that the consumption reduction in Argentina began prior to the devaluation of the real, in October 1998," Zarate said.
"The devaluation has been a horror for Argentinians. People have stopped spending and refrained from borrowing money. In newspapers, banks are advertising real estate loans at about 9.5 percent a year, and people are not going for it because they're scared," Zarate said.
Mendez said many plastics manufacturers are not making a profit.
The devaluation has slashed plastics exports to Brazil, Argentina's main trade partner.
According to preliminary data released by Brazil's Ministry of Development, Industry and Commerce, in 1998 Brazil imported from Argentina roughly $77 million, or 50.7 million pounds, of plastic products and exported about $78 million, or 44 million pounds. In 1999, Brazil imported $50 million, or 35 million pounds, and exported $75 million, or 50.7 million pounds.
An exodus-of-companies theme also has caused additional diplomatic problems between Brazil and Argentina.
Although plastics processors have stayed put so far, some important Argentine firms have decided to move to Brazil, such as the food division of Macri Group and a series of multinational auto-part makers, including the local subsidiaries of Delphi Automotive Systems DNMand Magnetti Marelli.
According to Andre de Oliveira Castro, general manager at the commercial office of the Brazilian resin maker Ipiranga Petroquimica SA in Buenos Aires, the tension between Brazil and Argentina has not created animosity in the plastics sector. Mendez, from CAIP, agreed.
Castro also is the director for the chemical and petrochemical production chains at the Buenos Aires-based Grupo Brasil. Grupo Brasil is a nongovernmental organization founded in 1994 by Brazilian executives, aimed at assisting Brazilian firms that intend to establish business operations in Argentina.
"With roughly 200 corporate members, we have helped a lot of companies to invest in Argentina, of which a small part are not even from Brazil, to whom we also provide support. This exodus thing doesn't make much sense to us," Castro said.
Grupo Brasil has played an important political role in integrating Brazil and Argentina, operating under the slogan "More Mercosul."
According to resin maker officials at Argenplas 2000, held April 3-8 in Buenos Aires, executives from at least five major Brazilian packaging firms were visiting Argentina during the week of the show, in order to analyze opportunities of entering the market.