BUENOS AIRES, ARGENTINA — A true story involving the Asian financial crisis, the Argentine recession, Brazil's currency devaluation and the Buenos Aires-based plastic syringe maker Casa Pi-Ro SA has recently turned into a major media event in Argentina. In an attempt to phase out its industrial unit and establish a plant in Brazil, the molder has became a symbol of the so-called exodus of Argentine companies to its richer neighboring nation.
Since Brazil devaluated the real in January 1999, the transfer of industrial activities from Argentina to Brazil has been generating increasing concerns among Argentine patriots, politicians and unions, becoming a nightmare for certain economic sectors.
Casa Pi-Ro's saga began with the first signs of the Asian crisis, back in 1996. The company started having problems competing against plastic syringes imported from China and South Korea.
"The situation got worse with the devaluation of the Korean currency — we couldn't compete against Asian subsidized prices. After that, as a second blow, came the real devaluation, and all export opportunities to Brazil disappeared," said Hector E. Piqueras, Casa Pi-Ro's owner and president. "In late 1999, facing a very bad situation in Argentina, we decided to install a syringe plant in Brazil."
Founded in 1947, Casa Pi-Ro is a family-owned company that supplies components and products to the medical-hospital sector. During the 1970s, the company entered the syringe market as an importer, and in 1988 it launched a polypropylene syringe facility in City Bell, a town situated in the Buenos Aires metropolitan region.
The $5 million plant has 12 Engel injection molding machines that can produce a total of 11 million syringes per month.
In 1995-96, when the unit operated at full capacity and registered annual sales of $5 million, Casa Pi-Ro exported about 30 percent of its production to Brazil. At present, it no longer exports to Brazil and in December was running at 35 percent of its production capacity, which was considered unacceptable by the company's board.
The main idea behind investing in Brazil was to maintain the City Bell facility just for finishing products manufactured in Brazil, Piqueras said. To make the plan a reality, Casa Pi-Ro hired a consulting firm, which selected the best Brazilian states in which to invest. The state of Paraiba, located in northeastern Brazil and one of the poorest states in the country, was chosen.
"The government of Paraiba offered unimaginable benefits in terms of land prices, basic infrastructure, civil construction and machinery financing, as well as of tax incentives," Piqueras said. Wages also were an important factor in Casa Pi-Ro's evaluation: $220 per month in Paraiba compared with $600-$700 in Buenos Aires.
Casa Pi-Ro's story became public knowledge early this year, when a Buenos Aires reporter called the company's consultants, looking for an example of a firm that was leaving Argentina for Brazil. Casa Pi-Ro became that example.
"Since then, I haven't stopped talking to the press," Piqueras said.
Casa Pi-Ro's project gained a lot of visibility, reinforcing a series of rumors and speculations regarding the exodus issue, such as the never-confirmed estimate that 100 companies moved all or part of their operations to Brazil between January 1999 and January 2000. So far, the only information confirmed on this subject is a list run by the main local newspapers that cites 28 companies that transferred their activities to Brazil, mostly from the automotive area.
In response to public-opinion pressure, the federal government and the government of the Buenos Aires Province approached Casa Pi-Ro in March and proposed a deal for the company to continue operating.
"They promised to begin investigating potential anti-dumping activities and to create a law prohibiting syringe imports from countries outside the Mercosul trade region, especially Asia," Piqueras explained, claiming that Asian plastic syringes are sold, free on board, at half the price of Argentine syringes.
"Also, both governments committed to purchase, together, between 50 and 60 percent of the City Bell plant's production," he said.
The Casa Pi-Ro case set a precedent for other companies in Argentina to ask for similar treatment. According to Piqueras, who is maintaining his syringe plant in Argentina but has not discarded the idea of installing a facility in Brazil, the Argentine government has not honored its part of the deal yet.
He has scheduled a trip to Paraiba on April 26, to check more details on the Brazilian project. Casa Pi-Ro is studying the possibility of having a Brazilian partner in the new business, if the idea becomes a reality.