SAO PAULO, BRAZIL — Japanese machinery executive Ichiro Mizuuchi typifies the high expectations that many have for Brazil's plastics industry.
Mizuuchi, president and chief executive officer of blow molding machine manufacturer Nissei ASB Machine Co. Ltd., is looking for a strong year and has dusted off plans to build an assembly plant in Brazil. He wants it up and running next year.
Mizuuchi launched Nissei's Sao Paulo office in 1992, when he worked in Nissei's Atlanta office. After backing away from similar Brazilian manufacturing plans several years ago, he now insists his company is ready to go.
The reasons: Brazil has tamed hyperinflation, achieved political stability, enjoys much lower interest rates and projects 4.5 percent annual economic growth.
"This will be the best year since [they opened a Sao Paulo office] because of the political and economic situation," he said.
But there are signs of trouble. Brazil's central bank raised interest rates in March a half of a percentage point, to 15.75 percent, to keep its currency, the real, from sliding. Brazil is watching its neighbor and major trading partner Argentina suffer a prolonged economic downturn, and it is hoping for a soft landing for the U.S. economy.
Brazil remains very vulnerable to downturns in the world economy and could see much lower growth if there is significant slowing globally, said Luciano Coutinho, a Sao Paulo economist.
Merheg Cachum, who heads Brazil's plastics processing association Abiplast, said that Brazil really only started liberalizing its economy in 1994, and its situation remains somewhat precarious.
"All economies in South America are fragile," he said. "You have to separate Chile, but all the others are fragile."
Sales in Brazil can be a ride from valleys to peaks. For example, when the industry was reeling from Brazil's currency crisis in 1999, the country bought 600 injection presses. Typically, it is about 1,000 machines a year.
In general, though, Brazilian business people say the economy is more stable than in the past, and foreign industry is optimistic about Brazil.
A January survey from the Brazil-U.S. Business Council, part of the U.S. Chamber of Commerce, found that more than half of companies responding predicted growth of at least 4 percent annually for the next three years. More than one-third of them predicted significantly more investment for their firms in Brazil in 2001.
Brazil is now the third-most favored location for foreign investment, after the United States and China, according to a survey put out in February from consulting firm A.T. Kearney Inc.
Much of the international plastics machinery industry is rushing in with investments, led by the Italians.
Sandretto do Brasil Ltda. in Aruja plans to double the size of its injection press manufacturing plant.
"In a country like Brazil, you can never look at the short term," said Mario Manzo, general manager of Sandretto Industrie SpA.
German firm Arburg GmbH is making a smaller investment. Its Sao Paulo subsidiary announced at the Brasilplast 2001 show that it is building a 32,000-square-foot technical center for more than $1 million. But Arburg officials said they have no plans to assemble machines in Brazil because they do not think the operation could be as efficient as their headquarters in Germany.
Much of the investment in Brazil is banking on increases in the local per capita plastics consumption. Brazilians use about 48 pounds of plastic per person annually, about one-fifth of that in the United States and less than a third of Western Europe.North American firms seem more reticent to invest than their European counterparts.
Husky Injection Molding Systems Ltd. in Bolton, Ontario, has a technical center in Jundiai where the company does complete systems integration. While the injection press maker would not rule out manufacturing in Brazil, it has no concrete plans.
"It is something we will look at in the future," said Michael Urquhart, vice president of service and sales. "Looking ahead, we have to be here and in Asia."
Husky is seeing double-digit sales growth in South America, with volumes returning to levels before 1999's currency devaluation, he said.
Milacron Inc.'s Uniloy blow molding manufacturing unit lost its local manufacturing presence in 1999 when its Brazilian partner, Irmalos Semeraro Ltda., pulled out its assembly contract with Uniloy. Uniloy said it is not looking for local manufacturing, partly because lowering duties make it cheaper to export to Brazil.
Many machinery companies identified automotive as one of Brazil's stronger markets. Others said they expect more conversion to PET bottles. A PET beer bottle will be launched within a year, said Leandro Scomparim, commercial director of Netstal Quality do Brasil in Sao Paulo. Mineral water and edible oils will also be a strong market, he said.
Last year, Brazil's market for blow molded consumer-goods packaging was weak, prompting Bekum do Brasil Ind£stria e Comercio Ltda. in Sao Paulo to eliminate some jobs and outsource some production. While industrial blow molding was strong overall, the company reported a 10 percent drop in sales in Brazil.
"The purchasing power of the middle class was not increasing," said Antonio La Selva, general director of engineering for the firm.
Brazil also is seeing a lot of activity among hot-runner manufacturers and auxiliary equipment suppliers, reflecting a sense that the country's molding is getting more sophisticated.
Polimold Industrial SA's sales grew 40 percent in 2000 and are projected to grow another 30 percent in 2001, said Alexandre Fix, director of the Sao Bernardo do Campo-based firm. The company makes mold bases and hot runners, including some technology licensed from D-M-E Co. in Madison Heights, Mich.
Mold-Masters Ltd. of Georgetown, Ontario, is building a plant in Brazil, and hot-runner maker Incoe Corp. predicts a doubling of growth in the country, led by a strong auto market.
"I think this is going to be a very exciting market for the next 10 years," said J. Colin James, a Hong Kong-based vice president of international sales for the company.