SAO PAULO, BRAZIL — Brazil has an ambitious new plan to boost plastics industry competitiveness.
A big part of the project involves getting low-interest, government-backed loans to small and medium-size processors.
Brazil currently has a $370 million trade deficit for manufactured plastic products. Officials believe the plan will turn that into a $500 million surplus by 2008.
During Brasilplast in Sao Paulo, the Brazilian processors' association Abiplast announced the launch of a nonprofit organization called Ecip, an acronym in Portuguese for Competitive Strategy for the Plastics Industry. The new group will spearhead the development effort.
According to Abiplast, roughly 53 percent of plastics processors in Brazil are small companies with fewer than 10 employees, while 33 percent are medium-size companies, with fewer than 50 workers.
Besides reducing Brazil's plastics trade deficit, other industry goals include:
Doubling the quantity of resin used by domestic processors, from 8.3 billion pounds in 2000 to 17 billion pounds by 2008.
Boosting processor productivity, from 39,682 pounds per employee in 2000 up to 69,444 pounds by 2008.
Increasing total sales of processors from $9.84 billion last year to $17.7 billion by 2008.
Supporting that level of growth will require a big investment. According to one estimate, Brazil's processors will have to invest $9.7 billion in the next seven years — $5.3 billion in new equipment, $2.9 billion in tools and $1.5 billion in infrastructure — while raw materials suppliers will need to invest another $8.2 billion.
"These are sizable figures, but compatible with projections for demand growth," said Jean Daniel Peter, president of the resin producers' trade association of the state of Sao Paulo, Siresp. He said Brazil's plastics industry has been growing in a sustainable manner and in double figures since 1995.
"As long as inflation stays under control and there is no turbulence in the financial market, we should have a full decade of sustained growth. And demand will be the key factor — if there is a market [for plastics], there will be money and investments," he said.
The creation of Ecip is the first important step in an effort orchestrated in August by the federal government through the Ministry of Development, Industry and Foreign Trade, together with trade unions and the national associations for processors, resin suppliers and machinery makers.
Plastics is one of 14 industries that President Fernando Henrique Cardoso's government is working on as part of a larger project aimed at reducing Brazil's trade deficit.
During the March 5 opening ceremony for Brasilplast, Minister of Development, Industry and Foreign Trade Alcides Tapias said Ecip will act as an agent of the BNDES bank. BNDES is the National Bank for Economic and Social Development and is the main financing agency for the country's industrial sector.
In general, smaller companies currently do not have direct access to BNDES because the credit they need is below the bank's minimum limit. As a result, smaller firms must access BNDES' funds through a commercial bank, making the funds more expensive.
Three new industry organizations are being formed to receive support from the new-business development agency: one comprising mold makers in Joinville, in southern Brazil; one of film makers in Sao Paulo; and a third focusing on plastics recycling, also in Sao Paulo. The groups will apply for credit as one entity, and will centralize raw material purchases and contracting services.
Plastics consumption in Brazil totaled 8.3 billion pounds in 2000, representing an increase of 9.4 percent over 1999, Peter said.
Abiplast President Merheg Cachum said industry's trade-balance goals also are realistic.
"Once our industrial complex is modernized, we can revert this deficit yet in 2003. We have already begun this trajectory by reducing the $454 million deficit in 1999 to $371 million last year," Cachum said.
Maristela Miranda, president of the Brazilian Machinery for Plastics Chamber, a division of the Brazilian Machinery Manufacturers Association, said easier access to credit will have to work very well in order to update Brazil's plastics processors.
"The processor who wishes to finance a machine in Brazil pays an average interest rate of 17 percent per year, having to pay it off within a maximum of five years, in addition to having to present guarantees that significantly exceed the loan amount," she said.
In general, notwithstanding those highly competitive segments such as the automotive and packaging sectors, Brazil's processors still are poor in terms of machinery technology, she said.