North American processors have the technological know-how, experience and capital to compete in Brazil and elsewhere around the world. The question is, when will they start doing so in a serious way?
North American companies have many reasons to be cautious about doing business in Brazil. Long-distance relationships are complicated. Keep in mind that Rio de Janeiro is closer to Paris than it is to Los Angeles. Language and cultural differences also are significant.
Most importantly, there's the risk of getting involved with customers you don't really know, in an economy you might not fully understand.
Still, the potential reward for participating in this growth market is pretty great. That's why many firms already are investing in Brazil, including many leading North American machinery and material suppliers.
Brazil's economy once was a nightmare. Currency devaluation and inflation gave investors fits. Today, relative stability and strong growth are the norm in most end markets. Sometimes that growth has not been rapid enough to keep up with overly optimistic business plans. That's what's been happening in Brazil's auto industry, which has seen layoffs and cutbacks despite decent demand.
At any rate, the Latin American market is big and growing, and Brazil is a prime location for joint ventures and regional manufacturing locations. As we discovered at the recent Brasilplast show, held March 5-10 in Sao Paulo, Italian machinery companies have been particularly active in Brazil in the past few months.
The global trend toward freer trade is going to make Brazil even more important in the future. U.S. business has, for the most part, benefited from free trade, with the North American Free Trade Agreement being the prime example. But there's a sense that protectionist sentiment is growing. If the economy continues to falter, the nation's taste for free trade could sour.
That would be a mistake. Manufacturers of competing materials — metal, glass and paper — already invest heavily abroad, in part to make up for the markets they're losing to plastics in North America. If the plastics industry wants to continue to outperform the rest of the economy, it also will have to get more serious about tackling some of the world's developing markets.