SAO PAULO, BRAZIL - Argentina's imminent risk of a default is putting plastics molders in that country on hold.
``Nobody knows what is going to happen,'' said Hector Mendez, president of the Argentine plastics industry chamber, CAIP.
Previous prognoses of modest, almost zero, growth for the plastics industry this year have been downgraded to a market shrinkage forecast, Mendez said in a July 16 telephone interview.
According to CAIP figures, total sales for plastics processors will drop from $4 billion in 2000 to $3.9 billion in 2001.
Argentina's economy is entering its fourth consecutive recession year. Per capita plastics consumption dropped to 64.3 pounds last year, compared to 67.9 pounds in 1998, and 68.7 pounds in 1999.
In terms of foreign trade, Argentina's plastics industry has also been suffering, especially after its main trade partner, Brazil, devaluated its currency in January 1999.
After the devaluation of Brazil's Real, Argentina's exports of plastics products decreased from $189 million in 1998 to $179 million last year.
``Argentina's situation is extremely grave, the industry's production is at a very low level, and the whole scenario is chaotic,'' said Merheg Cachum, president of the Brazilian plastics industry molders association, Abiplast. ``We hope that they overcome all this soon, because when they are doing well, it is good for us.''
Cachum had a meeting in Argentina with CAIP officials on July 12 to address a new agreement aimed at identifying and preventing any plastics-related predatory trade practices in the Mercosul trade region.
Worsening conditions in Argentina, which began in April, have affected Brazil's economy. At the same time, Brazil has suffered from an unexpected electrical energy rationing program, as well as a serious credibility crisis regarding President Fernando Henrique Cardoso's term.
As a result, Abiplast forecasts that Brazil's plastics industry will grow 9.5 percent this year, down from an earlier estimate of 13-15 percent.
Preliminary resin consumption figures already indicate a slowdown in Brazil. From January to May, domestic resin consumption dropped 8.9 percent compared to the same period last year.
Jean Daniel Peter, president of the resin producers' trade association of the state of Sao Paulo, Siresp, said resin imports fell during that period because of a disadvantageous currency exchange rate, and exports from Brazil were minimal.
According to Peter, Brazil's consumption of products in general has been weak as seen in the retail market, and this led the plastics industry to stop growing. ``We are walking somewhat sideways, but we are not in a hecatomb,'' he said.