For many years one of the major problems holding back Mexico's plastics industry has been the need for processors to invest in automation and more-efficient equipment. Processors consistently complain that they never have enough money or access to credit to modernize.
The slow economy and stiff competition from Asia means the problem may be getting worse, according to Luis VillagÃ³mez, director general of the Asociacón Nacional de Industrias del Plastico AC (Anipac).
``[Investment has] been left on the back burner for the simple reason that companies do not have enough money to update their technology,'' he said.
The figures look grim.
According to statistics from the Mexico City-based trade group, in 1999 total imports of machinery for Mexico's plastics industry amounted to $600 million, which went up to $684 million in 2000, but sank in 2001 to $606 million.
Sales so far this year are even lower. In the first three months of 2002, imports plunged to $120 million, down from $155 million for the same period in 2001 and $172 million in the first quarter of 2000.
In the weeks before the Plastimagen Mexico 2002 trade show, industry consultant Eduardo de la Tijera said Mexico's processors face some tough times, but some sectors show promise. The show is set for Sept. 3-6 in Mexico City.
``In past years, up to 1999, we saw lots of new companies in injection molding, in part because of support and investment from the electronic and communications maquiladora industry in Guadalajara. Since 2000, and still today, there have been less investments in this area, because of problems in the United States and because of certain movement to Asia. But other companies are arriving in the Bajío area [the Guanajuato/Queretaro region] for example, high density polyethylene pipe.''
He cited a recent successful uprising as an example of a situation that may discourage investment in Mexico.
``We are really in a very difficult situation at the moment, and the conditions to invest do not exist,'' de la Tijera said. ``The recent decision to back down on the location of the new airport sends a dreadful sign to investors, foreign and local, that some hundreds of local landowners with machetes in hand can stop a project of this importance. Imagine I want to set up a factory, and some neighbors come along with machetes?''
Still, some processors are updating their technology, which is necessary for survival, de la Tijera said.
Guillermo Salas, general director of Industrias Plasticas Maximo SA de CV, laments the lack of credit in Mexico as compared with other countries. Maximo sells a variety of Asian-made injection molding, blow molding and converting machinery.
``Here the producer has to pay for equipment with his own resources or fall back on the resources of the very companies that make the machinery and equipment.
``The credit available to the plastics industry in Mexico is channeled only toward the companies that export, and even then, with great difficulty. Meanwhile those companies that have local markets, such as bottlers, packagers and containers in general, are condemned to receive zero credit from Mexican institutions,'' he said.
Maximo, a 6-year-old company in Cuautitlan, not far from Mexico City, saw its sales grow about 8 percent in 2000 and 5 percent in 2001. Salas estimates the company will see sales grow about 15 percent this year.
``Normally when our economy is struggling, our sales increase, given that our machines are cheaper than the North American and European ones, but are still very reliable,'' he said. Although sales have not suffered, the company has been affected by delays in payments.
Salas said the company might see a substantial boost in business if it finalizes a joint venture with an undisclosed Chinese company. The venture is for an assembly plant in Mexico for injection presses with clamping forces of 50-350 tons. Salas said the project has been postponed until March 2003.
Pablo Vargas, founder and director of Proveedora Industrial Vargas SA de CV, is hopeful that processors will invest once economic conditions improve. His Monterrey, Mexico, company sells products and services to injection molders.
``I'm convinced [once the economy improves] that processors will buy newer technologies. Even at this difficult time, some companies are doing very well and are buying robots, conveyors, temperature controllers and hot-runner systems. The customers have become wiser buyers and they know who the leading brands are. But that's not enough; they are demanding credit, local service and training in Spanish.''
Privarsa sees a big opportunity in the mold-making sector.
``Each year Mexico imports $900 million in molds. The few good mold makers are booked. The problem is that in Mexico there's no technical school for mold makers,'' Vargas said.
De la Tijera said processors, too, need a better-trained work force, along with more modern machinery.
``For many years Mexico stopped investing, and companies, because of the closed economy, made do with the machinery they had. Realistically it will take us 10-15 years to replace the outdated machinery. It's a slow process because there are still many companies that cannot afford to do it, and can indeed survive in the meanwhile,'' de la Tijera said.
On Privarsa's sales, Vargas said this year probably will be the same as 2001, while 2003 should show improvement, although ``this is still very uncertain.''
As with most Mexican business people, Vargas' biggest concern is the recovery of the U.S. economy.
``We are very tied to that and its recovery would be important for our recovery next year,'' he said.
Most injection molders in Mexico are working far below capacity, and many maquiladoras have closed down and moved to China.
``Our component sales have dropped as a result of this situation,'' he said, and there is no sign of more funds becoming available to invest in machinery and new technology.
``The rest of the year we will still see companies moving to China. We have customers working at low rate capacity. With mergers and companies being sold to other companies, decisions for new investment become more difficult, so it is as though everything's on hold.''
At the same time, good decisions have helped Privarsa keep ahead, he said.
``Thanks to the introduction of the metric mold bases, we were able to expand greatly our share in the mold-making industry that we were partially covering in the past. So it is thanks to that and other products, such as heaters and magnetic plates, that we have been able to remain [at] about the same sales level of last year.''