Mexico's plastics sector expects growth in 2003 to be a couple of percentage points ahead of gross domestic product forecasts and above the sector's growth in 2002, despite the likelihood of a cautious and difficult environment.
``This year our industry will grow, in spite of an unfavorable macroeconomic environment,'' Luis VillagÃ³mez, director of Mexico's National Association for Plastics Industries, known as Anipac, said Jan. 9.
Mexico President Vicente Fox said Jan. 7 that 2003 will be a difficult economic year for the country because the U.S., European and Japanese economies are expected to remain weak. War against Iraq could mean the dollar would lose ground against other currencies, giving further cause for concern.
Mexico's economy is tied very closely with that of the United States, with 80 percent of Mexico's exports destined to its northern neighbor.
Last year was dreary, as Mexico's economy grew only 1.1 percent, 0.6 percent less than government predictions. Many industrialists expect better things for 2003.
``2003 will definitely be better than 2002,'' said analyst Eduardo de la Tijera of Infoplas, an information service that covers the industry, and consultancy firm Grupo Texne.
``This is a year in which we can expect a growth in the plastics market of 4-6 percent, while 2002 was 2.5-3 percent.''
``Packaging will grow, of course,'' Tijera said of the biggest sector that drives the plastics industry. ``We can already see a reactivation of manufacturing exports.''
He said that construction, while a small sector - 8-10 percent of the industry - will grow in a significant way, ``although we won't have the spectacular growth of 1996-1999,'' he cautioned.
``War is the big question mark,'' said Tijera. ``In plastics we are more `Naftizados' [influenced by the North American Free Trade Agreement] than the rest of the country's industry, with 90 percent of our exports in plastics going to the United States.''
He pointed out that the United States tends to look inward when at war, reducing imports.
``If that were the case, the plastic sector could be in a situation similar to 2001, or 2002.''
Angel Oria, director and major shareholder of Polymat, one of Mexico's biggest distributors of raw materials, also expressed concern about the war factor.
``The uncertainty caused by the possible war with Iraq is already destabilizing the market of petrochemical products, especially the polymers market, with insufficient availability of materials and prices increasing as the year goes on, by up to 20 percent,'' Oria said.
The main internal concern dominating Mexican headlines during the new-year period has been a demand from the nation's farmers to declare an emergency in the farm sector and renegotiate NAFTA, which lifted tariffs on a range of agricultural goods Jan. 1.
Although no direct effect could be expected on the plastics sector, economist Josef Stiglitz warned that the situation could provoke serious economic instability, like that seen in Argentina.
Inflation in Mexico hit 5.7 percent in 2002, which exceeded the government target of 4.5 percent. Economists blame higher electricity costs and a weaker peso. Tighter monetary policies this year, aimed at bringing inflation back to 3-4.2 percent, could make financing hard to come by for plastics processors, many of which are small companies.
Another significant local issue involves efforts by the state oil monopoly Pemex to privatize or link with private companies. Tijera said the end result will be major investment in new petrochemical plants, including polyethylene, polypropylene and intermediates used to make other resins.
``This means availability of local raw materials will increase - and with new capacity, markets respond immediately,'' he said.
Other pressing issues in Mexico concern waste issues.
In the last month of 2002, legislators were very active, with senators approving legislation on waste, which by spring will be law.
``This is not a disaster for the plastics industry - it could be worse,'' Tijera said. But he noted that it is difficult for the plastics industry to set up waste reclaiming programs required by the law, since municipal solid waste systems remain under local government control.
Another legal issue for 2003 will be the outcome of negotiations with Semarnat, the Ministry for the Environment, on a federal container-deposit law that could include PET bottles. The soft drink industry is pushing for voluntary collection programs.
Geographically, Mexico's plastics industry looks very much the same as it did a year ago, with the highest concentration of plastics processors found in the Mexico City area, Nuevo Leon and Jalisco.
However, an important part of the sector is growing in the area referred to as el Bajío, north of the capital around the cities of Queretaro, San Luis Potosí and Guanajuato. Queretaro in particular is growing in plastics production.
Tijera laments that Mexican plastics processors have failed to heed his repeated urge since 1995 that they move north to the maquiladoras.
``The maquiladora keeps growing and is supplied by imports. The market is so big that local processors wouldn't even feel the economic slowdowns, nor agricultural problems with NAFTA. They could grow 10 percent, but they need to go to Ciudad Juarez or Tijuana, and processors don't like to travel, except on vacation.''