Three years of accelerated growth in gross domestic product has put many Argentine molders in a situation similar to that of Pilar, Argentina-based bottle and cap manufacturer Latinplast srl: The red light showing that it is time to expand production capacity already has been turned on.
At family-owned Latinplast headquarters, however, a fundamental problem confronts shareholders: how to ensure the firm's sustainability in an economic atmosphere of controlled prices, low margins that no longer amortize investment in equipment, pressure for salary increases and unorthodox government measures in industry policy.
``The processing industry's costs have risen, while selling prices have dropped. We have lost 50 percent of our margin in the last few years,'' said Hernan Solveira, Latinplast partner and manager.
``Perhaps a temporary solution would be to modify production methods and opt for more automated processes,'' he said. ``Production capacity would not increase substantially, but at least we would reduce labor-force-related risks.''
Latinplast employs 55, processes 330,000-440,000 pounds of resin per month and currently works at 80 percent of its capacity. The firm caters to industries like vehicle oil, personal hygiene and cosmetics, and its customers include companies like Shell, YPF, Exxon, Procter & Gamble and Avon.
Commodity resin makers committed to not raise prices in the first quarter of the year, at which time Latinplast experienced a temporary lack of specific grades. ``What's happening is that we are headed toward an inflation caused by a lack of supply rather than due to demand.''
Solveira is particularly worried about what happened to the meat sector in March. In order to halt an increase in beef products, Argentine President Néstor Kirchner prohibited beef from being exported for a 180-day period. The measure generated sympathy from the public and revolt among meat packers that annually export roughly $1.5 billion.
The prohibition was suspended in early April through an agreement guaranteeing exporters a gradual return to exports in exchange for a 20 percent drop in prices for popular beef cuts.
The lower prices are to be maintained until the end of the year. Supermarket chains also have adhered.
``The climate is uncertain. What's happening is that there is no clear project for the country. The rules of the game no longer are clear and can change from one minute to the next,'' Solveira said. ``The beef episode creates a precedent for the same thing to happen with edible oil or another product at any time.''
>From a technological point of view, Solveira said, the plastics industry is moving backward. ``Since production needs to be increased and there's no liquidity for that, companies are opting to purchase Chinese machinery that costs less,'' he said. ``The Argentine market is not a buyer of state-of-the-art technology at this present time.''
