SÃO PAULO — Challenges lie ahead for Brazil's plastics and petrochemicals sectors, as high costs for labor, taxes, logistics and energy make up a loathed "Brazil Cost" that won't go away, according to analysts at IHS Inc.'s Latin American Petrochemicals & Polymers Conference.
The price of Brazilian-made processed plastic goods is now 29 percent higher than those of developed markets, 35 percent higher than from emerging markets and 34 percent higher than in China, due primarily to the "Brazil Cost" cocktail of input expenses. Imports have risen an average of 9 percent per year since 2003, and now make up 22 percent of processed plastics consumption in Brazil.
That lack of competitiveness for Brazil starts at its basic feedstock, most of which today is naphtha-based and imported, said Rina Quijada, senior director of Latin America for IHS. Higher gasoline demand in Brazil is also taking naphtha away from the petrochemical sector.
"With today's energy revolution in North America, light feedstocks like ethane and propane are much more efficient in making ethylenes and propylenes," she said. "So when Brazil looks at its productive environment, it sees high taxation, the lack of competitive feedstocks and a very weak local currency against the U.S. dollar. That weak currency makes naphtha feedstock more expensive."