“The emergent middle class in Brazil is consuming at an attractive
rate for paint and coatings manufacturers. Household consumption
is predicted to reach 4. 5 percent this year, according to data from
Brazil’s national economic data agency, IBGE.”
continued fiscal policy changes. But as Brazil readies to host
the World Soccer Cup in 2014, followed by the Olympics in
2016, President Dilma Rousseff has reduced taxes on consumer goods and is pressuring domestic banks to cut consumer
lending and savings rates, which are substantially higher than
in the United States.
Architectural Demand Buoyed by Demographics
The emergent middle class in Brazil is consuming at an attractive
rate for paint and coatings manufacturers. Household consumption is predicted to reach 4. 5 percent this year, according to data
from Brazil’s national economic data agency, IBGE. At the same
time construction overall is expected to be up this year by 1.5 percent, led in part by a housing boom and still-rising home prices.
This growth is led by the upper middle class in Brazil—or
those families earning more than $4,000 per month—which is
expected to reach 29 million by 2014, roughly equivalent to the
size of the upper middle class in Canada, according to the European Union’s Institute for Security Studies.
Housing demand in Brazil is projected to rise to 1.8 million
units by 2014, which has inspired the government to make plans
to add up to eight million units over the next few years. Still,
house prices are expected to rise by two to three times GDP
growth, as preparations for the World Cup in soccer continue.
Although per capita consumption of paint is still in the five
liters range, or one-third of that in the U.S. market, demand for
better quality paint is rising along with total per capita consumption. The $2.1 billion architectural paint segment is already
about two-thirds of the total volume of paint and coatings consumed in Brazil, including all segments.
Total architectural production of paints and coatings in Brazil
are projected to rise four percent by volume this year to 1.138
million liters, according to an August 2011 projection by Antonio Carlos de Oliveira, the president of Abrafati, the Brazilian
paint manufacturer’s association.
percent from 2010 figures. Now, China’s Anhui Jianghuai Automobile Group and Germany’s BMW are expected to invest an
estimated $15 billion in Brazil over the mid-term.
According to Anfavea, the national auto manufacturer’s association, production over the first quarter of this year dipped to
almost one million units from 1.1 million in first quarter 2011.
At the same time, new registrations only slipped to 1.08 million
over first quarter 2012 compared with 1.11 million during the
same quarter last year.
Last year, Brazil also was the world’s fifth largest market for
new car sales, with growth of over three percent. According to
projections from Roland Berger Strategy Consultants, “Car sales
in Brazil could double between 2010 and 2020 to 6. 6 million ve-
hicles; and production may rise by 3. 6 million cars in 2010 to 5. 5
million in 2020.”
The total production of Brazilian OEM automotive paint and
coatings manufacturers is expected to increase to 55 million
liters, up five percent from 2011, according to the August 2011
projection by Abrafati. After market paint volume projections
are nearly identical.
Automotive Production Outstripping Demand
Brazil’s government has made great investments in new roads
and simultaneously has fostered easy consumer credit for purchasing new cars. Since the federal tax on new cars can be 50 of
the new sales price, the revenue has been crucial to supporting
government infrastructure programs.
With most of the world’s major OEMs present in Brazil now,
the production and demand for new cars is robust. Brazil’s auto
production was the 11th highest in the world in 2011, up seven
Industrial Coatings Expand with National
Programs
Petrobras, Brazil’s state oil company, is a behemoth among national oil companies, with 2011 revenue of $134.8 billion, making it one of the ten largest corporations in the world. Its capital
investment program over the 2011-2015 period will be worth
$225 billion. The company expects to drill 1,000 offshore wells
during the period, to construct its own fleet of drilling platforms,
and to build four new refineries to keep pace with the oil production rise from some two million barrels of oil per day today.
While the cost of a protective coating for an oil rig may be
only one percent of the total value of the project, the cumulative
value of those coatings are significant when the investment program is in the multi-billion-dollar range, said Fernando Macedo,
the general manager for AkzoNobel’s marine, protective and
yacht coatings, in Sao Goncalo, Rio de Janeiro state.
Total volume production of industrial paints and coatings in
Brazil is projected to be up four percent this year to 185 million
liters, according to the Abrafati projection.
AkzoNobel Targets Brazilian Demand
Dutch powerhouse AkzoNobel is one multinational paint and coatings manufacturer that sees its future growth closely linked to
Brazil. “Today we have great aspirations for Brazil, which is our
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July 2012
