Coatings World - JUNE 2013

company, in São Bernardo do Campo, Sao Paulo State.

Marketing in Latin America also is increasing as brands struggle to rise with evolving consumer tastes. Not only are consumers seeking higher quality paints, but they are also helping to drive more global trends. “Peacock teals paired with pinks and corals are making a statement and are influenced by Latin America,” stated Marshalltown, Iowa-based Diamond Vogel’s Color Watch Internet blog.

Regional Economic
Expansion

The United Nation’s Economic
Commission for Latin America and the
Caribbean, based in Santiago, Chile,
projects regional growth this year at 3. 5
percent this year -- up from 3.0 percent
in 2012 -- led in part by recovery in
Argentina and Brazil. Among the fast-
est growing countries in the region are:
“Paraguay (which) will lead growth in
2013, with an expected rise in gross do-
mestic product of 10.0 percent, followed
by Panama at 8.0 percent, Peru at 6.0
percent and Haiti at 6.0 percent.”
Indeed, this growth will continue: The
International Monetary Fund predicts
that the region will average growth of 4.0
percent through 2015, compared with
2.7 percent in the United States and 2.1
percent in the European Union.

Such relatively strong regional growth has led to an expansion of the middle class with a corresponding expansion in consumer consumption. Over the past decade over 50 million people have migrated into the region’s middle class, which has had a long fight against poverty.

Among optimistic crystal ball gazers,
one suggests that by 2020, “Latin America
will have a combined GDP of $10.7 tril-
lion, equivalent to 9 percent of the global
GDP, and double that of 2010,” reckoned
Guillaume Corpart, the managing director
of Americas Market Intelligence, based in
Coral Gables, Florida. His future scenario
also suggests that “private consumption
per head will reach $11,143, compared to
$6,360 in 2012.” Finally, Corpart predicts
that, “by 2020, Latin America will represent
10 percent of the global population and a
total market of 640 million consumers.”
This growth of the middle class in
Latin America should help boost per
capita paint consumption, which is up
to about seven liters in Brazil, compared
with double that in the United States.

Among limits to growth in the region is inflation, which is expected to drop this year to six percent from 5. 6 percent in 2012, down from 6. 8 percent in 2011. However, some countries, like Venezuela, still are working to bring down very high inflation rates; inflation last year was 19. 5 percent, down from 29 percent in 2011.

Consumption Opportunities Thus far, Latin America only consumes about seven kilograms of paint and coatings on a per capita basis, so there is substantial room to grow before consumption hits U.S. levels of roughly twice the volume.

S-W’s Knight suggests that in the region, architectural paint represents 61 percent of total sales of $9.2 billion, followed by product finishes with 15 percent, protective and marine coatings 14 percent, and automotive 10 percent of total sales.

The build out of company-owned retail stores and dedicated dealers is key to expansion in the architectural segment. Sherwin-Williams plans to expand its universe of 801 company stores and dedicated dealers to 1040 by 2016, according to Knight.

Increased purchasing power is strongly affected by access to credit. While Mexican consumers are still recovering from a U.S.-inspired economic slowdown, credit is expanding rapidly. “Consumer credit continues to expand at a robust pace, by 20 percent (in nominal terms) in 2012 and early 2013,” observed Standard & Poor’s analyst Lisa M. Schineller, in New York, in an April report on Mexico. And in Brazil, new credit growth to households is growing by about 13 percent, according to S&P.

Brazil Leads the Latin
Market

Brazil’s massive $2.5 trillion economy is expected to grow by 3.0 percent this year, compared to less than one percent in 2012.

Other new investments in Brazil’s paint and coatings market include a new technical center for Munich-based Wacker Chemie AG, in Sao Paulo. The center will serve South America in applications of the company’s silicone and polymer products used in the architectural segment of the paint industry. Similarly, Metalgrafica Trivisan S.A. is investing an estimated $25 million, including $9 million worth of German technology, to double its annual metal can production capacity to 900 tons per year at São José dos Pinhais, Parana state.

“The growth of the oil and gas in Brazil, public and private investments in the energy and power industry with new technologies such as the renewable energy generated by wind mills also represent an opportunity for our marine and protective