Latin America
June 2014 www.coatingsworld.com Coatings World | 31
by the Global Property Guide shows that Uruguay is leading the
region with $14,700, followed by Chile with $14,000, then Brazil
with $13,000, and Mexico with $10,800, and Argentina with
$10,600. With the exception of Uruguay, which can be seen as a
sub-market of Argentina, the other four countries might be said to
be the most important markets in the region for paint and coatings.
While Chile may be a more promising consumer market for
paints and coatings than Colombia, the latter is a more strategic
location for manufacturing. Colombia has a long trade relationship with Venezuela, and also has been a financial and trade hub
for the entire Andean region, minus Chile.
The World Bank reports that there are an estimated 580 million people in Latin America, with an average GDP per capita of
$9,000, compared with nearly $50,000 in the U.S. If the average
Latin American consumption of paint is seven liters per capita, as one market analyst suggests, then regional consumption
would amount to nearly 4.1 billion liters. However, that seven
liter paint consumption level should be examined carefully to
confirm that other materials, like spackle or putty are not included in the count, one paint maker cautioned.
While a few years ago, one of the fastest growing architectural sub-segments was premium quality paint, the total disposable income available for such purchases now suggests that
lower- and mid-level quality paints will grow faster. “We have
the largest selling mid-level brand in the world in our Rende
Muito product, which translates from the Brazilian Portuguese
to “covers a lot,” said Jaap Kuiper, the managing director for
Akzo Nobel in Latin America, based in Rio de Janeiro.
New Investment
Shortly after the Sherwin-Williams offer to purchase Mexico’s
Comex for $2.3 billion was rejected, a Wall Street banker called
Coatings World to inquire which of the paint and coatings
manufacturers in Brazil were the largest and best family-owned
companies. He needed the information in less than a week. S-W
made it clear after the Mexican anti-trust agency rejected the
deal that the company was prepared to make other acquisitions
if that one did not go through. With such a S-W war chest for
Latin America, it is not surprising that other paint and coatings
companies also are targeting the region.
In January PPG CEO Charles Bunch told investors that the
company had $4 billion available for global acquisitions and for
cash returns to investors. Since then several PPG acquisitions have
been made in the region. “PPG is committed to continuing to invest
in Latin America; we are under-represented there in comparison to
our global share,” said Macouzet. “Our Latin America strategy in
the past has not been very focused, and has been more conservative,
so that’s why over the last two to three years we have increased our
attention and resources, making fairly large investments,” she says.
“We are looking for opportunities both to grow organically and
through mergers and acquisitions,” she added.
Similarly, Kuiper said, “We are making continuous investments in expanding capacity, building new warehouses, rapid fulfillment lines, and other productivity projects,” although he said
he could not make specific dollar amounts public information.
Automotive
For some paint and coatings manufacturers, following their
largest clients to Latin America was a wise move. “In the Latin
American region, the segment we see growing fastest is automotive OEMs and auto parts, particularly in Mexico and Brazil,”
said Macouzet. “There have been heavy investments from the
global OEM players, mostly in Mexico, which has become
a manufacturing hub for export to different regions in the
Americas and around world,” she said.
IHS Automotive, of Englewood, Colorado, forecasts that
“nearly 2.3 million additional vehicles will be sold in South
America by 2025, equal to the output of 10 modern assembly
Ernst & Young estimates that total investments in Latin
America’s automotive industry over the decade beginning in 2007
will amount to $17.7 billion. “The production of light vehicles
are expected to grow at a CAGR of 6.88 percent over the next
four years — from 7. 3 million to 9. 6 million units by 2017,” the
consultant indicated in a study of the market last year.
As the OEMs and part makers increase investments, paint
and coatings manufacturers may be forced to upgrade their local portfolios more rapidly than in the past.
Architectural
Perhaps the leading reason for the bullish outlook for architectural
paints is the rapid creation of a new lower-middle class as the economies of the countries improve. “In Brazil, for example, there is a
new middle class of over 100 million people, albeit at a low monthly income level, so what is growing fastest is the mid-segment, and
then the economy segment, more than premium,” said Kuiper.
“Because of the young population in the region, a lot of
house building is taking place, and many companies and gov-
ernments there are investing heavily or are planning to invest
heavily,” said Macouzet. “But because of the volatility in the
economies there, the performance of the housing market de-
pends on the conditions in each country.”
The Inter-American Development Bank reported in 2012
that, “Currently, one in three families in Latin America and
the Caribbean...live in dwellings that are either unsuitable for
habitation or are built with poor materials and lack basic in-
frastructure services. As many as 2 million out of the 3 million
households that spring up annually in Latin American cities are
forced to settle in informal housing, such as slums, because of
insufficient supply of adequate and affordable dwellings.”
Industrial
Among industrial paint and coatings suppliers investing and earning
more in Latin America is Shaw Pipeline Services, based in Houston.
The company earned $55 million in 2013 from the Technip project deployment of two portable concrete weight coating plants in
Trinidad. This year, the company expects continued growth from
“offshore and large diameter gas transmission pipeline opportunities in Mexico, the launch of insulation coating production at
the Socotherm Argentina operation, and an expected increase in
