Latin America Paint Outlook
June 2015 www.coatingsworld.com Coatings World | 33
together represent only about $70 million of total GDP value.
Paint and coatings distributed in these countries is often
managed through Panama, which is the de facto warehousing
center of both the Caribbean and Central America.
Countries with Moderate Slowdown
The IMF defines a moderate slowdown in growth as falling between -0.2 and -1.0 percent. The countries in this category include Argentina, Uruguay, Paraguay and Suriname.
Argentina is the most important of these markets, with
a $636 billion economy. This year, the GDP there is shrinking by 0.3 percent, and the forecast is for 0.1 percent positive
growth next year. With a relatively strong automotive industry,
Argentina has attracted substantial domestic production investment. However, the economic uncertainties that seem to cover
the country like a permanent smog, tend to limit both industrial
and architectural segment consumptions.
Countries with Marked Slowdown of -1.0
or More
Much of the Latin American region’s GDP is in this category
of contracting economies this year, with Brazil, Colombia,
Venezuela, Bolivia and Ecuador included, the IMF suggests.
Brazil is the largest market in the region, and is struggling to
reverse its current fortune. Dilson Ferreira, the executive director of the Associacao das Fabricantes de Tintas (Abrafati), the
national paint manufacturers association, said in February that,
“Adjustments always cause pain, and this (year) will be no exception. However, once we have this period behind us, we will be in a
better position to advance.” He noted that one bright point for the
architectural segment this year is the government’s housing construction program, “Minha Casa, Minha Vida” (My Home, My
Life), which will help make up for slower consumer purchases.
In its 2014 annual report BASF noted that “ Following the
sharp declines of the previous year, we predict widespread stag-
nation in the consumer goods industry in Brazil.” BASF’s Suvinil
brand is the architectural market leader in the country. “Suvinil
is the premium coatings brand from BASF and leads the segment
with 60 percent of market share, is produced in factories located
in São Bernardo do Campo (SP) and Jaboatão dos Guararapes
(PE ) and is exported to Paraguay, Venezuela, Cuba, Bolivia and
some African countries.”
Still, some strategic investments continue in Brazil. In March,
PPG marked the completion of a $40 million, 65,000-square-
foot plant for on-site resin production at its Sumaré, São Paulo,
Brazil, coatings manufacturing facility. Resin produced at the
facility will be used “to manufacture PPG’s electrocoat products
to meet growing demand from automotive original equipment
manufacturers (OEMs) and industrial coatings customers in the
region,” according to Silvey.
Sectoral Growth More Dependable:
Automotive Shines
Within the three major market segments for paint and coatings in
Latin America, the automotive segment is growing more evenly,
because it is a globally mature industry, unlike general industrial
development in specific countries, or the consumer-driven archi-
tectural segment, heavily affected by GDP and liquidity.
Massive global automotive investment is still flowing into
both Brazil and Mexico, but the latter is emerging as the stron-
gest and largest, given the current wave of billions of dollars of
new investment.
In Mexico the automotive segment is going gang-busters.
Mexican auto production was up nearly 15 percent in April
compared with the year before, and vehicle exports are expected
to hit a record 2.9 million in 2015, according to the Asociacion
Mexicana de la Industria Automotriz (AMIA), the Mexican
Automobile Industry Association. Over 70 percent of the cars
and light truck production in Mexico is shipped to the U.S. tax
free, thanks to the U.S.-Mexico Free Trade Agreement.
Mexico is also the world’s sixth-biggest manufacturer of
auto parts, with production up 11. 5 percent in fourth quarter
2014, according to Industria Nacional de Autopartes (INA), the
national auto parts makers association.
In Brazil, the situation is less promising. During the first
quarter of this year, Brazilian auto production was down over
16 percent, and General Motors and Volkswagen ceased production temporarily at their Sao Paulo plants to await better
domestic auto sales, down 19 percent through April of this
year, according to statistics from Associação Nacional dos
Fabricantes de Veículos Automotores (Anfavea), the national
auto makers’ association.
Industrial Growth Buffeted
In Mexico, industrial growth was barely positive as of
February, at 0.35 percent, following a contraction in January
and December. Mexico’s oil earnings are a primary source of
the government’s domestic spending program. By the end of
January, Pemex, the state oil company had cut its spending budget this year by $4 billion.
In Brazil, “The situation is complicated with coatings for
industrial use. The manufacturing sector has been limping for
quite a while, and 2015 should not see any radical change,” said
Ferreira in his February statement to the industry. Credit warnings from international ratings agencies went out on suppliers
earlier this year as Brazil’s state oil company Petrobras imploded
with corruption charges involving several dozen contractors. A
Central Bank poll of economists yielded an expected -2.8 percent contraction in overall industry in the country this year.
Argentina’s economy is warming in at least the oil and gas
sector, which bodes well for specialty coatings companies like
Shaw Pipeline. Last year, Shaw launched insulation coating production at its Socotherm operation in Argentina, and in April of
this year, the company announced two contracts worth a total
of $55 million from Tenaris to provide three-layer polyethylene
anti-corrosion pipeline coatings for the first two phases of the
Argentina Northeast Gas Pipeline (GNEA). The project is owned
by ENARSA, the state energy company, and includes the construction of a gas pipeline that will transport up to 11.2 million cubic
meters of natural gas per day to locations in northeast Argentina.
