Charles W. Thurston, Latin America Correspondent
Small improvements in markets like Latin America can be good news. Paint and coatings demand slowed last year as the regional economy shrank by 1.1 percent, but this
year, international analysts predict a recovery to 1.3 percent real
growth, led by several individual countries and Central America
as a subregion.
The Economic Development Division of the Economic
Commission for Latin America and the Caribbean (ECLAC)
observed in December that, “While in South America private
consumption and investment dropped by 2.3 percent and 9. 9
percent, respectively, in Central America private consumption
expanded by 3.0 percent and investment by 1.9 percent. Some
of these trends should improve in 2017, with stronger private
consumption and investment.”
Country notes are quite positive in many cases. “Central
America, including the Spanish-speaking Caribbean and Haiti, is
expected grow by around 3. 7 percent in 2017; including Mexico,
with a projected growth rate of 1.9 percent, bringing the (subre-
gional) average down to 2.3 percent. Positive growth is projected
in 2017 for South America, at 0.9 percent, and for the English-
speaking Caribbean, at 1.3 percent,” ECLAC also predicted.
Sales in the region are mixed now, but they are hoped to represent growing proportions of global revenue for some companies.
Axalta reported 11 percent of its sales as made in Latin
America last year. “Our goal in 2017 is to continue to grow, year
over year. We hope to capitalize on opportunities in all the end-use markets we serve across the region,” said Rosendo Gamboa,
the company’s director of marketing and strategic planning.
Sherwin-Williams reported that the region represented five
percent of global sales in 2016. The company is positioning it-
self for more growth through a plan to roll out far more compa-
ny stores. As of 2016, there were “339 company-operated stores
in Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Uruguay.
Distribution through dedicated dealers, home centers, distribu-
tors, hardware stores, and through licensees in Argentina, El
Salvador, Peru and Venezuela.”
One complicating factor in sales growth in local currency
is foreign exchange rates. With a wide variety of currency re-
valuations and manipulations in the region, hedging is a neces-
sity for any large country operation. Akzo Nobel, for example,
said, “During 2016 net investment hedge accounting was
applied on hedges of Brazilian real and the Chilean peso,” in
its annual report.
President Trump has vowed to attempt to keep jobs in the
United States at the cost of revoking or renegotiating bilateral
and regional trade agreements like NAFTA. This stance lends
uncertainty to business planners contemplating new investments in the region.
ECLAC forecasted that “For the region overall, international
demand should pick up in 2017, although this could be damp-
ened to some extent by trade decisions by the United States.
Intraregional trade should also regain some ground in 2017,
thanks to a stronger performance by the economies of the South
America, especially Argentina and Brazil.”
One of the few bright spots in the regional economy is
the runaway growth of Mexico’s automotive sector, now the
fourth-largest car exporter in the world, after Germany, Japan
and South Korea. Mexico produced 3. 5 million light vehicles in
2016, up 67 percent from 2.1 million in 2008, according to the
Mexican Automotive Industry Association.
“Mexico forms the backbone of the North America market
for us; we are strengthening that every year by investing $1 million in our labs there,” said Jorge Flores, the business manager for
BASF’s Automotive Refinish unit in Mexico and Central America.
Another way that BASF secures growth in Mexico – and elsewhere – is through training. “BASF is highly focused on sustainability, and we can do the job with lower paint usage, but that
requires training and equipment to support the customer base,”
said Frank Hezel, the vice president of BASF Mexicana.
Similarly, Axalta is investing in Mexico to serve the automotive segment. “In April 2016, we opened an expanded resin
production facility at our operations center in Tlalnepantla, just
outside of Mexico City from which we will supply many of the
leading automotive OEMs in Mexico among other customers,”
says Gamboa.
Among global automakers still investing in Mexican automotive capacity is BMW, which is building a new factory in San
Luis Potosi that will begin production in 2019 with a capacity
of 150,000 cars a year.
Brazil’s automotive industry may make a comeback this
year, solidifying its position as tenth largest automaker in the
world. The Brazilian automotive market is the tenth largest
Latin America Market
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