by Charles W. Thurston
Latin America Correspondent
thurstoncw@rodmanmedia.com
Venezuela’s paint and coatings manufacturers are under severe pressure both to produce and to
sell because of a shortage of raw mate-
rials, a limited access to hard currency
and a depressed local economy. Pablo
Olalquiaga, the president of Asociación
Venezolana de la Industria Química
y Petroquimica (Asoquim), the na-
tional chemical industry association,
recently said, “the industry is going
through a very difficult time.” Indeed,
Alejandro Werner, the director of the
International Monetary Fund’s Western
Hemisphere department warned in
early October that the economic situ-
ation in Venezuela is “unsustainable...
without adjustments.”
While the new Venezuelan president
Nicolas Maduro is attempting to re-
build the country’s decimated economy,
his task is formidable. Inflation is run-
ning close to 30 percent per year, prod-
uct price controls are still in effect for
many products – including paint and
coatings, and the weak and overvalued
domestic currency – the bolivar – is
making imports more expensive. Ex-
strongman Hugo Chavez died in March
after a long and contentious term as
president, marked by such business
stifling activities as nationalizations of
foreign companies.
Continued raw material imports
by paint makers are being slowed by
large outstanding debt payments to
the suppliers, both domestic and for-
eign. According to figures cited by
Olalquiaga, the paint and coatings
industry now owes foreign suppliers
close to $700 million, while domestic
suppliers are owed close to $400 mil-
lion. One impact is that suppliers are
raising prices: at mid-2013 the Central
Bank of Venezuela (BCV) estimated
that overall prices in the construction
industry went up more than 50 percent
over the prior year, against an infla-
tionary rise of only 30 percent.
Asoquim statistics show that most
Venezuelan paint producers registered
double-digit increases in sales over the
first two quarters of this year; however
continued sales growth is being threat-
ened by very low stock levels. Nearly
half of the association membership re-
ported production down during the first
two quarters by over 17 percent. Over
the same period, paint and coatings ex-
ports were reported by members to have
slid approximately 15 percent. Paint can
shortages are forcing some manufactur-
ers to produce only quarts, Olalquiaga
noted in one recent interview. Overall
idle capacity is running close to 70 per-
cent, he noted in another.
The Venezuelan economy is grind-
ing to a halt, with expansion forecast
at no more than 1.0 percent this year,
compared with 5. 6 percent last year.
More pessimistic, Spain’s BBVA bank
group forecast that Venezuelan econ-
omy would contract 0.4 percent this
year while Peru expands by 5. 8 per-
cent, Chile by 4.2 percent, Mexico and
Argentina by 3.0 percent, and Brazil
by 2.5 percent. The Latin American re-
gion is expected by BBVA to expand by
3.1 percent this year, according to the
bank’s third-quarter analysis.
One of the government’s plans for
recovery is to auction $900 million
worth of U.S. dollars over the next few
months to help companies with import
payment problems. The government has
also raised the minimum wage twice
this year, but is in a constant battle
with inflation. And finally, following
Venezuela’s 2012 entry into the South
American Mercosur trade block, more
imports and exports are expected with
Brazil and Argentina. CW
Venezuelan Paint Market Under Pressure
