Latin America Reports

Latin America Report

By Charles Thurston | August 11, 2005

The accelerating pace of infrastructure development in the Mercosul countries of South America is helping to drive up the demand for industrial paints and coatings beyond the more traditional demands of key industrial sectors, said Douglas Leslie, the general manager of marine industrial coatings at Akzo Nobel, in Sao Paulo.

Led largely by Brazil, the Mercosul free trade bloc also encompasses the countries of Argentina, Chile, Bolivia, Paraguay and Uruguay. Infrastructure sectors on the rise in the region range from oil and gas, to roads and bridges, to water and energy.

"Brazil, in particular, is lacking a lot of infrastructure in the energy and road sectors, among others, so there is a big potential for new industrial coatings in that area-it's just a question of how soon it will happen," said Leslie.

One factor that is increasing infrastructure spending in the region is an increase in the practice of privatization and private sector concessions, Leslie noted. In Brazil alone, there are billions of dollars worth of new infrastructure projects being developed with private sector capital. One project in Brazil which is giving a "boost" to the market for protective coatings is a set of three semi-submergible oil and gas processing platforms that the state oil company Petroleos Brasileiros, or Petrobras, is installing in its Campos field, off the coast of Rio de Janeiro, he said.

Brazil is also reassuming its role as the economic engine that drives Latin growth. The country's gross domestic product is expected to expand by 3.5-4.0% this year, following an economic contraction in 2003, predict economists at UBS Warburg Securities, of New York. International investors are warming to this growth, and are expected to make $12.5 billion worth of direct foreign investments this year, up from $10.1 billion last year, the UBS team said.

For Latin America as a whole, infrastructure is booming.

As of October, 168 projects in the region worth an estimated $34.4 billion were seeking funding for improvements in the road, rail, airport, seaport, water and sewage, and general buildings sectors, according to William Reinhardt, editor of Public Works Financing's 2003 Major Projects Survey.

Regional Industries Are Growing
In addition to the demand being presented by new infrastructure projects, several key industries in the region are growing at a healthy pace, providing a more stable growth in demand for coatings, Leslie said.

"The agriculture, mining, and pulp and paper industries are pretty strong right now, which is helping raise demand," he noted. "The petrochemical sector-particularly in Brazil and Argentinaalso is coming along now, so we can expect coatings consumption growth over the next three to four years, at least," he added.

Increased Brazilian exports of manufactured products from these and other industrial sectors also are helping drive industrial coatings demand, Leslie said. "As a result of international trade association linkages-like the pacts between Mercosul and the European Union and Asean-there is a tendency to increase the exports of products including finished goods, to Europe and Asia," he said.

Akzo Nobel is helping to add value to these exports.

"With the exception of one or two specialty products, Akzo Nobel produces all its industrial coatings in Brazil, and exports them to the other Mercosul countries," Leslie said.

The company's research and development facility in Brazil also is helping customers apply the latest international technology to protective coatings usage, for both initial and maintenance applications.

"We provide a technology platform for our customers," he added.

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