Latin America Reports

Peru demand, trade to strengthen

By Charles W. Thurston | December 19, 2007

As Peru's economy continues to grow, the country's paint and coatings industry is looking healthy.

The U.S. House of Representatives in November approved a Free Trade Agreement with Peru, which should further bolster that country's estimated $100 billion economy, including accelerated construction activities and consumer spending. The Senate is slated to vote in December and passage is all but assured. The agreement will eliminate 80% of the import tariffs on U.S.-made industrial and consumer goods entering the country, as well as provide Peru with tax-free access for its agricultural, textile and other products. As a result, some analysts suggest Peru's economy could grow by $400 million over the coming year. The European Union now is accelerating free trade talks with Peru as well.

Paint and coatings sales in Peru should rise as the construction boom continues and as consumer spending-up 12% in September-rises on automobile sales and DIY remodeling. Among U.S. paint manufacturers in the Peru market, Sherwin-Williams has opened a new company-operated store over the past two years. Among chain-store vendors of paint, Wal-Mart has been active in pursuing a larger Peruvian base.

Housing and commercial construction expanded last year at a rate of 16%, according to Centura Research, in Lima. Part of the continuation of the building boom will come from the government's affordable housing program, the analysts suggested. Finance Minister Luis Carranza recently suggested that average per capita income for this nation of 28 million will rise to $5,000 by 2011 from approximately $4,000 now, according to one local press report.

The Peruvian economy is growing rapidly under President Alan Garcia, and exports have tripled over the past five years to other Andean countries, to Central America, North America and to Europe. Centura Research forecast growth in Peru's gross domestic product at 7.7% this year, up a fraction from the 7.6% recorded last year. At the same time, inflation this year is only approximately two percent.

Peruvian paint manufacturers and distributors are increasing exports at a double-digit growth rate, according to Asociacin de Exportadores (ADEX), the national export association in Lima. The association indicated that 22 companies were involved in paint exports, including Corporacion Mara, Industrias Vencedor, Indubras, Teknoqumica, Mac Chemical and WR Grace. Export destinations over the first half of 2007 included Bolivia, Chile, Colombia, Ecuador, Panama, Venezuela, Germany and the U.S.

Among key Peruvian manufacturers, Teknoqumica suffered a large fire at its Lima production facility in August, which will affect the company's estimated $30 million per year in sales under the Tekno brand. Prior to the blaze, Guido Carabelli, the general director of the company, was quoted saying that sales were rising as a function of both lower prices and increased DIY activity in Peru, which has been growing at approximately 20% per year. The company indicated that exports were up 40% on increased shipments to Bolivia, Chile and Colombia.