Peru's paint and coatings industry is growing much faster than predicted at 20% this year, driven by a spike in construction sector demand and by the projected eight percent expansion of the overall economy. In February, aggregated paint industry manufacturing expanded by 47.9%, according to the Banco Central de Reserva Del Peru, in Lima.

Over the last few years, the $130 million Peruvian paint and coatings market, which produces approximately 14 million gallons per year, has grown between 15% and 20%, according to Erik Holmquist, commercial manager of Industrias Venecedor S.A., a Lima-based paint and coatings manufacturer.

New construction is moving almost as fast as the paint market it is driving. The construction sector grew 22.5% in February, reflecting the increase seen in the construction of homes, offices, commercial and industrial facilities, as well as the construction of mining and energy projects, the central bank reported recently. The jump in overall economic activity in February was the largest since 1995, according to the national statistics institute.

This construction boom should have positive effects on major players in the Peruvian paint market, including local manufacturers like Vencedor, which holds a professed 30% share of the market, as well as global leaders with a strong presence, like Sherwin-Williams. The demand, which is being led by the architectural segment, also should help raise the Peruvian per capita paint consumption, which is now only 0.3 gallons per year. Thus far, inflation control is roughly on track to meet the Central Bank's goal of two percent in 2008, so price increases should not dampen new demand.

"This year the architectural segment is growing at approximately 30%," said Simon Tavara, export manager for Vencedor, in Lima. Vencedor, which has been in the industry for more than 60 years, is now majority owned by Chile's Tricolor. Vencedor produces latex-based paints, enamels, lacquer and varnishes, and anti-corrosives in liquid and/or powder formulations. The company operates a retail store network, Colorcentro, which features a color mixing system, Sistema Tintometrico Galaxy. The company also has warehouses in Trujillo, Piura, Talara and Arequipa. It exports its products to the Andean region, Central America and South America; within its home region, Bolivia, Chile, Ecuador and Venezuela are key buyers.

Among recent product launches, Vencedor is now offering Vencesat�n, a premium latex in a satin finish; the company markets its products as "Class A." The company also has begun offering its Supermate, Vencel�tex, Rocky and Dar Color product lines in 2.5-gallon plastic tubs.

While the architectural segment is growing fastest in Peru, the industrial segment demand also is slated to rise quickly thanks to a host of new investments, which have followed the recent signing of the U.S.-Peru Free Trade Agreement.

Among large new projects, Dubai Ports World is building a container terminal within the port of El Callao, with an initial investment of more than $300 million. The Inter-American Development Bank also will lend more than $350 million to Peru over the next five years for the development of sanitation and water projects, which will benefit more than 100,000 families. And Maple Energy, which is developing gas projects in the interior of the country has also begun to develop a $157 million ethanol project, with plans to export to California.

At the same time, the government is requiring that the mining industry-the country's largest industry-spend more on infrastructure, which will improve workers' lives, according to Finance Minister Luis Carranza Ugarte. Such investments should bode well for both the housing and industrial coatings segments in Peru.