Latin America Reports

Peruvian economic recovery lifts construction

By Charles W. Thurston | March 16, 2010

Peru is undergoing strong recovery of close to five percent this year, including the construction sector, which has driven up the demand for paints and coatings across the country, which is Latin America's sixth-largest economy. Last year Peru's economy grew by little more than one percent, diving from a level of nearly ten percent in 2008.

The country's economic recovery has risen on strong oil, mineral and fish exports. According to Comex Peru, the national foreign trade association, exports were up to $2.2 billion in January, nearly a 38% jump over January 2009. Revenues from exports have helped fuel an expansion in the construction sector, which grew by approximately 20% in December, according to the national statistics agency INEI. Maximixe Consult, of Lima, predicts that the construction sector in Peru will grow by more than nine percent this year and continue to expand thereafter.

Thanks to such growth, Peruvian latex paint manufacturing in December increased by 63%, varnishes were up 49% and enamels were up 16%, according to government statistics. And non-primary manufacturing, including the paint and coatings industry, now is poised for particularly strong growth over the full year, according to analysts at Scotiabank. "Non-primary manufacturing may grow 6.2% this year, after the decrease registered in 2009 led by the industrial branch linked to the construction sector, including products, like non-metallic minerals, steel and paint," bank analyst Pablo Nano recently said in Lima.

This recovery bodes well for Peruvian paint manufacturers like Industrias Vencedor, which reported sales up six percent during third quarter 2009. While volume recovery continues, Vencedor is also pursuing market share augmentation through new introductions in packaging-the company recently launched a 2.5 gallon size plastic pail for products in its Supermate, Vencelatex, Rocky and Dar Color lines.

New low-cost housing construction is one rapidly growing area of strong demand for paints and coatings. The government expects to build 250,000 new units by July 2011, helping reduce the estimated national shortage of 400,000 units. Part of the housing drive has come as disaster response to heavy rains that destroyed many villages over the past year.

While the economy is expanding at close to five percent this year, inflation is expected to rise to only two percent, according to a consensus forecast reported by LatinFocus, which draws on projections by some two-dozen financial institutions active in Peru.

Longer term, Peru expects new direct investments of close to $50 billion in its mining and energy industries over the rest of this decade, which will help not only industrial segment paint and coatings consumption, but also further accelerate architectural segment consumption as domestic construction rises.