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Argentine Growth Bodes Well for Coatings



As Argentina’s economy is expanding, so too is its paint and coatings industry.



By Charles W. Thurston



Published January 17, 2011
Argentina led the Latin American pack of major economies in growth during 2010, chalking up an estimated nine percent expansion, compared with an average of five percent growth for the region. Industrial expansion is up, construction is booming and consumer spending is recovering. As a result, paint and coatings sales in architectural, automotive and industrial segments should improve over the coming year.

Perhaps the strongest growth area in Argentina's economy has been construction activity, which was up 17 percent in November, buoyed in part by 4.6 percent growth in the paint and coatings segments, according to INDEC, the national statistics agency. While government projects are moving rapidly, private sector projects are expanding at a faster pace. Standard & Poor's recently raised its credit rating to B for Argentina's leading real estate developer, Inversiones y Representaciones S.A. (IRSA), which is listed on both the Bolsa de Comercio de Buenos Aires and the New York Stock Exchange.

While sales of upscale houses and apartments are rising, the national deficit in basic housing is of increasing concern, following recent confrontations with the homeless in Buenos Aires, where groups of squatters have begun taking over parks and other open spaces. The government of President Cristina Fernandez has built or refurbished some 850,000 new housing units nationwide since it came into power, according to the national planning ministry, but the shortage in housing still looms. On average, Argentine consumers use three or four liters of paint per year, compared with 20 in other developed countries.

Industrial production also is up double-digits in Argentina, rising 12 percent in November, with sales in the automotive industry up a reported 67 percent. Automotive production is expected to rise to 840,000 units this year, compared with 730,000 units in 2010, according to the Argentina Association of Auto Manufacturers (Adefa). Auto sales also are being boosted by rising inflation, which is projected to be as high as 30 percent this year, as consumers seek investment hedges.

Growth in industrial sectors is being aided by recent increases in oil and gas exploration and development. The national gas agency Enargas is expected to open bids early this year for the construction of the estimated $1.8 billion Northeastern Pipeline. The 1,000-mile pipeline will move Bolivian gas to the Argentine provinces of Chaco, Corrientes, Formosa, and Misiones initially. And recent discoveries of large reserves of shale gas in the western Neuquen Basin also could provider longer-term energy to the country. At the time of the shale gas discover, President Fernandez was quoted saying, "We are very happy because this is going to keep up the country's growth."

International paint manufacturers like BASF, Sherwin-Williams and others continue to supply the domestic demand through imports and in-country production. Some Argentine manufacturers, like Sinteplast, also are exporting to surrounding countries, including neighboring Uruguay.


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