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Olympics, World Cup Spark Demand for Brazilian Paint



Preparations for these events will result in massive urban renewal throughout the social capital of Rio de Janeiro.



By Charles W. Thurston



Published May 9, 2011
This year Brazilian paint and coatings officials expect 1.5 billion liters in total sales and they predict 2.0 billion liters in sales within a few years’ time, buoyed by the strong economy and growing consumer spending. Brazil’s Associacao das Fabricantes de Tintas (Abrafati), the national paint manufacturers’ association, also expects that the 6.7 percent growth rate projected at the end of 2010 will be exceeded, according to a recent statement by Abrafati President Dilson Ferreira, in Sao Paulo. Last year, the industry expanded by a record 10 percent overall, with industrial segment sales even higher.

Among the host of positive architectural segment market conditions cited by Ferreira as supporting this year’s growth include ample financing for residential real estate investment and government-subsidized housing like the Minha Casa program. Similarly, new car sales and hard goods purchases have helped the automotive and industrial paint segments. “These factors contributing to growth in the paint business are structural, not circumstantial,” he said.

Looking back, Abrafati calculates that the paint industry grew by 60 percent during the past decade, and the association predicts that growth in the current decade will be even stronger.
 
A small but rapidly growing component of this growth has been export sales, traditionally a market used to compensate for slower domestic sales. In 2010, export sales rose 25 percent to $135 million, led by exports to the rest of Latin America, Africa and the Middle East. Since exports only represent three percent of total Brazilian paint sales, there is substantial room for growth, according to Ferreira.

The Mercosul trade region—comprising Argentina, Chile, Paraguay and Uruguay—alone accounted for 45 percent of total Brazilian export sales, or approximately $61 million, Abrafati reports. These sales were not suppressed by the rising value of the Brazilian currency, the real, compared to the U.S. dollar last year.

Brazil will host the World Cup in soccer in 2014 and the Olympic games in 2016. Preparations for these events are expected to result in massive urban renewal throughout the social capital of Rio de Janeiro. The city budget for the Olympic games preparations alone is $15 billion, and private investors are expected to plow as much or more into redevelopment.

Among major infrastructure plans associated with the preparations is an $18.7 billion high-speed rail line between Rio and the business capital, Sao Paulo. Several new freeways are planned within Rio, and a new subway line from the Ipanema hotel to the Barra da Tijuca Olympic site is under development.

Similarly, some 300 new hotels are planned for Rio to host the Olympic crowd, but that figure is still projected to be less than what will be needed. To ease the anticipated 20,000-room shortfall, plans are to spruce up the city port area and use cruise ships to house some 8,000 visitors during the games.

By the time the games are over, Brazil is expected to be the world’s fifth-largest economy. The paint and coatings industry will have to play a major role in helping Brazil put on a fresh face for these upcoming events.


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