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    Latin America Reports

    Brazil Emerges as Regional R&D Center

    A host of international manufacturers in the market have opened or expanded R&D operations over the past year.

    Charles W. Thurston, Latin America Correspondent03.13.20
    Brazil is emerging as a Latin American center for research and development in the paint and coatings market, buoyed by the region’s largest economy and by the growing sophistication of formulations and quality. A host of international manufacturers in the market have opened or expanded R&D operations over the recent past, fostered by the drive toward a new national standard for quality under the guidance of the national manufacturers association, Associação Brasileira dos Fabricantes de Tintas, or Abrafati.

    The most recent announcement of a new R&D facility in Brazil came from Actega do Brazil, a unit of Germany’s Altana, which inaugurated a €2 million facility in Araçariguama, São Paulo state. The new location will absorb activities from two existing R&D sites in Guarulhos and Barueri. “With the investment in the new integrated site, Actega intends to further establish itself as a technology pioneer in the South American market. To this end, the new location has explicitly invested in new high-performance dispersion units for printing ink production and corresponding equipment for the production of water-based and UV coatings,” the company said in a statement.

    The company also said it will transfer the operations of its Santana de Parnaíba site by 2021 “in order to be able to manage business in the South American market from a central location in the future in an even more targeted and customer-focused manner.” The company develops and produces a comprehensive range of products for the packaging and printing industries, such as UV and conventional inks, water-based, UV and solvent-based coatings, sealants, adhesives and PVC compounds.

    Actega’s commitment to R&D helps explain its increased investment in Brazil. The company earmarks seven percent of sales revenues to R&D and currently taps about 15 percent of its workforce for global R&D, the company profile states. In the past 10 years these investments have doubled, the company said.

    Other players in the Latin American market have made similar R&D investments in Brazil over the past few years. Arkema, for example, built a new laboratory in Brazil that provides binders and additives research and customer support. Similarly, AkzoNobel has invested in its Santo Andre facility.

    The Brazilian market for paint and coatings is being driven in part by the increasing demand for “eco-friendly coatings, accelerating demand for end-use specific coating solutions, increased R&D spending on new products, and recent advancements such as the introduction of fluoropolymer topcoats and the emerging field of Nanocoatings” per a November market research report from Kenneth Research.

    The R&D effort in Brazil has risen alongside the expansion of customer technical support and training facilities by the major formulators. The combined efforts of support and R&D have helped fuel a trend toward the growth of premium segment paint and coatings sales that have increased overall revenues for the industry. After a six-year lull in the market, expectations are of a sales expansion of around four percent this year, or about two percent above expansion of the gross domestic product, estimated at two percent this year.

    With more than 1.5 billion liters of paint and coatings produced in Brazil each year, the industry sales total is close to $8 billion and rising, on an average per capita consumption of about seven liters, according to Abrafati statistics. Abrafati has helped foment this growth with its 17-year quality program, which has incorporated some 44,000 test samples, covering 90 percent of the national market.

    Paint sales also are rising in Brazil because the per capita income in Brazil is rising, now close to $17,000, based on the gross national product of some $3.5 billion. There are about 70 million homes in the country. Overall, Brazil is the fifth-largest consumer of paint and coatings in the world, according to Abrafati.

    R&D in Brazil is expanding in the economy overall, along with the paint and coatings industry. A report by Brazil Tech suggests that private sector investment in R&D in Brazil had risen to 0.61 percent or over $12 billion by the beginning of 2018, based on statistics from the National Indicators of Science, Technology and Innovation within the Ministry of Science, Technology, Innovation and Communications (MCTIC).

    At the same time, R&D spending in the public sector had decreased to 0.64 percent in 2015 from prior years. “Brazil spends more than other countries spend on R&D, such as China, with 0.44 percent, Japan with 0.54 percent) and the UK with 0.48 percent.

    However, private sector investment in R&D in these three countries currently sits at 1.54 percent, 2.72 percent and 0.82 percent respectively,” the report said.

    According to the MCTIC survey over 300,00 people work in R&D in Brazil, including researchers and support staff, of which over 200,000 are in academia, about 70,000 are in the private sector, about 10,000 are in government and about 2,000 are in the non-profit sector, the report indicated.

    Expectations for Brazil’s economic turnaround – with a 2.3 percent growth in the gross domestic product – may be helping to fuel the private sector investment in R&D. “Unprecedented monetary stimulus, huge strides on the government’s reform agenda to bring public finances under control and open up the economy, and a record low exchange rate should help fuel the boom,” Reuters reported in December. “Essential conditions for sustained growth were laid down in 2019. Brazil is ready for a new development cycle,” said Waldery Rodrigues, special secretary to the Economy Ministry, Reuters reported.

    BBVA is similarly cautious but optimistic about the country’s economic upturn. “The Brazilian economy will continue to recover gradually in the coming years. After having grown around 1.1 percent in 2019, GDP is expected to expand 1.9 percent in 2020 and 2 percent in 2021, when it will finally reach the level exhibited before the severe crisis of 2015-16,” the bank said in its first-quarter 2020 review of the country.

    New investments in Brazil will be one of the strongest driving factors in the economic return, BBVA suggests. Fixed capital investments are expected to rise by 5.9 percent this year, compared with 4 percent last year, the bank projects.

    The chemical industry, including paints and coatings, will be buoyed by new direct investments, which will lower import expenses.

    “A 2019 report from Abiquim (the national chemical industry association) stated the deficit in the trade balance of chemicals reached a record high of $4.9 billion in the first months of 2019,” according to a June 2019 report from Global Business Reports.

    “We have a lack of raw materials at an internationally competitive price,” said the association. “Nowadays, 37 percent of the Brazilian market is being usurped by imported products,” the report concluded. 
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