By Herbert Martinez
About 4.4% in 2007 was the figure estimated by the International Monetary Fund would be gdp growth in Brazil, and although it might be thought that it is a very conservative figure in relation to the rest of Latin America, it is a growth that speaks of the relative macroeconomic stability of this country. like few in the region, of the global demand for raw materials. Its commercial exchange is dynamic with countries such as China, where in the period 2001 to 2006 its exports to that Asian nation reached US $ 8,400 million.
To this, we must add the growing domestic demand that according to the National Confederation of Industry (CNI) was expected to register an increase of 6% in family consumption and 12.8% in the investment rate last year. This domestic demand was positively reflected in the consumption of paint, which forced the sector to reach the record production of 1 trillion 45 thousand liters of paint in 2007.
To find out the balance of the sector in 2007 and the prospects for 2008, we interviewed the executive president of the Brazilian Association of Ink Manufacturers (Abrafati), Dilson Ferreira.
Balance
What factors contributed to the growth of the paint sector in your country?
The market grew based on a number of factors that were agreed upon. The Government's Growth Acceleration Program (PAC), falling interest rates, expanding consumer credit from real estate financing, rising income, and tax exemption for real estate paintings (approved in 2006) all contributed to higher paint sales than in 2006. On the one hand, the PAC is bringing positive effects for retail paint sales and also directly for builders, and on the other, it stimulates the economy as a whole with the consequent effect on our sales.
In the same way as real estate paints, car paints also had a positive year as a result of successive records in vehicle sales. Industrial and maintenance paints also had good results depending on the minor interests (sales of household appliances, furniture and other products that carry paint) and the PAC itself that stimulates sectors that use paints such as marine, energy, oil and gas, roads and others. We estimate that sales grew in 2007 by 8%. What type of paints grew in greater proportion? All paint classes had significant growth, but paints for new cars were the ones that grew the most in relation to the previous year by 12.5%.
Did the rising price of oil affect paint prices?
The growth of the international price of oil is a factor of great concern for the painting industry due to its impact on naphtha prices and, consequently, on the costs of production. Despite now being self-sufficient in oil and having recently announced the discovery of new reserves, Brazil depends on imported naphtha which aggravates the problem in the country.
The Brazilian paint industry absorbed the cost increases resulting from that increase. In 2007, as a result of the tax exemption process in real estate paintings, the prices of these products even fell.
Production costs
Are the costs of energy, water, wages and taxes to produce paints competitive?
Among these four factors, taxes are the main difficulty for Brazil's competitiveness. We have a very high tax burden today that is at the top of those countries that are at a similar degree of development to ours. The other factors also have an impact on our competitiveness. Energy costs are relatively high in the country, with growth above inflation in recent years. But what worries more is the supply of energy that may not be enough to meet the demand with the growing economy.
In relation to water, its cost has also increased in recent years, although it is still in average patterns compared to other countries. Average wages in Brazil are not high, but the charges associated with them double the cost per worker.
Competitiveness
What strategies should formulators follow so as not to lose competitiveness due to the price of oil?
There is no magic formula to solve this problem. There is a need to continue to invest in research and development of new solutions that do not involve petroleum derivatives or reduce their use. But this is a path that does not bring results in the short term.
What is missing from the sector to be more competitive internationally?
The export of Brazilian paints, although it is growing, still represents very little for the sector having reached in recent years a value a little above US $ 100 million which means about 5% of the total turnover of the sector. This value should continue to grow in the coming years once there is a market for our paintings abroad, especially for those that have greater added value.
The main challenges to increase external sales are, on the one hand, the appreciation of the real in relation to the dollar that affects the competitiveness of our exports. On the other hand, the still timid position of most of our manufacturers in the search for new external markets. Add to that, at the present time, the demand filed for paints in the domestic market that discourages the search for other markets.
Is competition from Asian coatings a threat to the sector?
Paints from China are not coming to Brazil because the domestic paint industry has quality in its level of production, offers services, is externally competitive in its prices and has a strong position in all the markets it serves. Any imported paint would have to be in conformity with the technical standards established by the ABNT (Brazilian Association of Technical Standards).
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