by Herbert Martínez
Competing globally in our painting industry means having technology, competitive costs, good distribution channels, fair prices, excellent quality and a good product offering. Towards this scheme, the Chilean coatings industry is advancing steadily, since the stability and competitiveness of its economy has allowed the southerners to be in a privileged place with respect to many other countries in the region.
The Chilean paint sector has benefited greatly from the sound macroeconomic decisions that governments have made. There, entrepreneurship has several advantages: zero taxes for technology imports, a competitive exchange rate and a revaluation that has benefited those who buy raw materials abroad, very low inflation and a very dynamic financial system. This has created the conditions for both domestic and foreign investment to spend their capital in search of satisfying the growing and qualified demand.
The World Economic Forum spoke about the security of the Chilean economy last year, which affirmed that the southerners remain the leading economy in competitiveness in Latin America and the Caribbean above Mexico and Argentina. The same report says that Chile is an advanced economy because "it has one of the most developed and sophisticated financial markets." Likewise, the World Bank had recently stated that Chile had the best Gross Domestic Product per capita in Latin America (US$12,277) compared to the average for the entire region (US$9,064).
A reflection of the above, is the per capita consumption of paint last year that reached 1.4 gallons of paint compared to the 1.2 that were recorded on average during 2006. To understand the characteristics of the Chilean market, we spoke with Rodrigo Infante who is the manager of the ceresita paints commercial technical unit, a company that had a turnover of US$80 million last year.
Balance Sheet 2007
What is your assessment of the industry in 2007?
There is a feeling that the development of the country has been increasing per capita consumption already exceeding the annual gallon. In 2006 it was at 1.2 gallons and rose last year to 1.4 gallons. This is due to the social development of the country that has been increasing and is perceived everywhere. I don't see any negatives because we are navigating the market well and we want to continue to do so.
How much did paint prices grow?
I would say they haven't grown at all. We've had an almost flat year, despite a few small increases. We had a year with very low inflation that is not passed on to prices and it is an issue that is very controlled.
How did paint lines grow in your company?
The most important were retail, industrial, then come the marinas and finally the products for wood in furniture or other industrial uses.
How many gallons of paint does the Chilean market produce?
Between 17 and 18 million gallons per year. Of that value what we export is very little that is represented in marine paints to Peru, some industrial anticorrosive paints to Bolivia and to Ecuador we are exporting powder paints. Powder coating is clean from the ecological point of view and serves to paint a lot of things with less paint losses and allows to form a high quality film.
Comparative advantages
How has the industry taken advantage of importing technology?
In our case, we have tried to bring new licenses such as a Spanish one for floor paintings and another from the United States for everything that is wood painting. Global technologies have reached the factories. On the other hand, with all the FTAs that Chile has signed with Europe and the United States, it has been easier for us to bring machinery at very convenient prices. That is, that machinery arrives without paying any type of tax and that is already a great advantage.
Where does that machinery come from?
It comes from Europe, the United States, Germany and also Argentina has good machinery for painting.
Do you think the sector is competitive internationally?
I think it's very competitive globally. I feel that we are with paints that are made in the United States and Europe. Globalization today has allowed much more progress to be made and to be able to be on par with other large countries and not have old products.
What does the industry in your country need to be more competitive?
We must improve deliveries. I wish we could count on a higher manufacturing speed to give faster responses to our customers. It is all the operational part, the market appreciates very much that an order placed is delivered to you no later than the next day.
Or is it that the demand has grown so much that they have fallen short of meeting it?
I don't think so. I think it has to do with the demands of companies today that want everything immediately. Before a company placed an order and did not mind having it the following week and today wants it the same day. This has to do with the cost of the inventories that users handle and that they tend to have them as low as possible. That happens to retail and hardware stores that are handling little inventory and require a greater speed of response. {mospagebreak}
Costs
Are costs such as water, taxes and labor competitive?
Energy is a situation that we are living in which day by day its cost increases and its solution is complex. The taxes have not changed because they are the same as they were 5 or 6 years ago. Labor has become more expensive in dollars because it has fallen in Chile and the peso has had strength and people tend to earn a larger amount in dollars. Those who are being affected are those who are exporting.
How have you handled the increases in raw materials?
Those raw materials that we bring from Argentina specifically in trucks have risen a lot. They have had increases in freight. They have occurred in resins and solvents but the fall of the dollar has not caused us such great damage.
Perspectives
How can formulating companies improve their competitiveness today?
I believe that in addition to having innovation in technology and offering products that meet the needs, I think it is more important to have a fast and efficient distribution. Giving an answer within 24 hours has a lot of value for the market.
Should we not invest in the distribution network or in bringing the end user closer?
What we are doing is approaching via direct marketing from the company to the end user (see box). For that, last year we gave 78 seminars to end customers among painters distributors, architects, engineers and builders. This is how we are strengthening our position in the market.
What are the prospects for this year?
We expect to grow this year by 4 or 5%. This has to do with what retail is, that is, not protective paints but decorative. The consumption of paints to decorate the house has risen and that means a social development. It is different the system of paints that have to do with protection that are the industrial or marine.
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