Transformation Industry in Brazil: Industrial Plastics Sector

Interview with José Ricardo Roriz Coelho, President of ABIPLAST (Brazilian Plastic Industry Association)

Could you give us your overview of the industrial plastics sector in Brazil?

The sector for industrial plastics and for the transformation of plastics is one of the principal sectors of the Brazilian economy. It figures as one of the five most important transformation industries. Of those five industries, the plastics industry is third in terms of how much employment it generates and it is the industry that pays the highest salaries within those top 5 industries. The plastics sector demands a much more qualified workforce than the other five largest sectors in the Brazilian economy. The revenue of this sector must be around 63 billion reals per year, this shows the importance of the sector. The sector employs around 350 thousand people. Therefore to sum up it is a sector that employs many people, pays good salaries and contributes a great deal to the Brazilian economy.

Tell us a bit about ABIPLAST.

ABIPLAST represents practically all of the plastics transformers in Brazil. The plastics industry is spread out over all of the states in the country, with the majority of factories in the largest cities, in all we have 12,500 companies. That means that in nearly every medium sized to large city there are dozens of plastics companies. ABIPLAST brings together all of these companies that represent the plastics industry in Brazil. We work in many areas which include organising the main demands of the sector in order to make it more competitive. We also work in terms of governmental relations and with the rules and regulations for the sector. We work with the technological advancements and innovations in the sector with our contacts and our suppliers of raw materials. We also work in areas of training and qualifications and areas to do with legislation. All of these things in one way or another are organized within ABIPLAST and are then diffused to all of the transformers. There is also a council in which ABIPLAST represents every state in Brazil and where the main leaders in the sector also participate with the administration of the association.

How many associates are involved more or less?

Practically all of the plastics transformer companies in the country are associated to unions and the unions are associated to ABIPLAST. Therefore there are associates that are linked directly to ABIPLAST and there are companies that are linked via the unions that represent them. In Brazil as a whole there are 12,500 associates in total.

Apart from the high costs of raw material and production, what are the main challenges that the sector faces at the moment?

I would say that the main challenge is one that all areas of Brazilian industry faces, and that is production costs in Brazil today. Currently production costs for anything manufactured in this country are 30% or 40% more expensive than in any other competing country. There are set of factors that are making it hard for our production to be competitive. Our raw materials are some of the most expensive in the world. Electricity here is expensive and the taxes on industry are very high. We also have so much bureaucracy which adds a substantial cost for the companies. Furthermore the costs due to our infrastructure in terms of ports, highways, airports, etc., all add to the final cost of the product. Hence our main challenge is to reduce these costs which represent a great disadvantage to our competitiveness.

On a positive note, we have a very large market and it is growing. The purchasing power of the Brazilian middle class is increasing. Our growth is based on consumerism but there are sectors here in Brazil that are doing fantastically. Our growth will follow alongside the country´s economic growth because we participate greatly to that economy.

Is your perception of the ease of doing business in this sector more positive than negative overall?

Yes. I shall give you an example: if you look at the agribusiness, Brazil is a champion in that field. The Brazilian products from that sector are extremely competitive and we practically export to the whole world. At the moment we are mostly exporting grains, but when we begin to add value to those products by processing and packing these food items here in Brazil, it will greatly increase the use of plastics. If you look at the infrastructure sector, this sector uses many plastic products as does the civil construction sector and oil and gas sector. Thus the growth of these other sectors will also bring growth to the plastics sector.

How important are Brazilian companies in this sector on an international scale?

What happens today is that when you begin to work with the food and automobile industry, the use of plastics is really increased. The majority of these companies are global, they are companies that have factories here in Brazil and other factories abroad. Whether these companies manufacture the packaging here or abroad, they are following the same quality standards. It is fundamental that the Brazilian plastics transformers not only have factories here but that they also follow the international trends and growth of the companies that they sell their products to. Therefore I think that if we have factories here and also participate abroad it can be really good for the plastics industry.

What is your vision for the future of this sector over the next two or three years?

I am not too worried about the growth of our market. The demand for our plastics is high. Plastic is a product where the cost-benefit is very attractive in terms of bringing out new products. Normally when you use plastics over other materials it is because not only is it a cheaper option but it can bring with it a series of other benefits such as the different types of plastics and the different performance options available. In the automobile or aviation industry plastics are used for many reasons. In the automobile industry plastics greatly increase safety in cars and greatly reduce the amount of fuel used. For these reasons I don’t see a fall in the demand for plastics. Our main worry is the high production costs. To be able to attract investors to this sector we need to reduce these costs.

Where would you like to see ABIPLAST in two or three years?

Nowadays the speed of coming out with an innovative product is ever increasing. The cycles of products are getting shorter; you always have to be coming out with a new product to keep up with the demand and with society. People are always asking for cheaper and better products. Therefore the plastics industry is always seeking to offer the best products to the Brazilian and international consumers. This is our goal, however it is not always easy to accomplish this. It requires training, qualified workforce, adequate equipment and a lot of technology. It also requires knowledge of the market, not only the Brazilian market but also the international market. It requires knowledge of market trends and what consumers are looking for. We want our plastics to be innovative and competitive when it comes to choosing a material for a product or packaging.

What would be your message to a national or international investor who is interested in this sector?

I think that the plastics sector in Brazil has enormous potential for growth. Particularly alongside the growth of diverse sectors of the Brazilian economy including areas such as agriculture, infrastructure, automobiles, and home-utility products like fridge-freezers and televisions which all use lots of plastics. As the income per capita here in Brazil has been growing steadily for the last few years, sales of plastics are going to increase more and more.

I think Brazil is a very interesting location for those investors who are looking to increase their incomes and manufacture for a defined market. Moreover Brazil can be a good platform for exports to our neighbouring countries. With a plastics factory here in Brazil you can export not only to South America and Latin America but also to other regions. I think that the outlook is very positive in terms of investment into the plastics sector here in Brazil.

Would you like to add something in addition to what has been already said?

Brazil needs to be more ambitious in terms of growth. Brazil could be growing at a much faster rate than the growth we are seeing today. What is lacking is a medium to long term plan which offers people defined goals and that the society demands that the plan be implemented.

Another message that I would like to give is that we can do a lot better. This country has enormous potential and we are only just beginning to exploit some of that potential for growth.

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