APLA '11: Latin American GDP growth persists as US, Europe slows

06 November 2011 09:00  [Source: ICIS news]

Latin American GDP to growBUENOS AIRES (ICIS)--This year's Latin American Petrochemical Association (APLA) annual meeting begins as the region's economies will continue growing ­– albeit at a slower pace ­– while the US and Europe contend with slowdowns.

Latin America's biggest economy, Brazil, should grow by 3.8% this year and 3.6% in 2012, both down from 7.5% in 2010, according to the International Monetary Fund (IMF).

Mexico should also grow by 3.8% in 2011 and 3.6% in 2012, down from 5.4% in 2010, the IMF said. Argentina should grow by 8.0% this year and 4.6% next year, down from 9.2% in 2010.

Venezuela should grow by 2.8% in 2011 and 3.6% in 2012, compared with its economy shrinking by 1.5% in 2010.

Despite the expected slowdowns, Latin America should still grow much faster than the US and Europe, according to the IMF.

The US economy should grow by 1.6% in 2011 and 1.9% in 2012. In Europe, growth should be 1.6% and 1.3% for the countries using the euro currency.

“I am still bullish on Latin America for domestic growth,” said Bob Bauman, president of the US-based Polymer Consulting International.

Local consumption is still relatively low, so it still has a large potential to grow if the region's economy remains strong, Bauman said.

Plus, the region's largest economies, Brazil and Mexico, still have some flexibility to fight any slowdown in their economies.

Raul Arias, Nexant senior consultant and manager for Latin America, said, "If you look at Brazil and Argentina ­– even Peru – if you look at the way consumer behaviour has changed and how buying power has improved, you see the Walmart effect taking place." 

As the region's economies expand, petrochemical demand should grow even faster.

Some of that demand will continue to be met by imports. The US could increase its market share in Latin America as the nation's petrochemical industry continues to rely on cheaper natural-gas-based feedstock.

Domestic demand will also be met by several large projects coming on line throughout the region.

Petrobras has overhauled its planned Complexo Petroquimico do Rio de Janeiro (Comperj) in the southern part of the country. Comperj will now rely on off-gas as a petrochemical feedstock. The complex will also have a second refinery to help the country meet its growing demand for fuel.

Farther north, Braskem plans to start up its polyvinyl chloride (PVC) and vinyl chloride monomer (VCM) plants in the state of Alagoas in 2012. The PVC plant will have a capacity of 200,000 tonnes/year.

BASF plans to build a world-scale acrylates complex in Camacari, Bahia. Products will include acrylic acid, butyl acrylate (butac) and superabsorbent polymers.

In Mexico, Braskem and Grupo Idesa are building Ethylene XXI in Coatzacoalcos, Veracruz. The $2.5bn project, with an early 2015 start-up, will have a 1m tonne/year ethane cracker and three polyethylene (PE) plants with a combined capacity of about1m tonnes/year of resin.

In addition, Mexichem and Pemex have proposed creating a joint venture that would expand VCM capacity by 400,000 tonnes/year.

Despite the new capacity, Mexico's petrochemical trade deficit will likely persist.

That deficit reached $17bn in 2010, up 43% year on year, according to the country's chemical trade group, the Asociacion Nacional de la Industria Quimica (ANIQ).

Venezuela, which has a resins deficit, recently revealed its latest plans to increase capacity at three sites.

By 2016, state petrochemical producer Pequiven said it would increase resin capacity to 1.86m tonnes/year from 694,000/year by expanding its sites at Jose, El Tablazo and Paraguana.

Looking forward, Latin America's outlook for growth will depend, in part, on countries' exposure to the US and Europe. The eurozone is struggling with a sovereign-debt crisis, while the US is fighting a high unemployment rate and slow growth.

On the other hand, Latin America's rising middle class is increasing demand for automobiles and consumer goods.

In Brazil, close to 32m people rose to the middle class between 2003 and 2008, according to a 2009 publication from  the group Fundacao Getulio Vargas (FGV).

The nation is hosting football's World Cup in 2014 and the Olympics two years later. Meanwhile, the country has continued its housing assistance programme, Minha Casa Minha Vida.

In Brazil, Mexico and Argentina, automobile registration continues to increase.

The 31th Latin American Petrochemical Association (APLA) annual meeting lasts through Tuesday in Buenos Aires.

For more on resins and olefins visit ICIS chemical intelligence
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy


By: Al Greenwood
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