ECONOMIC & COMMERCIAL REPORT
Number 05| March 2013 Embassy of India BrasĂlia
The Packaging Industry
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Economic and Commercial Report
Index Editorial Board
04 Brazilian Economy
Economic and Commercial Report Number 04 March2013
08 Focus Story: The Packaging Industry
Published by Embassy of India Brasília SHIS QL 08 conjunto 08 casa 01 - Lago Sul Brasília-DF
Editor: Raj Srivastava Texts: Yatin Patel Layout: Hadassah Levyski
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BRAZILIAN ECONOMY
PRESIDENT DILMA’S POPULARITY REACHES A NEW RECORD
T
he personal approval rating of Brazil’s governments, they will alo notice her popularity
first woman president rose to 79% in March from 78% in December, according to a CNI/Ibope opinion poll. 63% of the respondents rated Rousseff government as good to excellent, up from 62% in December. If one compares it to the previous
is even higher than the one former presidents Lula and Fernando Henrique Cardoso enjoyed at the same period of their first terms, 39% and 56%, repectively. If a presidential election was to be held today, Rousseff would easily win with 58% of the vote.
UN agencies to provide services for the new stadium in brasília
T
he Confederations . Cup is coming out in June and, in order to meet their deadline, Brasília has turned to the UN for assistance so the city can have its new soccer stadium up and running in time for the event that preceds the World Cup. Two UN agencies have signed a US$ 17.5 million agreement with the government of the Federal District to procure services and items for the stadium, such as generators, tents and security cameras. The new stadium, which is now 87% complete, will be the second largest venue for the World Cup 2014 and seat 70,000 people. FIFA has set the deadline for April 21; however, grass is yet to be planted and the roof is not finished.
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Economic and Commercial Report
P
etrobras announced that its Board of Directors has approved the 20132017 Business & Management Plan
(2013-17 BP), with investments of US$ 236.7bn, maintaining the same level of investments as last year’s Plan. Of the total Plan, US$ 207.1bn of investments are classified as under implementation. The 2013-17 BP maintains the project management practice of separating projects into four phases according to their maturity. The portfolio of projects under implementation amounts to US$ 207.1bn and includes all Phase IV projects that have already been contracted, and all E&P projects in Brazil. The portfolio under evaluation, with US$ 29.6bn, encompasses projects of other business areas that are currently in Phase I (opportunity identification),
BRAZILIAN ECONOMY
Petrobras to invest US$236,7 billion
II (conceptual project) and III (basic project) which, in order to proceed to the implementation phase, must have their technical and economic feasibility confirmed (Phase III approval). The analysis of the 2013-17 BP portfolio resulted in the maintenance of 2012-16 BP projects for the 2013-17 period, without including or excluding new projects in the portfolio under implementation, except for cases of E&P in Brazil where, in order to meet planned production targets, there were inclusions and exclusions as well as accelerations and postponements of projects. According to Petrobras, all 2013-17 BP projects incorporate the use of S-Curves (graphs that represents a project’s physical and financial progression) and projections are based on an analysis of executing these curves. The S-Curves are closely monitored by the Executive Board in order to ensure that the Plan´s targets are met. www.indianembassy.org.br
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BRAZILIAN ECONOMY
Brazil and USA seek bilateral agreements
D
evelopment Pimentel
Minister
by the members of Mercosur, in areas such
meeting the US Acting Secretary
as services, investment, transportation, and
of Commerce, Rebecca Blank, calling for
taxes. According to the Brazilian Trade Minister,
accelerated negotiations on a series of Brazil-
“we should explore all of the possibilities of
US
porposal
bilateral progress while we prepare within the
mentioned the bilateral agreements that can
Mercosur for mature negotiations with the US”.
accords.
a
note
be discussed without the need for approval
after
financial
released
Fernando
Pimentel’s
Brazil current account gap widens in February
B
razilian
Federal
Government
January’s record surplus of US$ 13.1, which was
registered a primary budget deficit
the result of decisions by banks and companies
of US$ 3.1 billon in February, which
to anticipate income tax payments. Government
represents the worst fiscal result on record for says these numbers are ‘atypical’ and do not the month - and the highest monthly deficit since September 2009. This negative result followed
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represent tendencies for the remainder of the year.
BRAZILIAN ECONOMY
FITCH SAYS UPGRADE TO BRAZIL IS UNLIKELY
R
Fitch said in a statement. Shelly Shetty, head of Fitch’s Latin America sovereign group mentioned report released on March 27 that weak that the nation has struggled to grow over the economic growth and looser budget past two years due to a cyclical downturn as well as structural issues that require deeper policies could delay any upgrades of the country’s reforms. “A difficult business environment, a sovereign credit rating. It noted that Brazil’s debt- heavy tax burden, labor market inflexibility and to-GDP ratio and interest payments are above the infrastructure bottlenecks have led to a drop in total factor productivity and investment growth, median of other countries with the same rating. reducing Brazil’s trend growth,” said Shetty in a “This could delay an improvement in Brazil’s statement. relative standing within its rating category,” atings agency Fitch warned Brazil on a
Brazil and China agree currency swap
C
hina and Brazil have signed a currency swap deal, designed to safeguard
against future global financial crises. The pact, first announced last year, will allow their central banks to swap local currencies worth up to 190bn yuan or 60bn reais ($30bn;
£20bn). Officials said this will ensure smooth bilateral trade, regardless of global financial conditions. The agreement was signed on the sidelines of the fifth Brics (Brazil, Russia, India, China and South Africa) summit being held in Durban, South Africa. www.indianembassy.org.br
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Packaging Industry
Idea of using any wafer packet as life saving jacket in swimming pool may be fool proof because of two things. First, they have more air than wafer and second packaging is very strong nowadays. Joke apart, it is impossible to survive in this world without using packaged stuff and it is more so in sixth largest economy in the world. Brazil´s packaging industry is surely worth paying attention to.
P
ackaging industry of Brazil is having size
the forecast period to reach US$33.1 billion
of Approximately 23 bn USD. Plastic
in 2016, driven by both macroeconomic and
packaging is having 37 % share of total
consumer demand factors.
packaging, Paper packaging is 34.5%, Metal
• Major sporting events such as the 2014
packaging is 16.7% and glass packaging
FIFA World Cup and the 2016 Summer Olympic
accounts for almost 5% of total value. Rest
Games will drive demand for packaging across
belongs to wooden packaging.
several industries, and will also drive tourism. • With sales of US$16 billion in 2011 the
Some of the features can be seen here. • Brazil’s packaging industry is the seventhlargest in the world.
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food and beverages sector accounts for 67% of the total packaging consumption in the country. • The pharmaceuticals market’s packaging
• It is valued at US$23.7 billion in 2011 and
sales are projected to grow to US$3.6 billion in
is expected to grow at a CAGR of 7.13% during
2016 from US$2.6 billion in 2011, recording the
Economic and Commercial Report
highest growth among the packaging industry’s food majors Perdigao and Sadia, is expected end-user markets.
to trigger further consolidation. Consolidation among major retailers in Brazil has led to the
Factors which make Brazil place to be
adoption of standardized packs and sizes in order to improve logistics and effective warehousing practice. This has benefitted the
The Brazilian agro-products industry, with a global share of 25% of the world food market,
packaging industry by allowing it to compete over standardized products and specifications.
is growing as a result of a significant number of global retailers making Brazil a global sourcing
Major Players in Brazil
hub. Consequently, the food industry, which accounts for more than 40% of packaging consumption, is expected to drive growth. Global
19 out of 20 top global packaging
sourcing has led to the adoption of international
manufacturers are present in Brazil. Tetra Pack,
standards of packaging to facilitate regional and
Sig Combibloc, Dixie Toga and International
continental shipments. New packaging formats
Paper
such as stand-up pouches are expected to record
investments in Brazil’s packaging market. It
growth in Brazil with applications in juices, milk,
would be interesting to observe the case of Tetra
tea and water packaging.
Pack in Brazil. Company has been operating in
have
decided
to
make
significant
The Brazilian domestic market remained a
Brazil since 1957. It established its first plant in
favorite destination for global companies in the
Monte Mor in Sao Paulo in 1978 and second
FMCG (fast-moving consumer goods) sector
plant in Ponta Grossa in Parana. In 1993, annual
as several announced new investments. Coca
milk consumption in Brazil was 5 billion liters and
Cola, for example, announced plans to invest
in 2006 it reached 10 billion liters. Tetra Pack
approximately US$5.8 billion in Brazil during
grew along with demand of preserving the milk.
2010-15. Additional investment is also expected
Sig Combibloc started its first plant in South
in the retail sector. Such levels of investment
America in Campo Largo in Curitiba, Parana.
highlight the expectation of higher consumer
Within Six months of starting operation they have
spending, driven by robust economic growth in
announced the investment to triple the capacity.
Brazil, which in turn will boost demand across
They are planning to achieve target of 3 billion
packaging segments.
units produced per year.
19 out of 20 In 1995, Dixie Lalekla and top global Toga merged to form Dixie Toga. years the Brazilian packaged packaging They have units in Valinhos, consumer goods supply chain has experienced greater consolidation. manufacturers Votorantim, Mauá, Cambe, The creation of Brazil Foods, as are present in Paranhuá, Pinhais, Curitiba and a result of the merger of Brazilian Londrina, mostly located in State Brazil. In
the
last
number
of
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of Sau Paulo and Parana.
region’s increased consumer purchasing power
North and North-East: To be or not to be
but many have preferred to remain where they
In state of Amazonia, Manaus Free
are.
trade zone is created to push the process of industrialization in this region. Packaging industry is looking at it with much of interest. Because of the provision of Suspension of PIS/PASEP
Challenges for the Packaging Industry in Brazil
and COFINS taxes for imports of raw materials, intermediary goods, and packaging materials by
High taxes, legislation relating to food,
companies located in the Manaus Free Trade
safety and the environment, energy prices and
Zone for use by manufacturing operations in
exchange rate fluctuations are some of challenges
establishments located in this free trade zone.
currently faced by the Brazilian packaging
All those mentioned taxes are suspended if
industry. Due to the complex supply chain, the
any company (out of Free trade zone too) uses
Brazilian packaging industry has numerous
packaging material produced in Manaus FTZ.
stakeholders, each of whom is represented by
It is encouraging many to be there. For
trade associations. Although there is a separate
Example, Rexam, major producers of beverage
agency representing the packaging industry, the
cans, has units in Manaus along with units in
affiliation of member companies is usually to
Rio de Janeiro, Minas Gerais, São Paulo, Rio
its core industry. Consequently issues faced by
Grande do Sul, Mato Grosso, Distrito Federal
the industry regarding high corporate taxes and
and Recife. Another Can producer, Crown is
import duties on packaging machineries remain
having units in Cabreúva-SP, Estância, Ponta
unresolved.
Grossa-PR, Manaus, Santa Izabel in Pará. North is alluring because of tax-incentive
the food and pharmaceuticals markets are
for sure but all the major firms present there have
highly regulated. In recent times, however,
most of their capacity located in regions of Sao
environmental concerns have become a major
Paulo and Parana. Most of the food processing
impediment for the growth of plastic packaging,
industry is located here. Most of the raw material
such as the law which prohibits the use of
as well as potential market is here. Transport is
plastic bags in supermarkets in Rio de Janeiro.
still major constrain for units present in North. So
In addition, the plastic packaging industry
companies are having
investments aimed at
faces the challenges of the irregular supply of
to the astonishing
raw materials from petrochemical companies,
responding
growth
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Among the end-user market segments,
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of
and fluctuations in price. Brazil also remains a
d o m e s t i c
high-cost capital country, and as the majority
demand,
of domestic packaging businesses are small or
stimulated
medium-sized, high borrowing costs affect their
by
ability to expand.
this
Economic and Commercial Report
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