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Business

Latin America: Dodging the economic bullet, the region has ambitious plans

by Alexander H. Tullo
January 11, 2010 | A version of this story appeared in Volume 88, Issue 2

It used to be that a U.S. recession would mean a severe downturn for Latin America. The region has avoided that fate this time around, largely because many countries have gotten problems such as inflation under control.

National experiences varied last year, according to the International Monetary Fund (IMF). Mexico saw a 7.3% decline in gross domestic product; Brazil slipped merely 0.7%. Except for Peru, which posted 1.5% growth, most major Latin American economies fell somewhere between Brazil and Mexico.

IMF expects every Latin American country but Venezuela to rebound in 2010. “Brazil will lead the way, in part because of its large domestic market and diversified export products and markets, especially its increasing links to Asia,” according to IMF.

Domestic polymer sales at Brazil’s largest chemical maker, Braskem, were down 7% for the first nine months of 2009 versus the prior-year period. However, the company has seen demand improve since March, and sales were up 10% in the third quarter.

Despite the downturn in Mexico, results at Alpek, the country’s largest private-sector chemical company, held up through the first nine months of 2009. Volumes in its polyester business increased 5% and volumes for specialty chemicals, polypropylene, and expandable polystyrene rose 11%.

This year and beyond, Braskem’s ambitions will spur growth in Latin America’s chemical industry. In November, the company unveiled plans with Mexico’s Idesa and state oil company Pemex to build a $2.5 billion ethylene complex in Mexico by 2015. In contrast to an earlier Pemex plan, the Braskem project already has a preliminary feedstock deal in place, says Jorge O. Bühler-Vidal, director of Polyolefins Consulting.

In Venezuela, Braskem is planning a $1.2 billion polypropylene project and a $3.3 billion ethylene complex, both with state chemical firm Pequiven. It has a smaller project in Peru and is interested in a massive heavy-oil based complex in Brazil. By signing on to all of these projects, Bühler-Vidal says, Braskem is hedging its bets in a region where plans tend to change.

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