Brazil is one of the most important and largest markets in Latin America. Brazil has a great potential of attracting foreign investment in the petrochemical sector.
The Brazilian petrochemicals market will demonstrate a strong recovery in the year 2010, which will be led by an increase in domestic consumption that will translate into industry opening rates of 80% from 90% in 2009.
In the year 2009, Brazilian petrochemicals fared better than its adversaries in global markets in terms of sales volume. Brazil has completely restructured its petrochemical sector. Brazil also has one of the largest automotive sectors and it is expected to grow in the double digits in coming years. In addition, the raw materials needed are easily available and local industry dynamics are in favor. The recent new discovery of gas and oil reserves further fuels the rapid development of petrochemicals sector.
Brazil is a major producer of petrochemical products and accounts for approximate 46% of South America's total petrochemical capacity including methanol. Brazil accounts for 70% of total South American capacity in ethylene, which is bound to increase with the new discoveries.
The Government is expected to make a major investment in Rio de Janeiro’s Petrochemical complex for integrated refinery and cracker complex. The project is a joint partnership between Petrobras and Brazilian chemical producer Grupo Ultra, with CPS expected to go for share holding.
Rising demand for thermoplastics in the global market also projects a bright future for the Brazil Petrochemical industry. The government is encouraging foreign investment in ethylene production, and the production is set to touch a capacity of 63% by the year 2013.
Foreign Investment Opportunities in Chemical Industry:
Brazil's chemical industry ranks in the world's ten largest chemical industries, and is also the topmost industry for the Southern hemisphere. The Brazil economy has grown at a consistent growth rate, and there is serious need felt for new investments as there is fear that the country’s economy may outpace industry's production. Brazil also experiences a high chemical trade deficit which proves there are bright opportunities for investment in Brazil's chemical industry. Chemicals are needed by agriculture as well as other industries. Production shortfalls can lead to growing reliance on imports and prove to be a hindrance to growth of other sectors.
Brazil’s government has taken concrete steps to encourage investment in the chemical industry. It has eliminated cumulative effects of Social Security tax, reduced excise tax on capital goods and lowered tariff rates. Brazil’s Government has also lowered domestic market barriers to facilitate competition with products that are manufactured in other countries.
The country's economic stability with low inflation, important trade surpluses in the balance and floating exchange rate extends promise for potential foreign investment in Brazil’s chemical industry.
FDI in Brazil has always been regulated by the logic of market seeking, and the profitability of investment is guaranteed by trade policy that protects the investment.