ecr march 2013

ECONOMIC &COMMERCIAL REPORT

Number 05| March 2013Embassy of India

Brasília

The Packaging

Industry

2 | Economic and commErcial rEport

VISIT OUR BUSINESS CENTER ONLINE:http://indianembassy.org.br/?page_id=228&lang=en

www.indianEmbassy.org.br | 3

Index

Editorial Board

Economic and Commercial Report

Number 04March2013

Published by Embassy of India

BrasíliaSHIS QL 08 conjunto 08

casa 01 - Lago Sul Brasília-DF

Editor:Raj Srivastava

Texts:Yatin Patel

Layout:Hadassah Levyski

04 Brazilian Economy

08 Focus Story: The Packaging Industry


br

aZil

ian

Ec

on

om

y

PRESIDENT DILMA’S POPULARITY REACHES A NEW RECORD

The personal approval rating of Brazil’s 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

governments, they will alo notice her popularity 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

The 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.


br

aZil

ian

Ec

on

om

y

Petrobras to invest US$236,7 billion

Petrobras announced that its Board

of Directors has approved the 2013-

2017 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),

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.


br

aZil

ian

Ec

on

om

y

Brazil and USA seek bilateral agreements

Development Minister Fernando

Pimentel released a note after

meeting the US Acting Secretary

of Commerce, Rebecca Blank, calling for

accelerated negotiations on a series of Brazil-

US financial accords. Pimentel’s porposal

mentioned the bilateral agreements that can

be discussed without the need for approval

by the members of Mercosur, in areas such

as services, investment, transportation, and

taxes. According to the Brazilian Trade Minister,

“we should explore all of the possibilities of

bilateral progress while we prepare within the

Mercosur for mature negotiations with the US”.

Brazil current account gap widens in February

Brazilian Federal Government

registered a primary budget deficit

of US$ 3.1 billon in February, which

represents the worst fiscal result on record for

the month - and the highest monthly deficit since

September 2009. This negative result followed

January’s record surplus of US$ 13.1, which was

the result of decisions by banks and companies

to anticipate income tax payments. Government

says these numbers are ‘atypical’ and do not

represent tendencies for the remainder of the year.


br

aZil

ian

Ec

on

om

y

FITCH SAYS UPGRADE TO BRAZIL IS UNLIKELY

Ratings agency Fitch warned Brazil on a

report released on March 27 that weak

economic growth and looser budget

policies could delay any upgrades of the country’s

sovereign credit rating. It noted that Brazil’s debt-

to-GDP ratio and interest payments are above the

median of other countries with the same rating.“This could delay an improvement in Brazil’s

relative standing within its rating category,”

Fitch said in a statement. Shelly Shetty, head of Fitch’s Latin America sovereign group mentioned that the nation has struggled to grow over the past two years due to a cyclical downturn as well as structural issues that require deeper reforms. “A difficult business environment, a heavy tax burden, labor market inflexibility and infrastructure bottlenecks have led to a drop in total factor productivity and investment growth, reducing Brazil’s trend growth,” said Shetty in a statement.

Brazil and China agree currency swap

China 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.


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.

Packaging industry of Brazil is having size

of Approximately 23 bn USD. Plastic

packaging is having 37 % share of total

packaging, Paper packaging is 34.5%, Metal

packaging is 16.7% and glass packaging

accounts for almost 5% of total value. Rest

belongs to wooden packaging.

Some of the features can be seen here.

• Brazil’s packaging industry is the seventh-

largest in the world.

• It is valued at US$23.7 billion in 2011 and

is expected to grow at a CAGR of 7.13% during

the forecast period to reach US$33.1 billion

in 2016, driven by both macroeconomic and

consumer demand factors.

• Major sporting events such as the 2014

FIFA World Cup and the 2016 Summer Olympic

Games will drive demand for packaging across

several industries, and will also drive tourism.

• With sales of US$16 billion in 2011 the

food and beverages sector accounts for 67% of

the total packaging consumption in the country.

• The pharmaceuticals market’s packaging

sales are projected to grow to US$3.6 billion in

2016 from US$2.6 billion in 2011, recording the


highest growth among the packaging industry’s

end-user markets.

Factors which make Brazil place to be

The Brazilian agro-products industry, with

a global share of 25% of the world food market,

is growing as a result of a significant number of

global retailers making Brazil a global sourcing

hub. Consequently, the food industry, which

accounts for more than 40% of packaging

consumption, is expected to drive growth. Global

sourcing has led to the adoption of international

standards of packaging to facilitate regional and

continental shipments. New packaging formats

such as stand-up pouches are expected to record

growth in Brazil with applications in juices, milk,

tea and water packaging.

The Brazilian domestic market remained a

favorite destination for global companies in the

FMCG (fast-moving consumer goods) sector

as several announced new investments. Coca

Cola, for example, announced plans to invest

approximately US$5.8 billion in Brazil during

2010-15. Additional investment is also expected

in the retail sector. Such levels of investment

highlight the expectation of higher consumer

spending, driven by robust economic growth in

Brazil, which in turn will boost demand across

packaging segments.

In the last number of

years the Brazilian packaged

consumer goods supply chain has

experienced greater consolidation.

The creation of Brazil Foods, as

a result of the merger of Brazilian

food majors Perdigao and Sadia, is expected

to trigger further consolidation. Consolidation

among major retailers in Brazil has led to the

adoption of standardized packs and sizes

in order to improve logistics and effective

warehousing practice. This has benefitted the

packaging industry by allowing it to compete

over standardized products and specifications.

Major Players in Brazil

19 out of 20 top global packaging

manufacturers are present in Brazil. Tetra Pack,

Sig Combibloc, Dixie Toga and International

Paper have decided to make significant

investments in Brazil’s packaging market. It

would be interesting to observe the case of Tetra

Pack in Brazil. Company has been operating in

Brazil since 1957. It established its first plant in

Monte Mor in Sao Paulo in 1978 and second

plant in Ponta Grossa in Parana. In 1993, annual

milk consumption in Brazil was 5 billion liters and

in 2006 it reached 10 billion liters. Tetra Pack

grew along with demand of preserving the milk.

Sig Combibloc started its first plant in South

America in Campo Largo in Curitiba, Parana.

Within Six months of starting operation they have

announced the investment to triple the capacity.

They are planning to achieve target of 3 billion

units produced per year.

In 1995, Dixie Lalekla and

Toga merged to form Dixie Toga.

They have units in Valinhos,

Votorantim, Mauá, Cambe,

Paranhuá, Pinhais, Curitiba and

Londrina, mostly located in State

19 out of 20 top global packaging

manufacturers are present in

Brazil.


of Sau Paulo and Parana.

North and North-East: To be or not to be

In state of Amazonia, Manaus Free

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

and COFINS taxes for imports of raw materials,

intermediary goods, and packaging materials by

companies located in the Manaus Free Trade

Zone for use by manufacturing operations in

establishments located in this free trade zone.

All those mentioned taxes are suspended if

any company (out of Free trade zone too) uses

packaging material produced in Manaus FTZ.

It is encouraging many to be there. For

Example, Rexam, major producers of beverage

cans, has units in Manaus along with units in

Rio de Janeiro, Minas Gerais, São Paulo, Rio

Grande do Sul, Mato Grosso, Distrito Federal

and Recife. Another Can producer, Crown is

having units in Cabreúva-SP, Estância, Ponta

Grossa-PR, Manaus, Santa Izabel in Pará.

North is alluring because of tax-incentive

for sure but all the major firms present there have

most of their capacity located in regions of Sao

Paulo and Parana. Most of the food processing

industry is located here. Most of the raw material

as well as potential market is here. Transport is

still major constrain for units present in North. So

companies are having investments aimed at

responding to the astonishing

growth of

d o m e s t i c

d e m a n d ,

st imulated

by this

region’s increased consumer purchasing power

but many have preferred to remain where they

are.

Challenges for the Packaging Industry in Brazil

High taxes, legislation relating to food,

safety and the environment, energy prices and

exchange rate fluctuations are some of challenges

currently faced by the Brazilian packaging

industry. Due to the complex supply chain, the

Brazilian packaging industry has numerous

stakeholders, each of whom is represented by

trade associations. Although there is a separate

agency representing the packaging industry, the

affiliation of member companies is usually to

its core industry. Consequently issues faced by

the industry regarding high corporate taxes and

import duties on packaging machineries remain

unresolved.

Among the end-user market segments,

the food and pharmaceuticals markets are

highly regulated. In recent times, however,

environmental concerns have become a major

impediment for the growth of plastic packaging,

such as the law which prohibits the use of

plastic bags in supermarkets in Rio de Janeiro.

In addition, the plastic packaging industry

faces the challenges of the irregular supply of

raw materials from petrochemical companies,

and fluctuations in price. Brazil also remains a

high-cost capital country, and as the majority

of domestic packaging businesses are small or

medium-sized, high borrowing costs affect their

ability to expand.


Foc

Us

sto

ry

namaste

VISIT OUR WEBSITE

www.indianembassy.org.br

Renúncia: ECR reúne os seus contúdos a partir de diversas fontes e as opiniçoes e pontos de vista expressos nas entrevistas e eartigos pubnlicados não representam necessariamente as opiniões da Embaixada ou do Governo da Índia.

ecr march 2013

Documents