risi latin american conference, eden roc hotel, miami, nov. 20, 2013

Scheibe, RISI, Miami Nov. 20, 2013

RISI Latin AmericaMiami, Nov. 20, 2013

Setting Up a Business Operation in Latin America: Brazil & Mexico


RISI Latin AmericaAll Abroad

Stephen Scheibe – Managing Director

30 plus years of hands on experience in Brazil

15 years in Mexico in packaging business mainly with Landsberg/AMCOR

An Insider/Outsider (Latin America/Industry)


RISI Latin AmericaTHE PROGRAM PROMISE

An insight into the practicalities of establishing your presence in the market, including identifying your manufacturing site, local demand, pitfalls and opportunities.


RISI Latin AmericaPeril

Uncertainty

Doubt

Danger

Lacking information

Exposed

A PUDDLE or

An unknown and unforgiving world?


RISI Latin AmericaProfits

Opportunity

Open for business

Demand

Large

Enchanting

A POODLE?

Hey, Let’s go!!!


RISI Latin AmericaWhere? Location, Location, Location ???


RISI Latin AmericaSamba


RISI Latin America


RISI Latin AmericaPUSH ME – PULL YOU


RISI Latin AmericaMexico-A PULL

Clients under NAFTA have moved production to Mexico

Corrugators and Box Plants have followed; they are pulled in

Geography – Along the border, “twin plants”, in central Mexico, in Guadalajara and Monterey following industries: food, auto, electronics


RISI Latin AmericaMexico Market Growth: Steady but not

spectacular

But near shoring and middle class consumption add promise

Is the Mexican market saturated?


RISI Latin AmericaBrazil: A PUSH

Wants investments & too big to neglect


RISI Latin AmericaNew Brazilian middle class and better income

distribution (around 50 million new consumers integrated into the market)

Desire to affirm new status through consumption

Major online shopping driving brown box packaging

New demand in Northeast of Brazil and midsize cities, both are underserved


RISI Latin AmericaBusiness Opportunities

Concentrated (especially for kraftliner) and yet spread out (for medium, test liner and boxes).

In Brazil top 10 producers have almost 50% market share in paper and top 3 have 33% in boxes

Bottom of the market held by many small “factories” with old and inefficient machinery

Growth of corrugated higher in Mexico and Brazil than in USA

Mexico tied to US performance (improving)


RISI Latin AmericaBusiness opportunities

NAFTA drew US producers to Mexico in the 90’s and first decade of 21st century

What’s next? Growth in both Brazil and Mexico at 2 to 4% per year with further consolidation

Brazil will add almost 1 Billion and Mexico 600 million cubic meters paper between 2010 and 2015


RISI Latin AmericaA Tale of Two Cities: Belo Horizonte and

Tijuana

Tijuana: Kappa Smurfit, CECSO, Harbor, Reliable, plus distributors like AMCOR/Landsberg, XPEDEX (IP), ULINE, very competitive market.

Belo Horizonte: Approximately 2 x’s larger with less corrugated capacity and limited distribution: thus less competition and more opportunity.


RISI Latin AmericaMARKET ENTRY

Mergers and Acquisitions – An Industry Tradition Brazil, i.e. IP-ORSA, Klabin-Igaras, MWV-Rigesa, Irani-Sao Roberto; Mexico: Kappa-Smurfit-OCC, Rock Tenn-Smurfit Stone, etc.

Greenfield international investment (more common in Mexican case for corrugators & boxes)


RISI Latin AmericaThe Pitfalls and ProblemsThe Cartels and the Cartels

Bureaucracy/Legal/Taxes/High Cost (custo Brasil)

Corruption

Learning Curve

Finding the right place/right people

Details, details!!! Taking care of the little stuff


RISI Latin AmericaIs the hour glass running out?

Is our cup half empty, half full or full?

Tequila or Cachaca or both?


RISI Latin America

ABPO, Relatorio Annual, 2012

AMEE, Anuario Estadistico, 2013

Bohm, Carl, Reunion de AICC, Mexico, May 17, 2012, http://www.aiccbox.org/region/meeting_data/Mexico/2012/Carl_Bohm_ICCA.pdf

Foster Vidal, Andre Carvalho, “O mercado de papelao ondulado e os desafios da competividade da industria brasileira”, BNDES Setorial 35 http://www.bndes.gov.br/SiteBNDES/export/sites/default/bndes_pt/Galerias/Arquivos/conhecimento/bnset/set3501.pdf

KPMG:http://www.kpmg.com/BR/PT/Estudos_Analises/artigosepublicacoes/Documents/Fusoes%20e%20Aquisicoes/2013/Pesquisa-FA1-trimestre-2013.pdf

References

http://www.aiccbox.org/region/meeting_data/Mexico/2012/Carl_Bohm_ICCA.pdf

http://www.bndes.gov.br/SiteBNDES/export/sites/default/bndes_pt/Galerias/Arquivos/conhecimento/bnset/set3501.pdf

http://www.bndes.gov.br/SiteBNDES/export/sites/default/bndes_pt/Galerias/Arquivos/conhecimento/bnset/set3501.pdf