Moldmaking Opportunities in Central and South America
In addition to the Asian region, Central and South America represent a high growth area for the U.S. plastics industry. In 2013, this region was the destination for $22.2 billion worth of U.S. plastics exports. Only 10 of the 48 countries in the region did not experience positive growth in such exports from 2000 to 2013, and 21 of them (44 percent) actually were among the highest growth export markets for the U.S. plastics industry during that time period. (To qualify for inclusion in this group, a country had to have received at least $25 million in U.S. plastics exports and have experienced an increase of 87 percent or more from 2000 to 2013.)
We examined the Mexican and Canadian markets in March, and will discuss Brazil, Russia, India and China (BRIC) in the August issue. Here we will discuss the top 10 export markets for the U.S. plastics industry after Mexico and Brazil. These countries, based on the total dollar value of U.S. exports shipped, are Colombia, Argentina, Peru, Chile, Costa Rica, the Dominican Republic, Venezuela, Ecuador, Guatemala and Honduras.
Central and South America
Central and South America were barely affected by the global financial crisis of 2008-2009. However, after a sustained period of very strong growth, the region is experiencing a moderate economic slowdown, which could become persistent if local governments do not take policy action to increase the growth capacity of their respective economies. Slower growth could result in severe consequences for the countries in the region.
Over the past decade, there was substantial reduction in poverty along with some lessening of economic inequality in Central and South America. In part, these developments have contributed to the emergence of a middle class, posing a challenge to policy makers as this group demands access to efficient and high-quality public services. In addition, this middle class is calling for more and better jobs, and for the introduction of policies to improve productivity.
Although more citizens in the region will be demanding these things from their governments, there will likely be fewer new jobs, smaller pay raises and less budgetary discretion with which to provide more and improved public services and goods.
At this time, the Central and South American region is confronting an international context shaped by lower external demand and more uncertainty surrounding external financial conditions. This is a result of normalization of U.S. monetary policy or an anticipated tapering of the Federal Reserve’s quantitative easing program.
The global economy has entered a period of slower growth. Although it will gradually improve, it is not expected to return to pre-crisis levels. Between 2003 and 2007, the world economy grew by an average of 4.8 percent a year. Today, the International Monetary Fund anticipates an average growth rate of no more than 4.1 percent a year for the next five years. Growth in Central and South America also has suffered from this global slowdown, since economic activity in the region is strongly tied to global business and financial cycles.
Ultimately, economic growth in the region should still fare well compared to previous decades, but the aforementioned global scenario will affect development in Central and South America with a decrease in the volume of foreign trade, a fall in commodity prices and a normalization of financial conditions for obtaining credit.
Ease of Doing Business
The World Bank has developed an index that ranks 189 economies on their ease of doing business. A high ranking on this Ease of Doing Business Index means the regulatory environment is more conducive to the start and operation of a local firm. The index averages the country’s percentile rankings on 10 equally weighted topics, made up of a variety of indicators. Countries are also ranked in each topic.
Although it is not specific to the plastics industry or exclusively regulatory in focus, this index provides an excellent benchmarking tool to assess a country’s general business climate/environment over time and in comparison to other export markets.
The chart below compares the overall Ease of Doing Business rankings and individual indicators for the 10 focus countries. The following findings reflect reforms implemented from June 2012 to June 2013 that affect all sets of indicators among seven of the 10 focus countries that underwent notable changes from last year’s report to the current one.