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Lack of investments hindering development of the Brazil chemicals industry

Press release   •   Apr 19, 2013 12:33 BST

The Brazil chemicals industry formally began in the early 1990s with the launch of the Plano Real, which stabilized the Brazilian economy and set the country on course for solid and sustainable growth. Currently the industry is dominated by foreign imports, which accounted for around $25.9 billion of the sector's valuation in 2011. Imports into the Brazilian market rose by 27.9% in 2011 from the previous year, while local production declined by 3%.

The Brazilian economy as a whole has seen comparisons with China in recent years, due to the rapid growth of many sectors. The country is now considered one of the key growth economies in the developing world, and is commonly referred along with Russia, India and China as the BRIC countries. Despite the fast developing nature of the Brazilian economy, industrial investments in the country have not been at the level that would be expected.

The level of investment in projects in the Brazil chemicals industry is expected to reach $22 billion between 2010 and 2016. Analysts suggest that there is a potential of up to $167 billion of investment between 2010 and 2020.

There are a number of key reasons behind this lack of investment in the industry. The main factor is the expensive nature of raw materials. Gas costs reach almost four times what is on the American market, with energy costs around double the price in the US. High interest rates and tax burdens such as taxation on investments in machines and equipment have also played a part in driving down interest in investment in the Brazil chemicals industry.

Despite this, there are now signs that the government is considering relaxing some of the negative factors surrounding investments in projects. This would see increased investment in the chemicals industry in Brazil, and help grow the market even further.

The discovery of large amounts of petroleum and gas reserves near Brazil, including the Lua oil field in 2006, have given rise to the hope that chemical companies installed in Brazil may be able to purchase raw materials at competitive prices, which is a key characteristic of all major chemical developing nations in the world.

For more information on the Brazil chemicals industry, see the latest market research: Brazil chemicals industry

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