Argentine paint recovery pinned to consumers: government programs could boost construction, and paint.

Argentina, like the U.S., is seeking to bolster its economy through renewed lending to consumers, and through expanded infrastructure projects, which will create new jobs. If new government programs succeed, the architectural segment of the paint and coatings market should revive first--thanks to both remodeling and new construction--with the industrial segment following.

"The construction sector is growing, although the economy is suffering the same way as in other countries," said Carolina Cappelloni, a spokesperson at BASF Argentina, in Buenos Aires.

Consumption of paint and coatings for construction in January was up 7.3% by volume, compared with a year earlier, according to government INDEC statistics cited by Business Trends, in March. The same report indicated that construction under permit had increased by approximately 45% by square footage in January, compared to the year-earlier figure.

This increase should be further affected by a new government lending line for home repair announced in March by President Cristina Fernandez de Kirchner, pegged at 13% interest for 20 months. Home repair is calculated to represent approximately 20% of the nation's total construction sector activity. With a population of approximately 825 million and a gross domestic product (GDP) of approximately $265 billion, Argentina is one of the most important economies in Latin America.

To better target environmentally conscious consumers, BASF introduced its low-VOC water-based Acronal Eco line in 2008. Among other leading paint companies in Argentina, Alba Fabrica de Pinturas, Esmaltes y Barnices S.A., based in Garin, also launched a waterbased enamel line in 2008, Alba Dulux. Alba was acquired by AkzoNobel in January 2008.

Another leading Argentine paint manufacturer expanding sales is Sinteplast, which increased its production capacity at a new plant in Ezeiza in late 2007 to 80 million liters, estimating its market share at 20%, which suggests a total Argentine decorative paint market of approximately 400 million liters. Among marketing campaigns, Sinteplast has sponsored sporting events like the Davis Cup in soccer, which was played against Great Britain in Buenos Aires last year.

Industrial paint and coatings consumption also should increase following the government's announcement of a $22 billion infrastructure investment program, which was projected to add over 400,000 new construction jobs through 2010.

Major infrastructure projects planned by the government include: a $3.8 billion high-speed rail network between Buenos Aires, Rosario and Cordoba; a $365 million gas pipeline project; and a $105 million upgrade of the Exolgan container facility--the country's second largest operator in Buenos Aires, as part of a $450 million port improvement.

Sales of OEM automotive paints are expected to continue to fall, while after-market paints could rise with consumer spending. Automobile sales in Argentina were down 16% to 37,000 vehicles, according to the national car dealership association Acara. Production was down even more in February at 55.7%, according to figures citing the Argentine automobile manufacturers association Adefa.

While the Argentine economy expanded by 6.24% in 2008, it is expected to grow by a mere 0.47% this year, then recover growth rate to 2.2% in 2010, according to a recent bank projection consensus calculated by LatinFocus. GDP growth in Argentina is projected by the World Bank to average five percent over the 2007-2011 period, with per capita GDP growth trailing at four percent; per capita income stood at $6,636 in 2007. At the same time, inflation is expected to slow this year to 8.13% from 8.48% last year, then warm to 9.1% in 2010, according to the same LatinFocus report.

CHARLES W. THURSTON

LATIN AMERICAN CORRESPONDENT

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