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Needlepunched nonwovens in Latin America.

In the past two years, the needlepunched nonwovens industry throughout Latin America has continued to evolve and expand. More than five new firms have begun manufacturing and many have enhanced their production capabilities.

One of the "hottest" areas has been the synthetic leather industry. Brazil, Mexico and Colombia have always been noted for shoe manufacturing and needlepunched shoe felts were an important part of this. Most of the basic components, the toe-box, heel and sole pads, were produced domestically, while more difficult products, such as the exterior artificial leathers, were imported from the Far East and Europe. Currently, however, at least five firms have begun to investigate manufacturing these types of items. Latin America as a whole still imports more than 30% of the shoes sold in this region.

Volkswagen of Germany brought good news to Brazil and Mexico earlier this year when it announced it was planning to produce all the cars for North and South America in these two countries. This would mean major expansion of current facilities, as well as the addition of the mid-size range of automobiles. The net result would mean a dramatic increase in automotive production within these two countries. Brazil already anticipates 1,000,000 cars and light trucks will be produced this year, up 230,000 from 1992 figures.

In addition, Volkswagen brought good news to the needleloom manufacturers, announcing that all Volkswagens would be made with random velour interiors. There are currently at least six random velour machines in Latin America with two more to be delivered by year end.

The final piece of good news from both Fiat and Volkswagen is the expansion of their "budget" sub-compact automobiles. The Fiat Uno is currently the best selling car in South America priced at $7000 and Fiat anticipates doubling its sales of this style over the next four years. Volkswagen is combating this with the reintroduction of the "beetle." These had previously only been manufactured in Mexico, but last spring, Volkswagen began making them in Brazil. From these two manufacturing plants in Latin America, VW hopes to sell this car throughout the Americas, including in the U.S.

All of this information, combined with the competitive reaction of the balance of the automotive producers, will result in an increased demand for needlepunched products and expansion of an already growing market.

The filtration and geotextile industries are not growing at the rates initially anticipated by industry experts. In spite of the large amount of investment in the infrastructure throughout Latin America, the specified geotextile products seem not to have been included. One producer in Brazil noted that the "industry standards" set by Europe and the U.S. are not the same in Latin America. Whether or not this is true, the geotextile industry has not equaled the growth rate of the U.S. in most Latin American countries and is virtually non-existent in others.

The filtration industry is also somewhat stagnant, with most filtration products coming in the form of finished product from the U.S. and Europe. However, it is widely believed that as increasing pressure is applied to these countries to curb their pollution, coupled with the manufacturing of finished filtration products moving to this area. the filtration market will grow.

The main needlepunched products of this region are still blankets, furniture and mattress padding. These products will continue to hold a large percentage of the overall market due to the high cost in shipping finished product from the U.S., Europe or the Far East. While these can be characterized as non-technical products, manufacturers have invested considerable time and money in making quality improvements and reducing product cost.

Free Trade And Its Impact

The impact of the free trade zones recently set up in Latin America are already being felt. In addition to these agreements, Chinese imports of garments and shoes have had a large effect on the domestic production. In fact, Mexico recently put a 10,000% tariff on all textile goods manufactured in China. Argentina, with its recent across-the-board reduction in tariffs, has been bombarded as well.

The Andean Pact, which included Colombia, Bolivia, Ecuador, Venezuela and Peru, is thus far is having a positive effect on each of these countries. Two new needlepunch firms in Ecuador and one in Bolivia have been established. Needlepunchers in Venezuela, although doing much better, are experiencing two problems at this time. First, the banks are offering 60% interest per year in a standard savings account. Factoring in devaluation, the yield is still approximately 28% per year. Thus the motivation for capital investment and business expansion is minimal. Second, 1993 is an election year and in most Latin American countries this tends to put a "drag" on the economy due to the uncertainty of which party will come to power and what effect that will have on business.

The Mercosur agreement is also nearing ratification, but the results have not been favorable for all those involved. Brazil, with its inexpensive labor and abundance of raw material, has quickly moved to the forefront and many of the larger Brazilian firms have been exporting or setting up operations in Uruguay and Argentina. The largest manufacturer of needlepunched blankets in Argentina has stated that he can buy a finished blanket from Brazil, F.O.B. Buenos Aires, cheaper than what his raw materials cost to produce the same product. Paraguay has also seen some growth due to very low raw material and labor costs, coupled with government and outside investment.

The Mexican economy has been stagnant for about one year, due to tight governmental controls on monetary devaluation, inflation and the rising uncertainty of NAFTA ratification. Most capital investment is at an all time low as stated earlier. Many high tariffs, especially against Far Eastern products, have been re-implemented. While most needlepunch manufacturers remain optimistic, it is apparent that they will no longer have a protected market and will be forced to compete in the global market for some time to come. The end result will be a considerably higher quality product coming out of Mexico at a much more affordable price.

Generally, labor is not a high portion of needlepunched fabric cost and therefore NAFTA will not immediately provide them an instant increased market. In fact, quite the opposite may occur, with high quality materials made in modernized U.S. and Canadian firms possibly invading Mexico. Therefore, most Mexican firms, in spite of difficult economic times, are still preparing themselves for future industry demands and requirements. This is being done through programs like ISO 9000 and with equipment enhancement rather than capital expenditure.

Latin American needlepunch manufacturers are alive and well and will continue to grow. This region represents the youngest average age of its populus and as economies continue to stabilize, the future can and will hold enormous possibilities.

Barry Roberts is vice president-international sales at Foster Needle, Manitowoc, WI, a manufacturer of felting needles for the needlepunched nonwovens industry. Mr. Roberts has traveled extensively in the Latin American market and was instrumental in Foster Needle receiving the "E" award for export excellence in 1991.
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Author:Roberts, Barry
Publication:Nonwovens Industry
Date:Nov 1, 1993
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