Printer Friendly

Needlepunching in Latin America.

a market with great potential, but many obstacles to overcome; the Latin American market has many players in developing nonwovens markets

To understand the Latin America nonwoven needlepunching market it is important to first understand a little about the area. Latin America includes all of South America, Central America and Mexico. The cultures vary dramatically throughout the area, from the predominant Indian influence of Mexico to the heavy European influence of Argentina. The area has about 410 million inhabitants or about 1.5 times as many as the U.S. and Canada combined. Some projections put populations at double the U.S./Canada, or 650 million by the year 2025. Latin America now has more than 20 cities with populations of greater than two million, four of them being among the ten most populated in the world.

A majority of the populations--88%--are literate and the educational systems are expanding at an astounding rate. In Uruguay the national average completing secondary learning (high school) is the highest in the Americas.

Although Latin America has long been thought of as an area of poverty, unstable economies and political upheaval, the 1970's and 1980's have brought about rapid industrialization throughout the area, causing different dramatic effects on each nation.

One thing that nearly all of these countries did was impose trade restrictions on imports in order to protect their growing domestic industries. What was done initially as a protectionist measure turned into a nightmare. As each of these countries progressed through their industrial revolutions at warp speed, a tremendous population of people with spendable income was created. For the first time, these people who never had money were now buying goods. With the protected markets there was no competition to keep prices down or quality high. The consumers demanded imports.

This protectionism proved to be a double edged sword in many ways as well. Many companies had to import raw materials, thus having to pay costly import duties. The result was a low profit margin and no money for development or growth. Import duties in neighboring countries also hampered exports to those potential markets.

Many of the governments tried to subsidize these import duties in an effort to expand exports, but mounting national debts, corruption and a general inexperience in business caused most of these efforts to be futile. In addition, the high taxation levied against the industries (in a trade off for protectionism) forced most companies to bank outside of the country, and to try to show huge losses within their company. Many of these nations also had government-owned industries, which further limited growth and reduced taxable income. Led by Chile and Colombia in the 1980's, the protectionist tariffs began disappearing. This has caused various effects throughout Latin America.

Due to a vast supply of raw materials and inexpensive labor, Brazil has moved into the economic forefront in South America. In 1989 Brazil had the eighth largest economy in the world and is currently still in the top 20. However, during the past three years the inflation rate has averaged about 10,000% per year and the country has been forced to issue new currency twice, the result of astronomical devaluation.

Argentina, by far the most developed nation in Latin America in the 1950's and 1960's, has watched its foothold in the region collapse as many of its neighbors industrialized beyond Argentina's base while at the same time it failed to modernize its production capabilities. Argentina's currency, the austral, exchanged at .94 australes to the dollar in 1986. Now the exchange rate is 10,000 australes to the dollar.

Conversely, Mexico has opened the "international business doors" and under the presidency of Carlos Salinas has held inflation to an all time low, about 15% annually. The devaluation of the peso was less than 8% last year, compared to 100% in 1987.

Chile and Colombia have remained fairly strong through the past four years. Chile has had the model economy since 1985, when it opened its doors to limited free trade throughout the world. This has brought in high technology in exchange for fruits and vegetables. Colombia was experiencing strong competition from Brazil and Central America in its world renowned coffee market. In an effort to diversify the economy the trade barriers were lifted and today its national debt per capita is the lowest in North, Central or South America.

For all of these countries "Free Trade" has been and will continue to be a difficult process to adapt to, primarily due to the bad habits created by the previously closed economies. Obviously, when competition is not a factor, then quality, efficiency and cost are not either.

The Needlepunching Industry In Latin America

There are more than 160 needlepunching companies in Latin America, not including the half dozen or so in the Caribbean. The variety of processes and products are as diverse as the people. There are companies needling continuous filament spunbonds, using random velour and other structuring machines, needling ceramic and glass fibers, as well as using a variety of other types of modern web forming, impregnation, calendering and finishing technology.

Below are ten South American countries with their top three products with total output dedicated to that product:

Argentina: wipes (40%); blankets (25%); automotive (20%).

Brazil: blankets (35%); carpets (25%), automotive (20%).

Chile: paddings (40%); blankets (35%); carpet (15%).

Colombia: blankets (45%); paddings (20%); apparel (15%).

Ecuador: blankets (60%); paddings (25%); carpet (10%).

Guatemala: blankets (80%); paddings (20%).

Mexico: paddings (30%); automotive (25%); carpet (20%).

Peru: blankets (60%); paddings (30%); carpet (10%).

Major Fibers Used

Due to the abundance of natural fibers in the area, such as sisal, jute, tampico, tequila and animal hair, the production of insulator pads has been a major portion of the needlepunching industry throughout Latin America. There are many uses for padding and waddings produced from natural fibers. The majority are used in the furniture and mattress industry; certain automotive applications are other outlets for needlepunched products made from natural fibers.

The greatest percentage of needlepunched products in Latin America, however, are made with regenerated fibers, more commonly known as waste fiber or shoddy. Many of the large textile firms have shoddy lines on their location to utilize their own garment clippings internally. However, the majority of shoddy needlepunchers utilize waste fabrics or fibers from other firms.

In terms of markets, the automotive industry is utilizing more yardage of shoddy every year from Mexico, Brazil, Argentina, Venezuela and Colombia. Insulator pads, in mattress and furniture industries, are also a very large market, especially in countries such as Argentina, Bolivia, Paraguay and Chile where there is a limited supply of natural fibers. In Argentina, where paper towels and paper wipes are nonexistent, a shoddy needlepunched product is widely used as a wiping cloth. In fact, more than half of the needlepunching factories in Argentina manufacture this product.

Another expanding market is carpet underlay. Although initially thought of as a "luxury item" for Latin America, this product shows signs of substantial growth in the upcoming years.

Following is a profile of various Latin American markets and their potential.

Blankets. Nearly every country in Latin America has at least one company making blankets. The raw material may range from waste fibers to polyesters to acrylic/acrylic/nylon blend. A majority of the products are napped, a process that loosens the fibers on the surface of the fabric without causing a great loss in the physical properties.

A few companies are also working with random velour machines for making blankets. A random velour loom is a needlepunched machine that punches into a bristle brush conveyor rather than a perforated bedplate. This process creates a "fuzzy" surface in which the needle hole is very difficult to find and the surface is free of linearity as caused by standard structuring looms. The random velous fabric is made by taking the preneedled base goods and pattern printing it, then putting it through a random velour machine. The look and feel of the finished product is quite similar to that of a wool blanket.

Automotive. One of the areas that represent the largest growth to needlepunched manufacturers in Latin America is the automotive industry. As Figures 1 and 2 show, the automotive industry in Latin America has grown over the past four years at a faster rate than the North American automotive industry. Mexico has doubled the number of cars produced in less than five years, with better than 60% being sold domestically, the balance for export to the U.S. and Canada.

This growth has been caused by the increase in the population with a spendable income. Projections are for continued growth. With some pending free trade legislation, these markets could potentially skyrocket.

The influences in the automotive trade in South America have been not only from North America, but also from the Far East and Europe. The result is the majority of automobiles produced contain much more needlepunched fabric than in North America. Mexico also uses a considerable amount of needlepunched material in the automobile manufacturing.

One country where the European influence is most obvious is in Argentina. Needlepunched headliners, which are very common in Europe, are widely used in this country and amount to about 300,000 sq. meters annually. The product is primarily a needlepunched three denier polyester fabric with a printed pattern laminated with a polyethylene heat sensitive film for molding.

As in North America, Mexico is also experimenting with needlepunched headliners. These will more than likely be incorporated in automobiles produced for domestic consumption.

In Brazil, Japanese influence can be seen with a high percentage (approximately 65%) of the automobiles manufactured with needlepunched floor covering. The needlepunched product is a 15-20 denier polypropylene that is preneedled, then structured, coated with a polyethylene powdered resin for laminating to the shoddy pad and molded into a finished product. Needlepunched floor covering is also used to a degree in all of the other Latin American auto products. Due to the difficulty of importing raw materials, more than 50% of the floor covering producers manufacture their own polypropylene staple.

The aftermarket floor covering products found throughout Latin America are almost entirely needlepunched. The quality of these products range from fair to good and many are marketed in the U.S. It is estimated that more than one million sq. meters per year are exported to the U.S. and Canada automotive aftermarket for use in both floor covering and also automotive dashboard covers.

Needlepunched kick panels now popular in the North American automotive markets are a growing market in Latin America, mostly in Mexico. The same holds true for package trays. These can be found in more expensive auto models in Brazil and Mexico.

The needlepunched vinyl substrate product is growing in popularity in Latin America as well. Due to the fact that the specifications for many of the GM, Ford and Chrysler products made in Mexico are generated in the U.S., it stands to reason that many of the Mexican producers are required to purchase vinyl substrate from approved North American suppliers. Recently, a few companies in Mexico have attempted to gain approval to manufacture these for consumption in the Mexican market.

Floor Covering/Carpet. Although volumes are not readily available, there are at least twice as many needlepunched floor covering producers in Latin America as there are tufters. Most commercial applications are needlepunched as are nearly all entry mats. This is primarily attributed to the low cost and the ease of manufacturing of the flat or structured type carpet compared to tufted. Brazil estimates more than 80% of the carpet produced within the country is needlepunched.

Geotextiles. The geotextile market is a relatively new one in Latin America, but with the mountainous terrains, erosion and pollution problems, geotextiles could become the single largest growth market.

Currently, Mexico, Brazil and others are spending tremendous sums of money on upgrading their infrastructure. From upgrading highways and airport runways to controlling landfills, the usage of geotextiles is definitely on the rise. The primary problem is understanding the usage of the geotextiles and the proper fabric specifications to match each application. In spite of this, many needlepunch companies are already producing both staple and continuous filament geotextiles for domestic use as well as export to other countries in Latin and North America.

Other Products. The range of other materials produced is extremely diverse. One rather interesting product is a "gold washing" material of a 30 and 70 denier blend structured into a repeating four-rib pattern and then heavily resinated. It is installed on a stair-like structure. The gold is separated from the dirt and clay by washing the mined slurry down this flight of stairs covered with the needlepunch material. The gold builds up with the ribs while sand and clay wash away.

Synthetic leather production is also on the rise, as well as markets in apparel interlining, shoulder pads, machine shock absorbers, decorative felts and scouring pads.

Future Trends In Latin America

One important area that is not present in any significant level is needlepunched filtration fabrics. Although there are companies making filtration products, the percentage of this is extremely small compared to North America. One major drawback in the industrial revolution described earlier is the serious problem of pollution, which is affecting every major city in Latin America. This problem is now attracting an increased interest in the filtration market. This area could represent one of the largest growth areas through the year 2000.

The automotive markets will continue to grow. It is projected that Mexican auto manufacturers will double capacity again in the next six years. Many other needlepunched markets could also increase dramatically pending approval of free trade agreements. With these pending agreements, it will be more financially advantageous to buy from the local trade group, rather than import from Japan, North America or Europe. Currently, countries without manufacturing or assembly look worldwide for automobiles.

Each of these "growth markets" require a degree of technical expertise, quality and specialized equipment. None of this coincides with the reputation of Latin American manufacturing. However, their reputations could not be any further from the truth. It is very surprising to learn that approximately 70 new needle looms have been sold into Latin America since 1986. The use of recent technological improvements such as bicomponent fibers, microfibers, lubrication techniques, computerized weight/speed controls and needle developments such as star blades, pinch blades, high density barb configurations and fine gauge fork needles are becoming more common. In addition, many facilities have already incorporated SPC or ISO 9000 programs and many others have targeted adoption of one of these programs in the next three years.

This recent push for quality, modernization and technology is bringing about rapid changes and opening many overseas markets previously not available to Latin America. One example is a company in Colombia that exports needlepunched products to more than 20 countries, including the U.S., Canada and three countries in Europe.

Technology is still one area where the most improvements can be made. At this time many companies are involved in open exchanges of information with North American, European and Japanese firms. Joint venture programs are also on the rise. In addition, many companies have budgeted money for technical conferences, seminars, trade shows or are bringing in consultants to assist them.

Latin American companies rely heavily on relationships with their vendors/suppliers. For those companies who cannot attend trade shows or seminars, the supplier is looked to for the latest market development, future trends and general guidance.

Latin America will continue to grow and develop. It will overcome the learning curve as it adjusts to open markets. With the ratification of the pending free trade agreements (see accompanying sidebar), the future is very positive and the expansion of the needlepunch market in Latin America will continue.

The Latin American companies are starved for real technical expertise, in both the roll good producers and end users area. Any company that can enter this market with high quality products and technical service, should be profitable with this venture in the long run.

Regional Common Markets And Free Trade Areas Emerge

Throughout Latin America, the notion of creating free trade areas and regional customs unions is becoming an increasingly popular means of fostering economic growth.

North American Free Trade Agreement (NAFTA). Perhaps the most important development of 1991 was the initiation of affirmative steps by the U.S., Canada and Mexico to consummate NAFTA. It would create one of the most attractive investment regions in the world, having a combined population of about 360 million and a gross national product of about $6 trillion. Despite criticism by environmental groups and labor advocates in the U.S. and Canada, negotiations between trade representatives of these three countries have been successful and an agreement is expected to be reached this year.

Southern Cone Common Market (MERCOSUR). Another important agreement that has not been given as much media attention is the Treaty of Asuncion. This treaty was entered into last March by Argentina, Brazil, Uruguay and Paraguay, to establish a framework for the creation of a southern cone common market by December, 1994.

Like the European Economic Community, the objective of the Treaty of Asuncion is to create a customs union (commonly referred to as Mercosur) where all the members will have unified tariffs and nontariff barriers on goods and services from non-member countries. In addition, the members are expected to adopt a unified economic policy, to the extent necessary to promote the free flow of labor, goods and services among the four countries.

By integrating their economies, the Brazilian, Argentine, Paraguayan and Uruguayan governments expect to enhance intraregional trade and create a more attractive business environment for both domestic and foreign investors. With a combined population of approximately 190 million and a total GDP of about $415 billion, the countries are likely to accomplish this objective.

The attractiveness of a southern cone common market is augmented by the possibility of a free trade zone among the Mercosur countries and the U.S. Under the "Four-Plus-One Agreement," the members of Mercosur and the U.S. have established a framework for future negotiations to eliminate all trade and non-trade barriers to free trade among the five countries. This agreement is the first the U.S. has signed with a regional bloc in the Western Hemisphere.

Revival of the Central American Common Market. Countries in the Central American region have recently renewed their commitment to create a successful common market that would operate to eliminate trade barriers within the region and to create a more competitive trade bloc. By combining their economies into a common market, the member countries would form a market with a population of 30 million and a GDP of $28 billion with which the U.S. and other nations would more readily conduct trade negotiations.

Andean Pact Free Trade Area. In what has been described as perhaps the most important agreement entered into by the Andean Pact countries in the group's 22 years of existence, the presidents of the five member countries agreed to form a free trade zone and a customs union among the member countries in December 1991. Under the agreement, effective January 1, 1992, Colombia, Bolivia and Venezuela created a free trade zone. Ecuador and Peru will join six months later. A common external tariff on goods from nonmember countries ranging from 5-20% became effective January 1992.

The presidents of the Andean Pact countries have also indicated they would like to enter into similar agreements with the Mercosur countries, Mexico and Chile.

During the course of the past year, the Latin American countries have undertaken significant steps toward the integration of their medium and small-sized markets into regional trade blocs. The governments expect to create an attractive investment environment for foreign investors by allowing the investors to sell their products to larger markets without having to establish operations in every country. As such, governments throughout Latin America have made an attempt to allow investors to avail themselves of the efficiencies associated with larger economies of scale and thus, obtain a better rate of return on investment.

Nonwovens In Mexico: A Success Story

Mauricio Menache, president of Mexican roll goods producer Milyon S.A., reflects on the struggles of starting up a nonwovens business in the Mexican market.

Odd as it may seem, it was on Mexican soil where the first seeds for the nonwovens industry in Latin America were planted, even before Mexico's deep structural changes in its economy. The changes, inspired by incumbent President Carlos Salinas De Gortari, enabled Mexico to project itself as one of the most attractive and open markets. The nonwovens industry in Mexico started with the establishment of Milyon S.A.; as far back as 1956, Milyon was hard at work becoming a pioneer in the nonwovens industry in Mexico. When borders remained closed and few searched for alternate markets, Milyon was already exporting products and technology, becoming quite competitive in both quality and price.

In a period of time characterized by accelerated industrial growth, the Third World and Latin America in particular lacked technology and know how. Merchandising and marketing were marginal functions in an environment which, because of its conservative consumption patterns, rejected innovative products. Latin markets were closed to new concepts, especially in regard to disposables. In those days no one ever got rid of anything, not knowing when it would again become available or if it would come in handy.

Considering the time, the geographical area and the market conditions, it indeed took a great deal of foresight, courage and ambition to put the nonwoven project through and make these products palatable to the Latin consumer.

By the end of 1958 and after many changes to the production structure of Milyon's equipment, the first commercial products of formed fabrics were put on the market for end uses in interlinings for the garment industry. Initially, progress was slow. With one small line of products, the company had to develop its own technology; simultaneously, given the scarce knowledge of the Mexican market regarding these materials, Milyon had to conduct a campaign to introduce its new products, test them and convince its potential clients of the advantages they would gain if they incorporated these modern materials into their industrial production.

Moreover, and in contrast to first world countries, versatility in those days was the name of the game due to a lack of massive consumption. The production capacity was far greater than the demand.

The success story of the nonwoven industry in Mexico is intimately linked to Milyon's presence in the Mexican market. Milyon acted as a catalyst for the establishment of more industries of the same kind in the country, as well as on the rest of the continent. In Mexico now and over the last decade, companies like Kimberly-Clark and Johnson & Johnson have started to produce nonwoven disposables. There is also a large operation of polypropylene spundbond with the "Reicofil" technology, four other companies producing high-loft nonwovens and a few more operations producing interlinings.

The free trade agreement that will be signed shortly between Mexico, the U.S. and Canada, making this area one of the biggest markets in the world, is viewed by the vast majority of productive sectors as a golden opportunity for increasing sales and finding new consumer markets. However, this will undoubtedly demand a higher degree of efficiency, better quality and pricing and lots of imagination.

To meet the challenges of being launched into the 21st century, Mexican industries are already being forced to develop faster and better or to succumb in the attempt. The story of the nonwovens industry in Mexico with Milyon as its main force might serve as inspiration to many companies trying to gain ground in an increasingly complex and sophisticated environment. The open door policy towards new products and techniques is part of the reason why Milyon has stayed in front in the area of nonwoven technology. Add to this a permanent search for innovative products, the anticipation of the market's needs and demands and plans for the future and Milyon will have a understanding of what it will take for industries in Mexico to survive an open and competitive economy.

Barry Roberts is international sales engineer at Foster Needle, Manitowoc, WI, a supplier of felting needles to the nonwovens industry. Since Mr. Roberts joined the company in 1990, Foster Needle has won the 1991 "E" award for Excellence in Exporting and the Wisconsin Small Business "Exporter of the Year" award.
COPYRIGHT 1992 Rodman Publications, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Special Section: The Latin American Market for Nonwovens; includes related articles on Latin American common markets, free trade areas, and nonwovens industry in Mexico
Author:Roberts, Barry
Publication:Nonwovens Industry
Date:Mar 1, 1992
Previous Article:Historic needlepunch developments.
Next Article:The nonwovens industry in Brazil.

Related Articles
The top companies in the worldwide nonwovens industry.
Needlepunched nonwovens in Latin America.
Nonwovens in Mexico: the land of opportunities.
The land of no tecidos.
Focus: the Americas.
Mead meditations.
Life In The Fast Lane.
Regional spotlight: Latin America: market characterized by a series of ups and downs.
Nonwovens: embedded in the fabric of society: defining materials that escape the public's awareness.
Emerging worldwide markets and nonwovens technologies.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters