“It will not be a quick process and requires serious investment, but we are trying to find a way to have more gas at a better price and to produce more local feedstock.”
What role does ABIQUIM play in Brazil’s chemical industry?
ABIQUIM represents local manufacturers of chemical products in Brazil and deals with issues such as the coordination of Responsible Care®, quality of products, environment and safety, free trade agreements, tariff negotiations, statistics and product advocacy. There are 160 member companies, and ABIQUIM also includes transporters and distributors of chemical products that are committed to the Responsible Care® program.
A recent ABIQUIM report stated the deficit in the trade balance of chemicals reached a record high of US$4.9 billion in the first months of 2019. What are the reasons behind this?
We have a lack of raw materials at an internationally competitive price. The problem is that one has influences from labor law and fiscal law. What is happening with increasing frequency is that imported products are marketed in Brazil. Nowadays 37% of the Brazilian market is being usurped by imported products. Brazil already has oil and gas and vast pre-salt reserves, and we are talking to the government about the possibility of bringing shale gas from Argentina’s Vaca Muerta. It will not be a quick process and requires serious investment, but we are trying to find a way to have more gas at a better price and to produce more local feedstock.
What is the aim of A Different Future is Possible, the report ABIQUIM put together with Deloitte?
A Different Future is Possible offers perspectives for the chemical industry in Brazil. Proposals are presented that aim at removing the obstacles preventing investments and providing the chemical industry with the conditions necessary to help Brazil and the Brazilian people. The report details the current bottlenecks, such as lack of competitiveness, high cost of raw materials, electricity and logistics, as well as bureaucracy. The vast opportunities Brazil offers, such as size of the economy, oil and gas reserves, energy from renewable sources and the topic of Chemicals 4.0 are also covered. 70% of the logistics proposals put forward from the Strategic Agenda of Logistics by ABIQUIM to the new government have been well accepted.
What can be done to deal with the logistical challenges in Latin America?
Neither the Brazilian government nor the Argentinian government has the money to improve the logistics significantly within their countries. The only other option is privatization, but to do that a legal framework that foreign investors can rely on should be in place, which is another issue Brazil needs to solve.
Have you noticed a difference when working with the new government in comparison with previous governments?
Michel Temer was in power for only two years before he was charged with corruption, but what he achieved was impressive – labor and political reform and fiscal change. The new government has the responsibility to change what is wrong in the country. It will be beneficial if the current government follows what was good in the previous government.
People expect the new regime to be economically liberal and to introduce more privatization and economic freedom. Recently, ABIQUIM and 10 other associations met with the government and were told that within two weeks they would put a package into practice that will be revolutionary for the economy of Brazil. They did not divulge the details of this package, but mentioned the gas price, which is three or four times more expensive than in the United States and Europe, needs to change. Paulo Guedes, The Minister of Economic Affairs, said that our agenda is aligned with the agenda of the government.
How critical is investment in innovation for the development of Brazil’s chemical industry?
Brazil has built a good infrastructure for innovation such as Embrapii – Brazilian Company for Research and Innovation, and the Senai Institutes of Technology. There are six Senai Institutes of Technology that are dedicated to chemistry in Brazil, and in the next 10 to 50 years the results stemming from increased research and development will be evident. Currently the chemical segment is the second largest segment for technology investment in Brazil. The first one is the oil and gas industry, as the Brazilian government puts 1% of the revenue from oil and gas back into R&D. They do not have many projects, but there is a lot of money available. If they do not choose a project, the money reverts back to the government. It would make more sense for the authorities to put this extra money into petrochemical projects.
What priorities would ABIQUIM like to see addressed in the coming years?
From an economic standpoint for Brazil, the priority for the government should be the implementation of the pension reforms. Regarding ABIQUIM’s proposed reforms in A Different Future is Possible, the first priority is to use the Federal Government’s oil and gas as raw material and energetic input in order to promote the industrial chain through structuring auctions. Secondly, the implementation of logistics suggestions is important. Thirdly, we have worked hard with government to prepare a law for the regulation of chemical substances. We are in discussion with the vice-president of congress in an effort to get this project through parliament as soon as possible. The Brazilian chemical industry wants to show the world that the chemical segment can promote sustainable development.