The largest economies in Latin America

Brazil and Mexico, in continuous ventilation

Industrial ventilation systems and the industry that houses them have enjoyed moderate growth in the two Latin American giants. More stable economies and trust in governments are the engines that drive it.

By Diana Agudelo

It has been said that Brazil is a country firmly established in the present and with its eyes on the future, however, this nation keeps for itself the teachings of a past with five centuries of European colonization and almost two of independence.

At the same time, optimism in Mexico, after the disruption caused by the problems in the elections, is stabilizing. Although growth has not been as expected, the surprising strength of the domestic economy, which is equivalent to two-thirds of the Gross Domestic Product, has not been significantly affected by the decline in exports.

With one of the largest workforces in the world, Brazil is now a leading economy and a force to be recognized. Production in this country has doubled since 1990. But both Mexico and Brazil participate in a globalized economy in which world policies affect the interests decided by international organizations.

When talking about the problems for the implementation of ventilation systems and the increasingly persistent incidence of the need to strengthen more environmentally friendly products, the two rules are still necessary: the Montreal and Tokyo Protocols.

But whether a country has ratified one or both treaties, this can affect both manufacturers and products established in the market. This is just one of the trends that have affected and decided the course of the ventilation industry over the past year.

On this occasion, ACR LATINOAMÉRICA, looks from the microscope at the predispositions that the two most representative economies of Latin America have had to endure, which lead from their axes, to the two sub-regions in which they exist.

Brazil's impact

The use of industrial ventilation systems has expanded with the advent of evaporative air conditioning, the same system that some companies in that country already use.

Thanks to the fact that it has a low cost of both acquisition and electrical energy, it is believed that due to the conjunctural moment in which the planet is located, (since a great transformation is taking place and people who are changing their mentality looking towards cheaper energies and that work together with nature), Novel air conditioners are a very good option to help reduce global warming and low electricity consumption.

It could be inferred that industrial ventilation systems have two growth factors in Brazil.

• New investments: expansion of companies and new constructions (shopping centers, malls, industrial buildings, commercial buildings etc ...).
• More rigorous environmental requirements: reduction of atmospheric pollution.

As for Brazil's economy, the government has in recent months helped the export sector with cheaper credit, due to the growth in the prices of the dollar against the real. This orthodox response seems to be working. Despite complaints from exporters, Brazil continues with a large south plus of exports, thanks to the growing international demand for raw materials, especially from China. The problem for Brazil is that it may fall into the position that Argentina is currently in: this country exports the raw materials to Brazil and then imports the manufactured goods from Brazil.

In this regard, Carlos F. Ehlers, General Director of OTAM Ventiladores Industriais Ltda., says that the growth in sales, in the case of depending on new investments, is subject to the economic growth of the region; and environmental requirements, "depend on the regulation of governments and environmental policies of companies, which is a very current and increasingly important issue."

As in this last year the Free Trade Agreements, the internal policies of each country, standardizations and the need for energy efficiency were the issues that most influenced the industry, how has been the behavior of the market with respect to these four topics in Latin America?

"I think free market agreements are very important, and they have a strong impact on the economy and domestic politics of countries. Inquiries from teams of foreign companies have increased in recent years. Standardization establishes a common language and makes technical communication with customers easier. Not only energy efficiency, but alternative fuels, such as ethanol, can strongly move the industry," says Ehlers.

For his part, João Henrique Schmidt dos Santos, of Climatizadores Joape maintains that "the market always follows the trends that run at the moment, both in the political and in the economic part. Companies have a lot to take advantage of especially if it is good for them, especially treaties like Mercosur, where countries will become a strong bloc and will be able to independently change technologies and resources."

The change of mentality to "bio-solutions" is another issue that is directly linked to the growth of the entire economy. Companies that are not molded and in accordance with this concept will be excluded from the world market, losing competitiveness and money.

The issue that in recent years should always be treated, is presented in the same way in this Latin American giant. Concern about China's excessive growth may affect, in some way, the growth of the ventilation industry in Brazil.

Therefore, the industry will have to take the path on a different side, that is, replace the parts used today with grafted plastic parts since this is the cheapest, informal, practical and natural way to replace the use of steel in air conditioning products.

Likewise, the fluctuation of the dollar for export/import necessary for the industrial ventilation industry, was an issue that until the end of the first semester was presented in this country.

"This is a big problem for all companies because the entire economy of a company is based on foreign sales and fluctuation of foreign currency. This generates a lot of concern for the manufacturer and the exporter. Like the Joape company, which always looks for alternatives in the foreign market itself, making purchases of imported inputs in order to balance the accounts of currency differences and also improve negotiations with its internal suppliers in goods called 'commodities', "says Schmidt dos Santos.

In reality, the only way out that the manufacturer has left is to look for exits and new opportunities outside the limits of his country expanding to other latitudes. Carlos Ehlers, of Otam, agrees, "the sale of products abroad is more difficult, because the Real has been evaluated a lot in relation to the dollar. We are looking for new opportunities and suppliers outside the country to take advantage of the good economic conditions of importation."

The market expands, and with it the companies and their strategies. Other countries in the region, such as Uruguay, Colombia, Venezuela, Bolivia, Argentina and Chile, benefit from Brazilian advances. All these are countries that are part of Mercosur, where companies like Joape can issue a certificate of origin and make exports of products with high competitiveness, because they enter the country without import tax.

Other companies barely open up the field with exports. Chile's market, for example, is one of the fastest growing in the entire region, while Brazil has the highest consumption as it is the largest economy. Central America and the Caribbean are a market dominated by Mexico and the United States.

In Brazil, the sectors that most require ventilation and air conditioning systems are leather and footwear, furniture, chemical and transformation. Outside the industrial it is also widely used in agriculture and livestock.

This is the time to make investments in products that can help in the future, especially in an environmental way, so that industries have a long and happy life. Evaporative air conditioners are the products that were created with this idea of thinking in the future. Its evolution through improvements, its improvement in design, all that was thought in the needs of people and companies. All have problems with heating and air pollution.

Mexico, always on the move

The main reason for the strength of the Central American country's domestic economy is that wages have increased and there is much more work. Mexican economists call this combination the "wage bill." In real terms as of June, it had risen 8.3%, which is more than enough to counteract the effects of a U.S. economy in frank lethargy.

In the first half of this year the number of people with constant jobs rose by up to 6.5%, while wages rose by 1.7% in real terms.

To translate this good news to the world of ventilation, Verónica Villanueva de Soler y Palau México, tells us that "fortunately, despite all the political, economic and social situation of our countries, the ventilation industry remains constant.

The greater growth has been reflected in the products, which at the specification level, are integrated into systems for commercial uses, such as shopping centers, self-service stores, recreational and hospitality. Unfortunately there is no growth in demand for equipment for use or application for medium-small industry, because it is a sector that has been very punished in recent years. "

Globalization has forced companies to be more competitive, since with the opening of free trade agreements and multinational agreements, the need for efficiency and quality in products and processes increases. Most countries in the region have become politically involved in all these border opening processes, in order to increase their exports to developed countries.

In terms of energy resources, regulations and standards aim to achieve as their main objective the use of resources efficiently; this leads us to analyze that in ventilation trends over time have changed, making equipment that can be perfected in all aspects. Until a few years ago serious companies in ventilation, thought about the search for silent equipment with great performance and aesthetics; now that has been coupled with a requirement for constant efficiency at all levels: domestic, commercial or industrial.

It could be said that the ideal current formula of a ventilation equipment in our Latin American market is: Fan = performance + aesthetics + sound level + efficiency + competitive price.

Steel speculation, associated with different economic factors, has created uncomfortable environments for the ventilation market; companies have been forced to be more competitive and efficient.

Faced with this, Villanueva agrees and states: "this situation in the materials, dramatically increased the costs of the raw material for all the manufacturers of the metalworking industry; situation that it was not possible to reflect to the customers in a notable increase in prices. That is why, in our case, thanks to this process of adaptation and search for best practices to achieve that efficiency, it was possible to overcome it".

In a general scenario, exports in Latin America have grown in the last four years, achieving a growth of 21% during 2006; this has been mainly due to the robust growth of the United States during this year and the consumption of large volumes of raw materials by Asian countries.

Unfortunately for this year the forecasts are not so flattering, due to several factors: economic slowdown in the United States, appreciation of the currency and fall in commodity prices.

In the ventilation industry, the appreciation of the currency in several countries has generated internally a decrease in export levels, on the other hand an apparent competitiveness for imports.

"In reality, for Soler & Palau it is not a determining factor, because, as with numerous transnational groups, the wide range of currencies for all subsidiaries around the world makes these small exchange rate variations imperceptible," says Verónica.

And to conclude he affirms that "I believe that the main problem, for any industry, not only ventilation, lies in the lack of seriousness of many competitors. Since at the end of this whole cycle, the most affected turns out to be the customer, because he finds in the market unreliable products, manufactured with very low manufacturing, quality and design standards. It is also very important to highlight the great work and achievements that have been achieved by various Latin American organizations, dedicated to bringing the guild together and making it more solid. With their effort, they have managed to "remove" borders and unify countries in matters of air conditioning, refrigeration and ventilation."