2015-05-27-Bain-Study_of_the_Potential_for_Diversification_of_the_Brazilian_Chemical_Industry_56页_1mb

Summary of the Study on the Potential for Diversification of the Brazilian Chemical Industry

Core Content

This report, conducted by Bain & Company in collaboration with Gas Energy, analyzes the potential for diversification of the Brazilian chemical industry, with a focus on increasing competitiveness and reducing the trade deficit. The study is supported by the Fund for Project Structuring (FEP) from BNDES and aims to identify and evaluate investment opportunities in segments of the chemical industry that can be developed with local and global relevance.

The Brazilian chemical industry experienced significant growth between 2000 and 2011, reaching US$153 billion in revenue in 2012. However, the trade deficit increased sharply from US$6 billion to US$28 billion between 2000 and 2012, driven by the mismatch between domestic production and consumption, and the higher value-added of imported products.

The study identifies 66 segments of the chemical industry, classifying them into primary, secondary, and tertiary focus based on Brazil's competitive potential. Of these, 21 primary focus segments account for US$8.9 billion of the trade deficit in 2012, representing 72% of the total deficit within the study's scope. These segments are characterized by high import growth (10% per year between 2008 and 2012) and higher value-added per unit weight compared to other segments.

Main Viewpoints

• Local Market Attractiveness: Segments like cosmetics and personal care, agrochemicals, food additives for animals, and chemicals for E&P have strong domestic demand and are attractive for investment due to their global relevance.
• Competitive Raw Materials: Segments such as aromas, flavors, and fragrances, cellulose derivatives, food additives for humans, and silicon derivatives benefit from competitive and available local raw materials.
• Potential Competitive Raw Materials: Surfactants, butadiene and isoprene derivatives, aromatic derivatives, polyurethanes (PU), lubricants, carbon fiber (CF), specialty polyamides, high-tenacity polyester, and oleochemicals have the potential to become competitive with the right investments and policies.
• Competitive Raw Materials with Emerging Technology: The segment of chemicals from renewable sources presents opportunities for innovation and the development of sustainable chemical products.

Key Investment Opportunities

The study highlights the following segments as having the greatest potential for diversification and value creation:

• Cosmetics and personal care
• Agrochemicals
• Food additives for animals
• Chemicals for E&P
• Aromas, flavors and fragrances
• Cellulose derivatives
• Food additives for humans
• Silicon derivatives
• Surfactants
• Butadiene and isoprene derivatives
• Aromatic derivatives
• Polyurethanes and their intermediates
• Lubricants
• Carbon fiber
• Specialty polyamides
• High-tenacity polyester
• Oleochemicals
• Chemicals from renewable sources

Investment opportunities in these segments could reach between US$33 billion and US$47 billion between 2015 and 2030. If realized, these investments could reduce the trade deficit by US$22 billion to US$38 billion annually by 2030 and create up to 19,000 new jobs.

Policy Recommendations

To realize these opportunities, the report proposes several public policy initiatives:

• Petrochemical Raw Material Utilization: Allocate part of the Brazilian pre-salt hydrocarbons to long-term, productive, and internationally competitive chemical investments. Import duties on these chemicals should be reviewed to enhance competitiveness in downstream chains.
• Regulatory Improvements: Streamline registration and approval processes for chemical products, especially in the agrochemicals segment, to improve local production and reduce trade deficit. Enhance access to biodiversity to support research and development of bio-based chemical solutions.
• Biomass-Based Chemical Production: Leverage Brazil's agricultural productivity and biodiversity to invest in the local production of chemicals derived from biomass, such as sugarcane derivatives. This includes the construction of biorefineries near existing ethanol infrastructure and in new agricultural frontiers.
• Logistics Infrastructure Development: Improve transportation networks (railways, roads, maritime) to support local chemical commodity chains. Propose projects to connect rail networks to petrochemical complexes, enhance access to the Port of Santos, and improve port conditions and shipping regulations.
• Technological Innovation: Increase R&D investment in the primary focus segments and in biomass-based chemicals. Develop a knowledge platform that integrates government, private sector, and research institutions to monitor and improve R&D initiatives.
• Tax Simplification: Implement tax policies that ensure competitiveness in three dimensions: cost competitiveness, reduced investment costs, and tax equality between domestic and imported products.

2030 Vision

The study outlines a vision for the Brazilian chemical industry in 2030, emphasizing the potential for increased value-added production, reduced trade deficit, and job creation. It also highlights the importance of aligning public policy with private sector interests to ensure the successful implementation of these initiatives.

Conclusion

The transformation of the proposed public policies into a government plan is essential for the realization of the investment opportunities identified. This requires collaboration between government entities and the private sector, including industry associations, to ensure the effective development and implementation of these strategies.