Weak peso causing some concern amidst growth in Mexico

Mexico City — A 25-percent drop in the value of the Mexican peso against the US dollar since the start of the year is causing concern within Mexico’s polymer industry.

Raw materials are a key concern. Industry consultant Rafael Blanco said 20 Aug that 60 percent of the polymers processed in Mexico are imported.

For the time being, resin distributors in Mexico appear to be absorbing higher costs and say they have not raised prices to their customers.

“I compare this situation to the crisis of 2008,” Ángel Oria Varela, owner of Polymat SA de CV, one of Mexico’s largest importers, said in another interview. “It’s very difficult because most of the imports are selling in pesos and we have to take into account the exchange rate when paying our suppliers.”

Polymat, standing for Polimeros y Materiales Primas Internacionales SA de CV, of Mexico City, buys and distributes polyethylene, polypropylene, masterbatch, polystyrene and engineering plastics.

“We buy though national distributors and the devaluation has affected us and we will have to increase our prices soon,” said José Carlos Niebla of Mexico City-based profile and strap manufacturer Cintas Plásticas SA de CV, which processes PVC and PE.

Alfonso García Díaz, managing director of Bamberger Polymers de México SA de CV, also of Mexico City, was less worried.

“We have a very healthy customer base. We have 1,000 customers. Right now, in our case, fewer than 2 percent of them are having problems. But I know that some clients are slowing down with their payments.”

He expects Bamberger’s business to grow 5 percent this year, an increase that tracks growth in Mexico’s plastics processing sector.

Bamberger’s clients, he said, are small and medium end users. “The highest-risk clients are the big ones that have big credit lines in dollars.” And he said that “there’s a lot of price volatility.”

He believes that “this situation will last at least until the end of the year. I’m worried also about the price of oil, not only about the peso’s weakness, and about any new problem brought about by political changes,” a reference to the government’s program of reforms currently underway. “The government does not know how to react to this situation,” he said.

Francisco de Caso, president of industry association Anipac (Asociacion Nacional de Industrias del Plástico AC), said 60 percent of the processors operating in Mexico are micro businesses.

“Since 1975 we have had several devaluations and adjustments have to be made in the medium term. We will have to wait two or three months for the situation to stabilize.”

Caso and others were interviewed at a Mexico City forum on plastics raw materials, organized by Anipac.