Notes From A Latin American Meeting
Apr07

Notes From A Latin American Meeting

Back on March 25, I attended the Petrochemical Networking Meeting in Houston, put on by the Latin American focused chemical consulting groups Intellichem and Maxiquim. It attracts many of the Latin American executives that are in the state for the CMAI conference and NPRA. I picked up a few bits of information from the presentations: 1) Otávio Carvalho, managing director of MaxiQuim, gave a talk on the Brazilian economy. He pointed out that since 2004, Brazilian unemployment dropped from about 13% down to about 6%. “In the future, it will be difficult to find people to work in your companies,” he said. In addition, 30 million people exited poverty and entered the middle class over the last five years. Who would have thought a decade ago that Brazil would have made such a transition by now? 2) Javier Constante, commercial director of performance plastics in Latin America for Dow Chemical, spoke at the gathering. For the first couple of slides, I was worried that I would suffer through a run of the mill marketing oriented talk. I was wrong. It turned out that Javier is a very bright thinker on the very nature of technology. “Do we ever ask ourselves what is wrong with the computer that is sitting in front of you or the packaging that you are using? When you ask yourself these kinds of questions, then you can begin innovating.” So True. Remember how normal life seemed in the 80s? 3) Constante also noted in the Q&A session that Dow was going to move forward with its plan to build a polyethylene plant in Brazil using ethylene derived from ethanol. The plant, he said, would have 350,000 metric tons per year of LLDPE capacity based on Dow’s solution process. It would start up in 2014. “In the coming weeks, we’ll have some kind of announcement,” he said. He also noted that Dow is in discussions with a new feedstock partner for the plant. (This project languished because its first partner—Crystalsev—dropped out.) This coming announcement, I would think, will be a new agreement with a new partner. 4) Rui Chammas, executive five president for Braskem’s polymers division, gave an update on Braskem’s project with Pequiven in Venezuela. He said the ethylene/polyethylene project is “on hold”, noting that Braskem is still in discussions with the Venezuelan government on raw materials. He said that the polypropylene project is “more advanced” though there are still talks around location, etc. I think that Rui was just too diplomatic to pronounce the projects dead in front of a room full of people. Venezuela, as a country, is showing very little upside...

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Who Would Invest In Venezuela?
Oct18

Who Would Invest In Venezuela?

I have a funny feeling that somewhere a Koch family funded printing press is churning out a Spanish translation of A Business Man Looks At Communism. The Marxist president of Venezuela, Hugo Chavez, has “authorized the expropriation” of FertiNitro, a urea fertilizer firm owned by Koch (35%), Italy’s Eni (20%), and Pequiven (25%), the state-owned chemical company. The company, according Fitch Ratings, makes about 4,400 metric tons of urea every day. Its plant is in Jose and is downstream from a natural gas processing plant run by Venezuela’s state oil firm PDVSA. The government is also nationalizing Venoco, a local automotive lubricants firm, which also gets feedstocks from PDVSA. One commenter on Chavez blog, José Hernandez, wrote “Excellent decision, president; to release the mother country from the yoke of Capitalism; to assure strategic zones for the nation, means of production for the town; to do justice.” Oh, you are just sucking up, José. To be fair, nationalization doesn’t necessarily mean that Chavez will steal these assets. As this Reuters Factbox points out, there have been many nationalizations in Venezuela in recent years. Some companies have been “fairly” compensated, whatever that really implies, and others are seeking arbitration. Nationalization does mean that the companies are being forced into a negotiation process with the Venezuelan government that has to conclude in a sale to the Venezuelan government. And, incidentally, this Venezuelan government supplies feedstocks to these companies. Is that a negotiation that is likely to result in the same sort of deal that Koch or Venoco would get selling to a private company? No, definitely not. And what is the point of Venezuela doing such a thing? Whatever capital Koch and Eni get from the government will most certainly flee the country at the first opportunity. If fertilizers are set below market prices, there will be shortages that could disrupt Venezuela’s agricultural output and its food supply. If Venezuela continues selling the fertilizers at market prices, the government will likely use the profits to fund government coffers, not reinvest in the company. This spells long term shortages. What’s the point? Punishing “capitalists” only? A chemical company would have to be insane to invest in an environment this arbitrary. That said, some companies have been doing just that. In August, METOR, a methanol joint venture between Mitsubishi Gas Chemical, Mitsubishi Corp., and Pequiven, completed a $136 million expansion that more than doubled production capacity at its Jose complex to 1.6 million metric tons. Braskem and Pequiven are planning $3.5 billion in petrochemical projects together. Granted, these have been scaled down. Original plans called for a propane dehydrogenation plant to be built in...

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