A different future is possible Perspectives for the chemical industry in Brazil The Brazilian Chemical Industry Deloitte provides audit, consulting, Association – Abiquim (www.abiquim. financial advisory, risk management, tax org.br) is a nonprofit entity created on and related services to public and private June 16, 1964, which gathers small, clients spanning multiple industries. medium and large-sized chemical Deloitte serves four out of five Fortune industries, as well as service providers Global 500® companies through a that work for the chemical industry in the globally connected network of member fields of logistics, transportation, waste firms in more than 150 countries bringing management and emergency response. world-class capabilities, insights, and high-quality service to address clients’ The association performs a statistical most complex business challenges. To monitoring of the industry, promotes learn more about how Deloitte’s 286,200 specific studies on products and activities professionals make an impact that of the chemical industry, monitors matters, please connect with us on changes in the laws and regulations and Facebook, LinkedIn or Twitter. In Brazil, advises member companies regarding where it has been operating since 1911, economic, technical and foreign trade Deloitte is one of the market leaders with matters. The entity also represents the its close to 5,500 professionals and industry in negotiations of national and operations all of Brazil with 12 offices. international agreements regarding chemicals. Table of contents
The shifting point for Brazil – and for the chemical industry 5 Executive summary 6 Competitive dimensions 9 Portrait of the chemical industry 11 The chemical industry’s bottlenecks 14 Opportunities for the Brazilian chemical industry 20 A leap for development 27 The two possible futures 35
3 A different future is possible | Perspectives for the chemical industry in Brazil
4 A different future is possible | Perspectives for the chemical industry in Brazil
The shifting point for Brazil – and for the chemical industry
It is undoubtedly possible to say that, in 2018, The proposals presented in this report “The proposals Brazil is going through a shifting moment in aim at removing the obstacles preventing its history. After beginning the 21st century investments and at providing the chemical presented in with its hyperinflation problem settled, we industry with the conditions necessary to were engaged in a growth cycle that resulted help Brazil and Brazilian people. In brief, the this report aim in greater development, prosperity and social initiatives comprise measures to reduce costs justice. However, in the subsequent years, the and bureaucracy, modernize production at removing growth exuberance was replaced by one of processes and insert the chemical industry in the most severe downturns in our history – in the 21st century. In this sense, it is essential to the obstacles addition to in-depth questionings regarding create conditions so that the industries can how businessmen and governments interact. innovate. This is the only way for the sector preventing We are currently living a unique moment to be included in the context of the Industry divided between the hopeful past and the 4.0. We are a sector that pervades the other investments and uncertain present. The choices we make, this sectors in our industry. We are part of the year and in the next ones, will be essential for agribusiness chain, of the automotive industry, at providing the determining what country we want to be. of the electronics segment, among many others, and we act as an important agent of chemical industry The chemical industry wishes to exercise its the convergence marking the new economic vocation as one of the major players in Brazil’s era – an economy that is more and more with the conditions development. In order to do so, it needs to digital, integrated, collaborative and, especially, resume investments, which depend on the interdependent. We proudly play our role necessary to help resolution of a series of obstacles that take of contributing with the others in order to competitiveness away from our industry. We achieve the productivity growth and gain Brazil and Brazilian need to return to our position in the internal Brazil longs for. production chain, without giving up the people.” foreign trade. Have a nice read.
Fernando Figueiredo Marcos De Marchi CEO of Abiquim Chairman of Abiquim’s Board of Directors
5 Executive summary
A sector with strong Resumption of An industry seeking participation in the investments is one of competitiveness economy the challenges to be The main obstacles weakening the faced competitiveness in the Brazilian The chemical industry is present chemical industry are the high costs in nearly all economic activities – Over the last few years, the Brazilian of raw materials (which can agriculture, automotive industry, chemical industry has been facing a represent up to 80% of the electronics industry and health care series of challenges that have caused production costs of a petrochemical sector are some examples. The production stagnation, decrease in plant) and energy (about 20%). Other companies of the sector are also investments, deficit in the balance of challenges are the excessive responsible for creating sustainable trade and closure of companies. complexity of the tax system, solutions that help protecting the According to Deloitte’s study, 73% of inefficiency of the existing planet and improving the quality of life the chemical industry executives framework and bureaucracy of the and longevity. The Brazilian chemical interviewed do not intend to make Brazilian business environment. industry is the eight largest chemical investments to increase the Over the last few years, the recession industry in the world, and it accounts production capacity in the next two was added to this list of obstacles. for 10% of the national industry Gross years – and 38% have already had to The slowdown of the economic Domestic Product (GDP) (or 2.5% of the interrupt projects for increasing the activity resulted in reduced supply of aggregate GDP) and 2 million persons, production capacity. chemicals produced in Brazil to other between direct and indirect jobs. sectors and increase in imports.
6 Solutions on the horizon Gains for the entire Chemicals 4.0 economy In order for the chemical industry to be The chemical industry’s business strengthened, recover competitiveness model is going through a revolution The results expected with the and resume growth, it is necessary that caused by the implementation of the adoption of Abiquim’s proposals the public and private sectors combine concept of Industry 4.0, and it should represent, by 2030, an accumulated efforts regarding a renovation agenda. suffer changes with the development increment of US$231.2 billion in the Abiquim translated the sector’s of digital technologies, such as industry’s GDP, an increase of concerns in a set of short, medium and advanced robotics, the Internet of US$63.6 billion in tax payment, and long-term proposals focusing on three Things, artificial intelligence and big an accumulated growth of US$53.1 points: cost reduction to increase data. Exploring properly the billion in work compensation. competitiveness, improvement of moment, the Brazilian chemical regulatory aspects to provide security industry may be able to come out of to the industry and consumers, and this revolution better prepared to increase in investments. These are compete with global players in the measures that aim at maximizing the value chains. production of wealth provided by the chemical industry to the Brazilian economy, especially considering the huge competitive potential of the sector, represented by the country’s large oil and gas natural reserves.
7 Executive summary
Scenario of the Brazilian chemical industry
Bottlenecks
Business High cost of basic High cost of Logistics costs High bureauc environment raw materials electricity raticcosts with low and lack of competitiveness long-term agreements
Opportunities
Size of the Large oil Use of energy Incentive to Sectorial Chemicals 4.0 Brazilian and gas from renewable the sustainable opportunities economy reserves sources development of other sectors
8 Competitive dimensions
Priority aspects for increasing the production, profitability and investments
1. Raw material 5. Foreign trade The competitiveness challenge in the Brazil needs to sign agreements Brazilian chemical industry starts with ensuring the competitiveness of the the high costs of raw materials essential Brazilian chemical industry, defending for chemicals production. It is necessary the national production from unfair to create conditions that make it possible trade practices. More than that, it is to reduce the costs of such inputs, necessary to promote the foreign trade, which can currently reach 80% of the integrating the industry into global and production costs in a petrochemical value chains, causing exports to be part plant. of the businessmen’s agenda.
2 . Electricity 6. Regulation For the chemical industry, electricity A regulatory framework that meets the represents 20% of the industrial costs. diversity and complexity of the chemical The Brazilian chemical industry pays industry and promotes production a higher price for electricity than its efficiency, compliance, security for peers from other countries. The end of investors and Brazil’s competitiveness in such cost discrepancy will bring great this segment. competitiveness gain to the sector.
3. Logistics Abiquim’s proposals Problems in waterways and in railroad Short-term Medium-term Long-term Total and highway networks cause increases in costs and loss of efficiency and, Raw material 5 2 1 8 therefore, are an obstacle to the Electricity industry’s productivity gain. 5 4 1 10 Logistics 4. Innovation and Chemicals 4.0 7 18 5 30 The Brazilian chemical industry needs Innovation and Chemicals 4.0 to follow the trend of using digital 9 2 1 12 technologies, such as the Internet of Comércio exterior Things, big data, artificial intelligence 4 3 - 7 and advanced robotics to increase Regulação 3 3 - 6 productivity. TOTAL 33 32 8 73
9
A different future is possible | Perspectives for the chemical industry in Brazil
Portrait of the chemical industry
The chemical industry represents 10% of the industry GDP in Brazil. However, over the last few years, a series of challenges in the business environment caused production stagnation and investment drop.
Convergence sector Wealth generation It is important to mention that worker’s The chemical industry produces inputs that The Brazilian chemical industry is the eight compensation in the chemical industry is are present in almost all consumer goods largest chemical industry in the world. In Brazil, 100% higher than the industrial average, and in all economic activities. It is possible it represents 10% of the industrial GDP (Gross according to the Brazilian Institute of to state, with no risk of making a mistake, Domestic Product of industries), which makes Geography and Statistics (IBGE). that no manufacturing sector operates it the third largest manufacturing segment in without the participation of the chemical the country. The sector is responsible for 2 Other studies show that the chemical industry. Chemicals are found in important million direct and indirect jobs. industry is the second sector that most segments, such as the automotive and civil promotes the country’s economy. This is construction. Such characteristic turns the Chemicals is an important step in adding precisely due to the high value addition, sector into a strategic segment in developed value to the industry. The technological high technology used and the fact that its and developing economies. complexity significantly increases beginning products are used in more than 90% of the on the Exploration and Production, going manufactured products. Therefore, the chemical industry is one of through refining until consumption. the most important and dynamic sectors of The divestments of the sector the Brazilian economy. In this context, the Studies show that the processing of oil and In 2012, investments in the Brazilian chemical disinvestment in the chemical production gas results in a value addition of an average industry reached a peak of US$4.8 billion. chain is harmful to Brazil and causes a series of six to eight times the original value, The number reflected the sales record of losses to the country’s economy. generating employment, collection of taxes achieved in the previous year, of US$150 and wealth. billion. The exports increased by US$15.8 billion in 2011, a 52% growth since 2009. Investments (made and scheduled) in the Brazilian chemical industry (US$ billion)
4.8
3.5
2.9 2.5 2.6 2.3 2.1 1.7
1.0 0.7 0.7 0.6 0.4 0.4 0.2
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Made Scheduled Source: Abiquim 11 A different future is possible | Perspectives for the chemical industry in Brazil
A superficial analysis of the numbers Except for duplicated lines, 893 products and development. The numbers reveal how made it seem like the chemical industry were discontinued and 447 are no longer the market responded to this scenario of was unquestionably growing. However, locally manufactured. stagnation and low investment in research despite the increase in investments and and innovation. During the period between the sales record, the sector was truly being Other factors had an impact on the 2003 and 2007, the chemical industry dissolved. Between 1990 and 2011, 289 production. Over the last few years, grew 16%, while between 2013 and 2017 companies closed or changed their field Brazil faced challenges in developing and the segment grew only 2%. In practice, it is of activity. A total of 1,710 product lines producing new products and technologies possible to say that the sector is stagnated. were discontinued during the period: 904 that could replace the ones that were between 1990 and 2000; and 806 between discontinued as a result of the end of The deficit in the balance of trade 2001 and 2011. This results in an average of their life cycle, especially in product lines progressively increased – despite the 78 lines per year. requiring great investments in research growth in exports, which reached
Production volume of the chemical industry (ratio basis 100 = 1994) 150.0 151.4 148.4 148.0 146.1 146.6 149.0 145.8 145.5 144.2 140.6 136.7 136.4 138.4 128.2 123.0 122.3 118.1 116.4 110.6 108.9 100.0 101.8 103.7
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Abiquim
“The stagnation of the chemical industry cannot continue 73% as this is a fundamental sector that supplies the entire of executives in the Brazilian processing park established in Brazil. To this day, no chemical industry do not intend to make investments to increase the country has developed without counting on a relevant production capacity in the next chemical production.” two years, according to Deloitte’s survey Marcos De Marchi, chairman of Abiquim’s Board of Directors
12 A different future is possible | Perspectives for the chemical industry in Brazil
US$14.1 billion in 2013, an 35.6% increase Chemical industry revenues (US$ billion) since 2009. The deficit, which was US$15.7 150 147.7 billion in 2009, increased to US$32.0 billion 144.3 146.9 in 2013, that is, it more than doubled in less than five years. In 2016, exports dropped 124.4 124.4 to US$12.1 billion, given the industry’s 119.6 111.9 increasing difficulty in being competitive 109.2 in both the domestic and foreign markets. 101.9 In 2017, the deficit of US$23.4 billion in the balance of trade increased once again in comparison with the previous three years. Such result reinforces the importance of resuming the economic growth, as well as strengthening the country’s internal competitiveness, making it possible to have greater participation of the national product in the consumption increment and to obtain a boost for making new productive investments.
As it was expected, revenues dropped – 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 from US$150 billion in 2011 to US$109.2 Source: Abiquim billion in 2016. It is worth mentioning that this result also reflects the effect of the floating exchange rate. Investments in R&D on the net revenue (%)
0.77 The investments drop was even more 0.74 0.73 0.68 0.66 0.66 significant: 85% between 2012 and 2015. 0.63 A Deloitte’s study1 revealed that 73% of 0.57 0.58 0.56 interviewed executives of the sector in Brazil do not intend to make investments to increase the production capacity in the next two years, while 38% were already forced to cancel or interrupt projects for increasing the production capacity. In the worst case 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 scenario, investments may drop to US$200 million in 2022. Made Scheduled Source: Abiquim
The lack of investment results in loss of relevance of the chemical industry in the Participation of the chemical industry in the GDP (%) Brazilian economy. In 2004, the sector accounted for 3.6% of the total wealth 3.6 produced in Brazil. In 2016, its participation 3.2 3 3 dropped to 2.4%. If this number still classifies 2.9 the sector as one of the most relevant 2.5 2.4 2.4 2.4 2.4 sectors to Brazilian economy, it is certain 2.3 2.3 2.3 that such decrease cannot continue. It is also important to consider the potential for wealth generation provided by the chemical industry in Brazilian economy, especially in processing wealth derived from the country’s large oil and gas reserves.
2004 2005 2006 2007 20o8 2009 2010 2011 2012 2013 2014 2015 2016
Source: Abiquim 1. Digital Chemicals Survey 2018 (Deloitte) 13 A different future is possible | Perspectives for the chemical industry in Brazil The chemical industry’s bottlenecks
Understanding the reasons that led to production decrease in the Brazilian chemical industry is essential for the recovery of the sector. Among the main factors, are:
1. Business environment with low 2. High cost of basic raw materials and According to a study of the Institute of competitiveness. Just like other sectors lack of long-term agreements. The Economic Researches, the high gas price of national production, the chemical Brazilian chemical industry pays one may take away 0.5 percentage points of industry suffers with issues related to of the highest prices in the world for the annual growth rate of Brazilian GDP by the Brazilian business environment. petroleum naphtha, a basic input for 2025, reduce the investment rate by 1.4 This can be measured by the Brazilian many products. Another challenge is percentage points and increase inflation position in the global competitiveness the terms of supply agreements for raw by 0.44 percentage points3. Even with ranking produced by the World Economic materials, which are usually short: while, the enactment of the Gas Law in 2009, Forum2: Brazil is in the 80th position, in Brazil, such agreements are effective the policy for using gas as an industrial out of 137 countries. Among the main from two to five years, in other countries raw material has not yet been regulated obstacles pointed out are the complexity agreement terms range from 20 to 30 – as it was done in other countries. Here, of the tax system, restrictive labor laws years. This situation causes uncertainty the price is close to the price charged in and regulations, high corruption rate, in investors, since it is not possible to general sales to the market, and it is much significant bureaucracy and ineffective know if there will be raw material for their higher than the price for the gas used to logistic infrastructure. One example plants. In practice, short terms discourage produce electricity. Another issue that of difficulty is the tax structure, which, long-maturity investments. Another explains the high prices of natural gas in in addition to being expensive, is very great obstacle to the competitiveness of Brazil is the monopoly of Petrobras, which confusing. This situation causes an the Brazilian industry as a whole – and is responsible for producing, importing increase in costs and risks, as it allows specifically, the chemical industry – is and distributing the input. On the other different interpretations regarding the the price of natural gas in the o preço do hand, in the United States there are events of application and collection of gás natural no País, insumo fundamental around 6,000 small companies competing undue amounts. country, an essential input for the sector. for consumers.
Naphtha price in Brazil (US$/t and €/t) 1100 2. The Global Competitiveness Report 2017- 1000 2018, World Economic Forum (www.weforum. US$/t org/reports/the-global-competitiveness- 900 €/t report-2017-2018) 800 3. Exame magazine 12/5/2012 (https://exame. abril.com. br/revista-exame/la-o-preco-do-gas- 700 cai-aqui-sobe)
600
500
400
300
200 Jan-11 Jan-15 Jan-17 Jan-12 Jan-13 Jan-16 Jan-14 Jan-10 Apr-11 July-11 Apr-15 Apr-17 Apr-12 Apr-13 Jan-09 Oct-11 July-15 Apr-16 July-17 July-12 Apr-14 July-13 Apr-10 Oct-15 July-16 Oct-17 Oct-12 July-14 Oct-13 July-10 Oct-16 Oct-14 Oct-10 Dec-17 Apr-09 July-09 Oct-09
Source: Abiquim, based on international publications
14 A different future is possible | Perspectives for the chemical industry in Brazil
Price of natural gas (US$/MBTU) 11
10 EUA 9 Brasil 3. High cost of electricity. The electrical 8 energy is a strategic input for the chemical 7 industry, as its participation in companies’ production costs may range from 20% 6 to 50%. According to a research of the 5 Institute for Strategic Development of the
4 Energy Sector (Ilumina), the escalation of the electricity price charged from the 3 industry between 2013 and 2017 was of 2 almost 80%, which resulted in many plants closing and production units migrating to 1 countries in which the electricity price is cheaper. The average electricity tariff in Jan-11 Jan-15 Jan-17 Jan-12 Jan-13 Jan-16 Jan-14 Jan-10 Apr-11 Apr-15 July-11 Apr-17 Apr-12 Apr-13 Jan-09 July-15 Apr-16 Oct-11 July-17 Apr-14 July-12 July-13 Apr-10 Oct-15 July-16 Oct-17 July-14 Oct-12 Oct-13 July-10 Oct-16 Oct-14 Oct-10 Dec-17 Apr-09 July-09 Oct-09 Brazil is between the fifth and sixth highest Sources: Gas Energy (up to Dec./2006); Monthly Natural Gas Release (Ministry of Mines and Energy – MME) and EIA (as of Jan/2007). Preparation: Abiquim tariffs in the world. In the United States, the electricity price (with taxes) is of about US$69/MWh; in Mexico, US$82/MWh; and in Canada, US$78/MWh. In Brazil, Electricity tariff for energy-intensive industries (R$/MWh and US$/MWh) the tariff is US$124/MWh (without taxes), 300 or about US$164/MWh (with taxes). This relative differential brings down the sector R$/MWh competitiveness, which still lacks a long- US$/MWh 225 term policy for assisting the industry in adding value to Brazilian natural resources.
150
75
4. Logistics costs During the last three years, the increase in logistics costs in 0 Brazil was of 7.4% – which represented an expense of R$15.5 billion for companies. Jan-11 Jan-15 Jan-17 Jan-12 Jan-13 Jan-16 Jan-14 Jan-10 Apr-11 July-11 Apr-15 Apr-17 Apr-12 Apr-13 Jan-09 Oct-11 July-15 Apr-16 July-17 July-12 Apr-14 July-13 Apr-10 Oct-15 July-16 Oct-17 Oct-12 July-14 Oct-13 July-10 Oct-16 Oct-14 Oct-10 Dec-17 Apr-09 July-09 Oct-09 Most of the costs (63.5%) are related to Source: Brazilian Electricity Regulatory Agency (Aneel). Preparion: Abiquim transportation. The costs result from a modal matrix very focused on the highway network that, on top of that, does not have good quality. Competitors’ logistics costs, whether from developed or developing countries, are lower. For the chemical industry, logistics costs represent 7% of the revenues. In Europe, for example, the chemical industry’s logistics costs are between 3.4% and 4% of the revenues, according to the study “Chemical Logistics Vision 2020”, carried out by Deloitte with the European Chemical Industry Council (Cefic).
15 A different future is possible | Perspectives for the chemical industry in Brazil
Consolidations concentrate operations in the chemical industry
The capitalist world is living a phase of fixed costs, that is, the new companies 5. High bureaucratic costs. The creation of companies that are promising are more productive and competitive. significant bureaucracy imposes many to become giants, capable of mastering Some acquisitions are “vertical”, that is, obligations to Brazilian companies, sectors not only in one field, but also in they move forward in different parts of including those from the chemical many fields. This movement results from the production chain through mergers industry. According to the Doing Business a wave of mergers and acquisitions in with former suppliers or customers. As a report, of the World Bank, Brazil is in almost every segment. According to data result, they start to dominate the entire the 125th position in a ranking with 190 from Thomson Reuters, between 2008 chain. countries that assesses the ease of doing and 2018 there were 54 thousand business. The country is next to Iran, acquisitions in the world – an average of Experts explain that these consolidations which occupies the position above it, US$49 billion in operations per year. In are a result of the increasingly and Guyana, which occupies the position the telecommunications sector, competitive environment, which leads below it. Competitors from Latin America, operations generated US$16 billion; in companies to integrate activities such as Mexico and Chile, occupy much the electronics sector, US$18.2 billion. worldwide. In this new way of operating, higher positions. The indicator in which the production is divided into different the country is worse evaluated measures The chemical industry is not different. countries, following the comparative tax payments: 184th position. A great Between 2001 and 2005, there were advantage logic – places with low costs, part of this bad reputation reflects 1,278 acquisitions around the world – an skilled labor and a healthy business the time spent to fulfill tax obligations: average of US$18 billion in operations environment. 1,958 hours – against the average of per year. Only during the last ten years, 160.7 of countries in the Organization there were 3,562 – an average of annual According to the World Investment for Economic Co-operation and US$31 billion. Report, two thirds of the global trade are Development (OECD). Deloitte’s research conducted by large transnational carried out with companies from the The impact of these operations for the companies. This forces the Brazilian 4 Brazilian chemical industry showed that Brazilian chemical industry cannot be chemical industry to be prepared for the 95% of these organizations have teams underestimated. Mergers between competition, without giving up the to monitor changes in the environmental companies are creating large corporations foreign trade, by developing strong and laws and regulations and 76% to monitor with access to new markets, new competitive industries to deal with this changes in the tax laws and regulations. technologies, gains of scale and reduced new scenario.
4. Digital Research on the Chemical Industry 2018 (Deloitte)
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A different future is possible | Perspectives for the chemical industry in Brazil
17 A different future is possible | Perspectives for the chemical industry in Brazil
The vicious cycle of the chemical drop, in its turn, makes room for increasing industry imports and decreasing profitability. High In practice, the Brazilian chemical industry is costs and uneven competition cause an in a vicious cycle, which operates as follows: increase in the industry’s idleness level and, high costs of inputs and infrastructure take therefore, impair investments and cause the the competitiveness away from the Brazilian closure of units. chemical industry. The competitiveness
The deficit in the balance of High prices of naphtha, gas, Loss of competitiveness trade increases with industrial electricity and logistics chemical imports
Decrease in profitability
Increase in Decrease in national indebtedness production
Need for investments in production maintenance Increase in production costs caused by loss of production Cost of indebtedness scale
Decrease of investments in new industrial plants and Cycle begins in R&D
Use of the installed capacity in the chemical industry (%)
87 87 87 87
83 83 82 81 81 80 80 80
78 78 77
73
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*
* Regarding the first four months of 2018
18 A different future is possible | Perspectives for the chemical industry in Brazil
Profitability and indebtedness of the chemical industry (Ratio 1990 = 100)
400
300 Indebtedness Profitability 200
100
0
-100
-200
-300
1990 1992 1994 1996 1998 2000 2002 2004 2006 2007 2008 2009 2010 2011 2012 2013 2014
How the chemical industry can increase innovation in Brazil
In 2017, Brazil occupied the 69th position in A hemical industry – and the economy as a 20 years. As comparison, in Japan these an innovation ranking with 130 countries, whole – the low profitability registered by the investments are of about 4.5%. The United created by Cornell University, in the United sector impairs investments in this front. States allocates 2.8% of its revenues to States, by Insead, in France, and by the Between 2013 and 2015, companies research, while in Europe this indicator is of World Intellectual Property Organization producing industrial use chemicals in the 1.8%. With little investment in innovation, (WIPO). In 2011, the country was in the 49th country slightly increased the percentage of breaking the vicious cycle that weakens the position. Developed countries occupy 24 investments in development researches, productivity and competitiveness of the out of the 25 first positions. China, in the from 0.63% of the net revenue to 0.8%. Brazilian chemical industry becomes an even 22th position, is the only developing country However, according to the background, this greater challenge. in this group. Chile (46th), Costa Rica (53th), level has been kept below 1% for almost Mexico (58th), Panama (63th), Colombia (65th) and Uruguay (67th) are the six Latin American countries before Brazil5. As noted, Investments in research and development – Industrial use chemicals sector Brazil is not only behind developed (% of the net revenue) countries, but it is also behind its peers in Latin America with smaller economies. 0.91
THe chemical industry plays an important 0.80 0.78 0.80 role in the promotion of advanced 0.73 0.70 0.68 0.69 solutions, which serve the productive 0.66 0,60 0.60 sector and families. The industry 0.58 0.63 0.58 contributes to Brazilian agribusiness so 0.55 0.54 0.53 that it becomes one of the most relevant 0.50 0.50 agribusiness in the world. The sector also contributes to advanced solutions in energy and environmental terms. More efficient home appliances, less pollutant vehicles and more sustainable houses depend on solutions created by the chemical industry’s technology. 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Yearbook of the Brazilian Chemical Industry, based on ABIQUIM’s direct research
5. O Globo (oglobo.globo.com/economia/brasil-fica-estagnado-em-ranking-mundial-deinovacao-21480176) 19 A different future is possible | Perspectives for the chemical industry in Brazil
Opportunities for the Brazilian chemical industry
Despite all challenges, the scenario offers several opportunities for resuming the growth and investments in the Brazilian chemical industry. The main opportunities are detailed below:
1. Size of the Brazilian economy. The 8.6% 2. Large oil and gas reserves. In 2017, 3. Use of energy from renewable drop of the GDP between 2014 nd 2016 12,835 MMbbl of Proven oil reserves (1P) sources. It is possible to make use of was strong, but the Brazilian economy still and 23,630 MMbbl of Proven, Probable renewable energy sources, such as sugar appears among the largest (it occupies and Possible (3P) oil reserves were cane, wind power and solar energy, the eighth position) and most dynamic declared. This means, respectively, a 1% among others, to stimulate the chemical economies in the world. The productive and 4% increase in comparison with 2016. industry, as a factor for reducing energy sector is one of the most diversified: Considering the production in 2017, the expenses. Brazil is the world’s largest there are industries from several sectors, proven reserve replacement ratio was producer of sugar cane, an energy source in addition to strength in services and 109%. Current proven reserves show with very competitive cost in comparison agribusiness – not to mention the size of that there are commercial projects for an with other carbohydrate sources (such the domestic market, which is operated additional exploration of about 30% in as beetroot sugar). In order to achieve by the more than 200 million Brazilians. volumes produced in Brazil by the end of the potential, it is necessary to make All these data demonstrate that the 2022. This situation enables the solution investments in the development of chemical sector will not stop growing for two challenges: adding value to the oil technologies, especially those directed to due to lack of demand. and gas industry in Brazil and reducing processing biomass. costs of raw material for the chemical industry. The oil and gas industry lives under the pressure of decreasing the use of fossil fuels, due to the development of electrical vehicles. As a result, Brazil may see the wealth in pre-salt reserves being lost at the bottom of the oceans due to lack of demand. The solution to this problem would be to increase the demand of the petrochemical sector – and the chemical industry can help adding value to pre-salt oil reserves, as the need for exporting oil, which is an activity with lower added value, would be reduced.
20 A different future is possible | Perspectives for the chemical industry in Brazil
Opportunities with biomass in Brazil
The growing concern with preservation of biodiversity like Brazil However, the good prominent crops are soybean, corn, the environment opened space, over the use depends on making production costs orange, rice, cassava, wheat and banana. last few years, for Brazil to become a cheaper: most markets do not accept All these crops can produce residues that worldwide reference in products derived paying prices higher than those paid for will be used by the chemical industry, from renewable raw materials that can traditional petrochemical products. through the processing chain of these replace the raw materials for petroleum resources, until they become the raw by-products. It may be said that no other In Brazil, the sugar cane accounts for materials necessary for the chemical country meets the conditions that stimulate 74% of the planted biomass. Other industry.
Main technologies for the transformation of biomass into raw material
1st generation of 2nd generation Oil and gas Refinery petrochemicals of petrochemicals
Gas synthesis Chemical Gasification Gas into liquid Building Blocks Biomass Crops Sugars Saccharification Fermentation
Source: Abiquim
In the current scenario, oil should The transition from petrochemical raw necessary to obtain chemicals, the continue to be the main source of raw materials to renewable sources, however, availability and storage will become materials for the chemical industry. The depends on the reduction of the cost of complex variables to be managed in the growth of renewable sources will depend such raw materials. value chain – and pointed out as critical on a greater engagement of companies for the viability of sustainable with sustainability in their processes. Due to the great amount of biomass solutions.
21 A different future is possible | Perspectives for the chemical industry in Brazil
he chemical industry invests to become more sustainable
4. Incentive to the sustainable In addition to helping other sectors volume of water abstraction per tonne development of other sectors. A recent become more sustainable, the chemical of product in ten years. In this same research6 showed that 81% of Brazilians industry invests to adopt the best period equivalent CO2 emissions find it very important to see seals ensuring practices aiming at causing less regarding the chemical industry had a the use of renewable sources in the environmental impact and less impact on reduction of almost 30%. products they buy. Around the world, 85% people’s lives. Abiquim has been of the people believe that environmental coordinating the program Atuação These results reflect the changes in the matters will become more relevant in the Responsável® for more than 25 years. The energy matrix, with the migration for the next five years. The scenario imposes program represents the chemical use of cleaner fuels, in addition to new challenges – and also opportunities industry’s commitment to sustainability investments in more efficient heating – for the chemical industry. If, on one – and being part of the program is a systems. It is not by chance that the side, there is the challenge of the sector requirement to join the association. For a Brazilian chemical industry for industrial implementing sustainable production quarter of a century in Brazil, Atuação use chemicals stands out among its standards, on the other, this is a chance Responsável® proposes and encourages global peers. According to the to show the industry’s importance as the adoption of good practices in the International Council of Chemical a creator of solutions in favor of the following areas: process security, health, Associations (ICCA), the intensity of CO2 sustainable development. Many initiatives environment, occupational safety, emissions of the Brazilian chemical of the chemical industry are related to the product management and facility industry is 51% lower than the average for Sustainable Development Goals (SDG), security. 47 countries associated to the entity. an agenda created by the United Nations (UN) that is, in the institution’s words, In the sustainability area, the Brazilian A relevant channel for CO2 emissions is a “plan of action for people, planet and chemical industry has obtained the transportation of raw materials, prosperity.” One example: production progresses in reducing the consumption inputs and final products. Part of this of inputs and chemicals that increase of electrical energy in its production problem arises from the lack of an agricultural productivity by making it processes. This is a result of investments extensive and good railroad network and possible to reduce the use of resources in systems that monitor and ration the high cost for short-sea shipping. The such as land and water, in addition to consumption through more efficient result is a great use of the highway increasing food durability, reducing waste. equipment and processes, including network for transportation by truck, a The sector believes that chemistry has internal generation of the energy more pollutant vehicle. the potential of being one of the sciences consumed or sold to other companies. that will contribute to the sustainable Indicators show that the consumption Investments in infrastructure would development in the next decades, by of electrical energy per tonne of product make it possible to change this scenario. developing solutions to create products presented a 30% reduction during According to Abiquim’s projections, and processes increasingly better, which the period from 2006 to 2016. reducing the use of cargo transportation spare the maximum of natural resources Improvements in processes also resulted by highways would possibly reduce possible and cause less and less impact in a reduction in water consumption. annual CO2 emissions by 2.14 million on the environment. There has been a 25% reduction in the metric tons.
Indicators obtained by the chemical industry between 2006 and 2016 through the Atuação Responsável® Program
41% 25% 29% 30% Reduction in waste Reduction in water Decrease in CO2 Reduction in generation (kg/t) abstraction volume emission electrical energy
(m3/t) (kg of CO2eq/t) per produced tonne (kWh/t)
6. Environment Research 2017 (Tetra Pak and Ipsos)
22 A different future is possible | Perspectives for the chemical industry in Brazil
5. Sectorial opportunities. Many industry 6. Chemicals 4.0. Based on the concept sectors are going through deep changes, of Industry 4.07, the new structure driven by several factors, such as changes of Chemicals 4.0 brings innovations in consumers’ habits, pressures for greater in important driving forces of the sustainability, technological advances chemical sector, such as the automotive, and need for greater efficiency. There are construction and packaging industries, opportunities in the following sectors: which will gradually take place. The •• Water treatment and sanitation: The new reality of the chemical industry industry can provide important chemicals is especially related to the continuous or technologies for water and sewage process of digitalization of the business treatment and means for distribution models. This new approach is related to of clean water through a reliable piping topics and concepts of circular economy, system; renewable raw materials, renewable energy, carbon use and capture, •• Plastic packages: The most modern biorefineries and bioplastics. There will packages are manufactured with chemical be a massive influence in technologies, inputs that make it possible to have productive portfolios, and structure for packages that are lighter, more resistant value generation – in addition to new and safer when handling, increasing the business models in the chemical industry, useful life and reducing waste; as well as customers and suppliers. •• Mobility: Pressures for reducing emissions Some examples of disruptive changes of pollutant gases and reducing the use of in technological processes can be found raw materials are resulting in the creation in the biotechnology and in the use of of lighter and more efficient vehicles – and renewable resources and energy. The the chemical industry has an essential role progress in the biotechnology industry in achieving these goals; will result in the increase of more efficient •• Buildings: Products of the chemical applications of biological raw materials industry are essential for the construction in chemical production processes (the of sustainable buildings, that its, buildings “biological chemistry”). Meanwhile, the that enable a rational use of water and production of chemicals from electricity, energy, for example; hydrogen and CO2 will gain importance. •• Agriculture: Development of more resistant The chemical sector shall take over a and adaptable seeds, more efficient key role of combining energy and the fertilizers and products that reduce the industrial sector, making use of offer need of using water in agriculture; peaks for renewable energy until the production of synthetic raw materials, so •• Health: The chemical industry can develop that it is able to reduce the use of fossil and provide materials that increasingly materials. An example of a fundamental reduce the risks of contamination, in change in the demand structure is the addition to lighter and more resistant growth of electrical mobility, which causes prosthetics and more efficient medicines; the decrease in the demand for many 7. Industry 4.0 was created in Germany as a strategy for resuming the industrial competitiveness lost •• Cosmetics and toiletries: Opportunities chemicals catalysts, oil and gasoline, for for using the Brazilian biodiversity in the to Asian countries that started competing with tax example, as well as oil and fuel additives. incentives and low labor costs. Since in Germany, a production of ingredients. At the same time, new business segments highly developed country, it would not be possible are opening around electrical engines, to compete based on costs – which would require an inconceivable impoverishment of the population such as technologies for recycling – the solution was investing in new technologies, batteries. Additionally, the demand for such as advanced robotics, the Internet of Things light materials should increase. and artificial intelligence.
23 A different future is possible | Perspectives for the chemical industry in Brazil
India and China: examples of industrial Main measures: 4. Uniting efforts from the public and policies •• Simplify business regulations; private sectors: Convergence of visions •• Streamline the process for closing of the government and investors. The India bankrupt companies, ensuring labor rights; role expected from the governments In 2011, the Indian govern created the is of issuer of licenses to ensure the •• Use governmental purchases to drive National Manufacturing Policy, a policy for development of businesses. certain sectors, especially infrastructure industrial development aiming at enhancing and technology; participation and increasing the added China value for manufacturing in the GDP, by •• Create institutional and financial In May 2015, the State Council of China encouraging the technological development, mechanisms to support technological launched the strategic plan Made in China, in promoting increase in competitiveness development; response to the competitiveness loss that the and generating jobs, especially for poor •• Establish policies for personnel training country’s industry was suffering as a result of persons in urban areas and for the growing and qualification, specialized for the the fierce competition from other countries. rural population migrating to big cities. The industry; If, in the previous years, one of China’s plan emerged from debates between the •• Protect exports from fees and barriers competitive advantages were the low labor government, businessmen and experts that imposed by other countries; costs, this time the objective is to provide occurred for two years and listed six goals: the country with advanced technology. •• Create the National Investment and “The Chinese processing industry is facing a 1. Increasing manufacturing growth by 12% Manufacturing Zones (NIMZs), which work serious challenge of double pressure from to 14% per annum in the medium term, as industrial cities with infrastructure, industrialized countries and other developing making it the growth engine of Indian clean energy and centers for personnel countries”, the official document of the State economy; qualification; Council highlighted. 2. Creating jobs; •• Encourage small and medium-sized 3. Providing professional qualification to companies through tax exemption and The plan was inspired by the initiative poor urban population and to rural create a fund to facilitate credit. “Industry 4.0” in Germany, with the goal of migrants; overcoming the so-called “middle income 4. Promoting the technological development In 2014, the National Manufacturing Policy trap”, when a country, after an initial and increasing national added value; was reinforced by the program Make in India. industrialization outbreak and progress in 5. Increasing competitiveness in the With the program, between January and July income, is not able to make progress and industry; 2015, the net flow of foreign investments had truly becomes a developed country. Made in a 73% increase in comparison with the same China seeks to turn the Asian country into a 6. Ensuring growth sustainability through period in the previous year, reaching US$21.5 global leader in manufacturing high-quality energy efficiency, optimization of natural billion. Make in India actions include four and high technology products. resources and recovery of ecosystems. areas: The idea is to build a production structure Some priority sectors were chosen – and it 1. Improvement of the business similar to that of Germany and Japan, is important to highlight that the chemical environment: Creation of an online countries with strong and innovative industry has a fundamental role in all of them: platform to centralize, simplify and industries, without losing the status of •• Intensive labor industries: food, textile, streamline the relationship between the “world’s factory” for low cost products to clothing, leather, footwear, jewelry and private sector and public bodies. Services other countries. The program stipulated gems; of all departments and ministries of the central government, such as applications goals to be achieved in three stages. •• Capital goods industries: heavy for industrial and environmental licenses electrical equipment, machines, heavy are centralized in the platform; 2025 Goals transportation and mining equipment; • Modernize the industrial sectors; 2. Attracting direct foreign investments: • •• Industries that are considered strategic: Reducing or extinguishing the limits •• Reinforce China’s position as a global aerospace industry, shipbuilding, to foreign participation in order to industrial hub; hardware, electronic, telecommunications attract investments in defense and •• Promote quality production and smart equipment, defense and solar energy; infrastructure; manufacturing technologies; •• Industries in which India already had 3. Creating industrial corridors and •• Improve energy and material efficiency and a competitive advantage: automobile, smart cities: Creation of industrial labor productivity; pharmaceutical and medical equipment; areas, focused on information technology, •• Put Chinese companies in the leading •• Small and medium-sized industries, high-technology electronics, automotive position in value chains of the processing which accounted for 45% of the industrial and engineering, interconnected by high, industry; production and 40% of exports; speed transportation, creating industrial •• Master key technologies in the main •• Governmental defense and energy corridors. The project includes industrial industries – and not import such entities. cities, logistics hubs and residential parks technologies. throughout these corridors;
24 A different future is possible | Perspectives for the chemical industry in Brazil
2035 Goals 7. Promotion of technological advances in and accelerated depreciation of fixed •• Elevate China to a medium-level industrial the ten elected key sectors; assets in industries and tax incentive for country; 8. Restructuring of the industries for industrial labs and technological centers. •• Increase internal innovation; improvement of efficiency and resolution •• Talent development and recruitment: •• Increase intellectual property; of overcapacity problems; Qualification of skilled labor, through the extension of study and training programs •• Achieve innovative progresses on a 9. Increase of quality in services for the abroad and by attracting external labor. worldwide scale. industry. Inclusion of courses directed to new Agenda of measures: technologies, such as the Internet of 2049 Goals •• Systematic institutional renovation: Things, 3D printing, big data, advanced •• Turn China into the world leader in the Changes in governmental functions robotics and cloud computing, in the main high-technology industrial sectors; to support the implementation of National Catalog of Courses and Specialties •• Drive innovation and maintain competitive industry strategies, plans, policies and for Vocational and Technical Training, a advantages. standards and strengthen the sector’s document that works as guideline for autoregulation; many courses. Strategic tasks: •• Equitable market and business According to the global ranking of chemical 1. Strengthening of the innovation capacity; environment: Increase in quality standards industries disclosed by Abiquim, India (6th position) and France (7th position) have 2. Promotion of the use of integrated and of industrial production, avoiding the recently surpassed Brazil, as a result of their digital production, focusing on smart manufacture and sale of defective or fake industrial policies. Brazil, which previously manufacturing technology; products; punishment for monopolies and unfair competition; was in the 6th position, currently occupies 3. Strengthening of the basic industry, the 8th one and may be surpassed by •• Policy for financial support: focused on components, processing Ireland, which reinforces the need for Modernization of the capital market, technologies, basic industrial materials implementing initiatives that bring the allowing more efficient manners for and services; Brazilian chemical industry back to a greater financing innovation; 4. Implementation of green production competitiveness level. methods; •• Fiscal policy: Tax incentives primarily focused on research and development, 5. Internationalization of Chinese including with credit for small and medium- companies; sized companies. Refund of import taxes 6. Improvement of product quality and for products used in R&D, exemption from building of world Chinese brands; value-added taxes for technology transfer
France investments in innovation
Just like Brazil, France saw its industry of workers’ competences and skills this phase, actions were gathered in nine shrink over the last few years. Between required by such technologies. dimensions: new resources, sustainable 1995 and 2015, the industry participation city, ecological mobility, future in the GDP decreased from 16.2% to 10%. The plan consisted in actions focused on transportation, future medicine, As to employment, the drop was from topics related to the new technologies, 15% to 10%. The industry’s balance of such as big data, cloud computing, data economy, smart objects, digital trade went from a 2% surplus of the GDP nanoelectronics, augmented reality and reliability and intelligent eating. In the to a 2% deficit. robotics. NFI mobilized sectors from the item new resources, the purpose is to industry, the government and universities develop a green chemistry, focused on In order to reverse this trend, the aiming at increasing investments, the use the rational use of energy and raw government launched in 2013 the New of disruptive technologies and the materials, with emphasis on renewable Industrial France (NFI), a plan to number of jobs. In 2015, the program resources and biofuels. modernize and provide competitiveness entered its second phase, which to the country’s manufacturing sector, anticipated a financial support of €2.2 The project Future Industry was also focused on three areas: development of billion for companies to finance established a French equivalent of the offers of new technology, support to investments in digital technology. German initiative Industry 4.0, which aims diffuse such technologies to companies, at modernizing and transforming the aiming at modernizing the production A tax benefit was also exceptionally French industrial model through digital system, and development and adaptation granted, in the amount of €5 billion. In technology.
25 A different future is possible | Perspectives for the chemical industry in Brazil
26 A different future is possible | Perspectives for the chemical industry in Brazil
A leap for development
The chemical industry prepared an agenda with proposals to create conditions for the segment to recover the force, the competitiveness and the growth. The measures do not increase government expenditures.
Over the last few years, Brazil saw the Industry participation in the composition of the GDP (%) 15% Manufacturing industry lose its participation in the 5% Construction economic development, gradually assigning 40.2 39.5 2% Extraction industry its importance to the services sector. 32.7 31.6 31.4 30.1 29.7 According to data from The World Factbook 28.9 28.2 25.6 24.0 (assessment of the Central Intelligence 22.0 19.4 19.0 18.9 17.9 Agency) and of the Brazilian Institute of Geography and Statistics (IBGE), in a group of selected countries, Brazil appears with one of the lowest industry proportions in the Italy India GDP, and with one of the lowest per capita Chile Brazil Japan China France Poland Mexico income. Vietnam Germany Argentina Switzerland Netherlands United States
This phenomenon is not exclusive to Brazil, Source: The World Factbook (CIA) and IBGE United Kingdom but it faces a special challenge. In developed countries, replacing the industry by the services sector is a natural process of development. As a country has a stronger Per capita income (US$, purchasing power parity) industrial park, the next step is developing 61,400 services used in all other sectors of the 59,500 economy and that add value to the national 53,600 product. In Brazil, however, the growth 50,200 of the services sector happened before the country could achieve manufacturing 43,600 43,60042,700 maturity. And this early deindustrialization 38,000 scenario brought serious implications to the development of its economy. 29,300 24,600 In a context of public deficit and low 20,70019,500 investment, the response comes in the 16,600 15,500 decrease in productivity, innovation and per capita income. If the price for the strategic 7,200 6,900 error of lack of investment in manufacturing is paid by all, the benefit with the recovery of Brazilian economy’s industrialization is Italy India Chile Brazil also shared by the society. Due to all these Japan China France Poland Mexico Vietnam
factors, it is evident that Brazil cannot give Germany Argentina Switzerland up its industrial park. Netherlands United States United Kingdom Source: The World Factbook (CIA)
27 A different future is possible | Perspectives for the chemical industry in Brazil
At the end of the second decade of the 21st The Minister of Industry, Foreign Trade century, many countries are watching their Even the United States, where industrial and Services should also play the role of industries losing prominence once again. policies suffer resistance from several “Ambassador”, promoting an approach with The recent experience of countries that sectors of the society, saw its government national and international businessmen, developed or recovered their industry shows adopting a new policy for protecting the as well as with the States and Cities that the Government’s action as a promoter of industry: the country prohibited oil and gas interested in promoting their own economic the manufacturing development is essential. exports, which resulted in recovering the development based on the chemical chemical industry and played an important industry. There is no doubt that China’s industrial role in driving the entire American industry. boost in the last decades results from Although state action is important, it is not guidelines for an industrial policy established In Brazil, the accelerated development of enough. The new instruments for industrial by the Superior Council in the 8th and 9th the chemical industry was also due to a policies should present combinations of Five-Year Plans that, on one side, empowered Government positive action for attracting policies that are aligned with initiatives local government entities to promote actions investments through the Executive Group of the private sector and that assign to for attracting investments and, on the other of the Chemical Industry (GEIQUIM), which the governments the role of encouraging side, chose 120 companies from different promoted the so-called tripartite model: innovations. strategic sectors, among which there were State + National investor + International seven chemical companies, to lead the investor holding the technology. The result In this type of industrial policy, issues that Chinese industrial expansion. In other words, was the creation of the petrochemical hubs are common to the national economic a selective industrial policy directed to of Camaçari and Triunfo, both carried out in model, such as discontinuity, little political sectors that are considered strategic. a period when Brazil did not have abundant support and lack of criteria for allowing raw materials, and that currently represent the entrance and competition of imported Accordingly, India turned into a new industrial 20% of Bahia’s GDP and 6.1% of Rio Grande products and the accommodation of the power thanks to a strong Government do Sul’s GDP, respectively. private sector end up being reduced. inducing and organizing action in selected Concrete goals directly increasing social sectors and aligned with the country’s For this reason, in a moment when Brazil wellness would make it possible to achieve needs, such as, for example, the textile, becomes one of the world’s richest countries a gain in the communication with the pharmaceutical, heavy equipment and in oil and gas, there is nothing more population and a greater involvement of the information technology industries. In the appropriate than having the Government play civil society. chemical industry, the creation of the Ministry its role of inducer, organizer and promoter of of Chemicals and Fertilizers turned the country the chemical industry’s development. In order into the largest manufacturer and exporter of to do so, the creation of the Executive Group Strategy and governance active ingredients for pharmaceutical products of Diversification in the Chemical Industry and agricultural pesticides in the world. In (GEDIQ) is proposed, which would directly In addition to all these proposals, it is 2017, the Indian chemical industry became report to the Minister of Industry, Foreign important to establish a strategic bigger than the Brazilian industry. Trade, and Services and be composed of: positioning of the chemical industry •• Executive secretaries of the ministries of regarding approaching and In Europe, two recent examples demonstrate Finance, Science and Technology, Mines communicating with the Government. the importance of Government’s action: and Energy and Planning; Some of the initiatives that can Germany, which always had a leading •• Executive presidents of CNI and ABIQUIM; contribute to this challenge are: position when it comes to encouraging •• Three representatives of state •• Creating the Strategic Council for the local industry, and where, in 2014, the governments. Development of the Chemical Investment and Commerce Agency launched Industry (CEDIQ) in order to the first “Industry 4.0: smart manufacturing The GEDIQ’s purpose is to assess establish communication between for the future” project, with programs for investment opportunities and identify the the government, representatives supporting industrial modernization; and public policies necessary for making such of the chemical sector and workers France, whose government developed the investments, pursuant to the six dimensions of the chemical industry, aiming at project “New Industrial France”, supporting for competitiveness of the chemical industry preparing concrete proposals of the industrial development of nine markets demonstrated in this document. industrial policies to recover the that are considered strategic and 47 state- growth of the chemical sector; of-the-art technologies. The program has GEDIQ can be organized by thematic •• Creating sectorial chambers that already invested more than €1.9 billion in committees for sectors that are propose solutions or measures that subsidies with public funds. Just like in China considered strategic, such as, for example, reconcile the development of every and India, a selective industrial policy directed agrochemicals, sanitation chemicals, part of the chemical production to sectors that are considered strategic. The chemicals for civil construction and chain, as it is done at the Ministry of French chemical industry became bigger than structuring projects as refineries and Agriculture. the Brazilian industry in 2017. petrochemical hubs.
28 A different future is possible | Perspectives for the chemical industry in Brazil
The final purpose of the industrial policy 5. Foreign trade: Brazil needs to sign It is important to highlight that Abiquim’s should not only be promoting a certain agreements ensuring the competitiveness proposals do not increase government sector; it should be to help this segment of the Brazilian chemical industry, expenditures. The final major objective is to generate the maximum of wealth for the defending the national production from help Brazil’s development. country – as investments, jobs and taxes. unfair trading practices. More than that, it Connected to this new way of implementing is necessary to promote the foreign trade, industrial policies, Abiquim proposes an integrating the industry into global and Short-term solutions: one year for agenda for resuming investments and value chains, causing exports to be part of implementation growth of the chemical sector. Six driving the businessman’s agenda; Raw-material forces are contemplated, aiming at reducing 1. Use the Federal Government’s oil and gas costs, improving the regulation, encouraging 6. Regulation: A regulatory framework as raw material and energetic input in innovation and, finally, increasing meeting the diversity and complexity of order to promote the industrial chain productivity. the chemical industry, promoting through structuring auctions; 1. Raw material: The competitiveness production efficiency, compliance, security 2. Promote a systematic agenda of auctions challenge of the Brazilian chemical for investors and Brazilian for oil and gas exploration areas; industry starts with the high costs of raw competitiveness in this segment. 3. Ensure the best use of natural gas liquids materials that are essential for producing and the steady quality of natural gas chemicals. It is necessary to create There are 73 proposals that will strengthen supplied to the market, through the conditions that make it possible to reduce the industry and its competitiveness, limitation of a maximum ethane content the costs of such inputs, which can which is an essential condition to face of 9% and a minimum methane content of currently reach 80% of the production current challenges. In order to facilitate 88%, also ensuring the control of costs in a petrochemical plant; implementation, the initiatives were divided greenhouse and pollutant gas emissions; into short-term (one year for effectiveness), 4. Maximize the creation of value for 2. Electricity: For the chemical industry, medium-term (two to three years) and long- petroleum by-products, through a policy electricity represents 20% of the industrial term (more than four years) measures for limiting the incorporation of petroleum costs. The Brazilian chemical industry pays facing challenges. With that, the goal is to naphtha into gasoline; a higher price for electricity than its peers reach a consensus and focus the efforts on 5. Regulate, as provided by law, the policy for from other countries. The end of such cost priority and urgent issues for the Brazilian use of natural gas for purposes other than discrepancy shall bring a great chemical industry. energy or raw material, based on competitiveness gain to the sector; international costs and criteria. Short-term actions aim at interrupting the 3. Logistics: Problems in the waterways and decrease in value-added of the chemical Electricity in the railroad and highway networks industry and resume growth in production, 6. Promote free access to infrastructure for cause increases in costs and loss of sales, investments and generation of jobs. gas and petroleum by-products efficiency and, therefore, are an obstacle In this sense, the chemical industry seeks (offloading, terminals, processing, to the industry’s productivity gain; financing and capitalization alternatives to transportation and distribution) ensuring invest in new industrial plants, modernize transparency, isonomy and 4. Innovation and Chemicals 4.0: The chemical parks (including digital solutions competitiveness; Brazilian chemical industry needs to follow of chemical industry 4.0), train personnel 7. Establish a regulatory framework for shale the trend of using digital technologies, and invest in the creation of sustainable gas exploration (unconventional gas); such as the Internet of Things, big data, products. 8. Structurally reduce costs of the energy artificial intelligence and advanced sector, eliminating sectorial charges and robotics to increase productivity; cross subsidization, as well as social policies financed by energy consumers; 9. Accelerate the progressive reduction of the Energy Development Account, Abiquim’s proposals financed by the industry; Short-term Medium-term Long-term Total 10. Enhance restructuring of the electricity Raw material 5 2 1 8 sector; study proposed in the scope of Electricity 5 4 1 10 Public Consultation No. 33, of the Ministry of Mines and Energy (MME). Logistics 7 18 5 30 Innovation and Chemicals 4.0 9 2 1 12 Foreign trade 4 3 - 7 Regulation 3 3 - 6 TOTAL 33 32 8 73
29 A different future is possible | Perspectives for the chemical industry in Brazil
Natural Gas Processing Unit (UPGN) and improvement in gas quality
In order to maintain the reliability and •• Add value to the natural gas produced security to persons and the environment, •• Increase in emissions of controlled in the country, using ethane as a raw the natural gas should be marketed pollutants (NOx and CO) and of material for an entire comprehensive including its composition and quality. The greenhouse gases, with implications chain in the chemical industry, rather National Agency of Petroleum, Natural in the environmental permitting of than its combustion; Gas and Biofuels (ANP) should establish current and future industrial facilities; •• Help developing a chemical and guidelines that guarantee the quality of •• Impact on residential consumers’ petrochemical industry, increasing the gas to be marketed and ensure the safety and on the cost for distribution investments and creating jobs. commitments for reduction in of natural gas, given the need for greenhouse gas emission, pursuant to adjusting the existing system; With the pre-salt, it is possible to add 1.3 international agreements. Through the •• Loss of energy efficiency of equipment million metric tons per year in the annual Natural Gas Processing Unit (UPGN) it is using natural gas; ethane supply to the domestic market – a possible to regulate and ensure efficiency 30% increase in the offer for chemical in the production process and •• Impacts on generation in thermal and petrochemical industry. It is distribution of this important industrial power plants and, as a result, in important to note that ethane separation input. electricity cost; does not prevent the producer from selling it as a petrochemical raw material, The ethane content of up to 9% in natural On the other hand, taking advantage of as its use as energy will always be gas allows maximum use of the gas and the availability of pre-salt natural gas and possible in specific equipment. The its liquids as raw material, as well as the separating the ethane from the gas are destination of ethane as raw material will regulation of the Brazilian market, goals that will bring the following depend on a trade agreement between matching public policies with producers’ benefits: the natural gas producer and the and consumers’ interests. •• Increase the use of natural gas chemical and petrochemical industry, Non-compliance with this specification produced in Brazil – as it is associated and, therefore, there will not be an causes impacts, such as: with oil, it is rich in ethane; economic imbalance in the market.
Logistics 15. Improve the system for controlling the Innovation and Chemicals 4.0 11. Invest in the preservation of the performance of ANTT’s concessionaires, 18. Preparing a program for financing and Centro-Atlântica railroad. Certain roads in order to ensure the transport of promoting startups related to the under the concession of this railroad hazardous chemicals and other chemical sector, in order to accelerate the present little use and their state of categories of chemicals in railways development of technologies in Brazil; preservation prevents the attraction of (improvement in control of goals use good practices of existing programs, new cargo; established per TKU – tonne per km – per such as Start-Up Brasil, among others; 12. Establish a system for formalizing, product category); 19. Provide permanent funding to the monitoring and inspecting the priorities 16. Ensure real-time update of the Orange National Fund for Scientific and for berthing ships by berth at the ports of Book version, the prevailing international Technological Development (FNDCT); Santos and Aratu; regulation for transportation of 20. Offer credit facilities for installation of 13. Introduce in National Agency of Land chemicals, according to UN codes, in pilot plants that promote improvements Transportation’s (ANTT) legislation for order to ensure safety and facilitate from the scale of laboratory plants to the concession and regulation, incentives for marketing of chemicals between commercial scale; transportation of chemicals, associated countries; 21. Create specific credit facilities for the to financing or concession renewal; 17. Study the feasibility of developing and segment, structured as to promoting the 14. Standardize and formalize risk implementing the levitation transport integration between researchers and management associated to accidents by technology, also called vacuum tube companies; concessionaires in the railroad network trains. Although it is a new technology, it 22. Review the New Regulatory Framework through a risk management program, by is under development in many countries for Science, Technology and Innovation ANTT, common to all concessionaires, (including Brazil, in the state of Minas and streamline the process for regulating aiming at mitigating the impacts caused Gerais) and has potential for significantly the new law; by accidents; reducing the cost for input 23. Develop a chemical platform within the transportation. National Program of Knowledge Platforms (established by pelo Decree
30 A different future is possible | Perspectives for the chemical industry in Brazil
No. 8,269/14), aiming at including the chemical industry in the program, The importance of the regulation of creating an opportunity to develop the renewable sources (bioenergy) and the chemical industry biotechnology segments; 24. Create a working group in the National The chemical sector is one of the most as medicines and cosmetics) and specific Biotechnology Council aiming at studying regulated sectors in the world, because substances (such as lead and paints). For and proposing solutions and alternatives of the nature of production and risks Abiquim, a new law is necessary, which: for the installation of biorefineries involved. The chemical industry defends •• Does not supersede existing laws and dedicated to manufacturing biochemical the creation of regulations that adopt the regulations; products; principle of risk analysis, based on •• Treats products manufactured in the 25. Offer conditions suitable for the Brazilian scientifically provable data. It is country and imported products with Institute of Industrial Property (INPI) in necessary to create new regulations for isonomy; order to resolve requests for new issues that are currently not covered by •• Assesses the substances according patents currently under analysis, raising any law or regulation. Creating to the risk of exposure and establish the performance standard to standards regulations for issues that are already when it is necessary to have risk of international timings; regulated will result in increasing the management plans; 26. Strengthen the Brazilian system of bureaucracy and losing the efficiency of innovation in applied research, the laws and regulations. •• Respects data confidentiality. supporting the Brazilian Agency for Industrial Research and Innovation Abiquim actively acts in the development Abiquim is aligned with the principles (EMBRAPII) and SENAI’s Innovation of regulatory models that ensure safe of the Organization for Economic Institutes. management of substances and Co-operation and Development (OECD) products of industrial use – and, with and defends carrying out studies on the Foreign trade that, reduction in the risks to the analysis of regulatory impact as a good 27. Permanently establish the Special Regime environment and to people’s health. practice. With that, Brazilian laws will be of Reintegration of Tax Amounts for Brazil has many regulations that improved and will become truly Exporting Companies (REINTEGRA) and individually approach end products (such effective. increase the reimbursement rate to, at least, 6%, in order to immediately encourage exports and compensate whole, according to OECD principles, Energy hidden taxes that are levied on several upon approval of PL 1539/2015; 36. Modernize agreements on the production stages; 32. Send the project of Regulation of transportation and distribution of natural 28. Reactivate the Brazilian List of Increases Chemicals for Industrial Use prepared by gas, promoting international to the Common External Tariff (CET), with the National Commission on Chemical competitiveness; Regulation of the Decision by the Safety (CONASQ)/Ministry of the 37. Encourage processes for increasing Common Market Council (CMC) 27/15; Environment to the Legislative Branch, natural gas supply and suppliers, through 29. Ensure the isonomy and reciprocity adopting the principle of risk analysis international partnerships and/or principles in the regulatory and based on scientifically provable data; financing, through imports, including, in bureaucratic treatment between local 33. Establish a new regulatory framework for addition to Bolivia, Vaca Muerta in and international producers, especially agricultural pesticides based on risk Argentina, GNL, or through the access to regarding licenses and inspections of the analysis and management upon approval gas from other producers in the national consenting bodies in production facilities of PL 6299/2002. territory other than Petrobras; and products exported to Brazil; 38. Standardize the regulation of the natural 30. Ensure an efficient operation and the Medium-term solutions: from two to gas market between states, based on the integrity of commercial defense three years for implementation best international practices for promoting mechanisms. Raw material an open and competitive market; 34. Promote the development of the oil 39. Encourage the use of alternative energy Regulation industry by means of investments in the sources in the chemical industry, giving 31. Turn studies for analysis of regulatory midstream and downstream sectors in priority to renewable sources and impact into a mandatory process, as an order to increase the generation of cogeneration. essential tool for establishing truly added value; effective regulations, considering the role 35. Encourage the increase of the petroleum Logistics of regulations in the development of safe naphtha supply in the country, seeking 40. Increase tankage availability in berths environments and in the transparent greater competitiveness in comparison in which there are operators handling relationship of the ndustry with with the international market, by industrial chemicals in the terminals of regulators and with the society as a increasing the refinery. the Port of Santos;
31 A different future is possible | Perspectives for the chemical industry in Brazil
41. Increase offer of port terminals dedicated 51. Ensure good operation of Right-of-Way Foreign trade to liquid bulk in the Brazilian coastline; and Mutual Traffic mechanisms between 60. Promote trade liberalization through 42. Promote the creation of short-sea railroad concessionaires for the outflow international trade agreements with shipping navigation routes intended for and distribution of cargo throughout strategic partners. The initiative plays a handling liquid bulk. The ship offer in production chains; key role in resuming the sustainable short-sea shipping routes for liquid bulk 52. Create rules in ANTT’s regulation to economic development, and it should is low. The market is centered in two strengthen the image of the user that result from a comprehensive discussion players, and one of them is Transpetro depends on the Brazilian railroad between the government and the private – engaged with Petrobras; transportation, as to establish sector, in a structured manner and with 43. Increase the capacity of some RUMO/ALL guarantees in the provision of services the legal protection required to ensure a Malha Paulista roads, which presents for users declared dependents of this fair trade that eliminates predatory parts with a level of use of more than network; practices; 50% in the connection Santos-Paulínia, 53. Improve conditions for investor users to 61. Establish a fast track model for increasing among other bottlenecks; invest in railroad infrastructure. Establish the Common External Tariff (CET) for 44. Increase the capacity in some sections of clear criteria to compensate investments cases in which the regional production is RUMO/ALL Malha Norte. Some sections made by investor users in the network’s beginning and for reduction in case of in the states of Mato Grosso do Sul and infrastructure. Possibility of interruption of the production, for any of Mato Grosso present high use, indemnification in the process of handing the member countries; constituting local bottlenecks that make over the concessionaire’s assets to the 62. Implementing an agenda with it impossible to use the entire railroad; Government; institutional improvements in Mercosur 45. Improve the preservation of roads 54. Create alternative regimes, without that is a part of commerce administrative connecting the Northeast and Southeast owner preference, in order to increase and legal proceedings and seeks the regions; access to the country’s transportation debureaucratization of such proceedings. 46. Expand the works of making road routes; pavement, ensuring quality in road 55. Establish rules for shared use of the Regulation transportation and development of excess idle capacity of transportation 63. Establish an International Regulatory affected regions; routes; Cooperation Agreement in the scope of 47. Establish rules for the use of the 56. Develop and implement a plan for the Chemical Substances Laws and infrastructure of common access preservation and preventive Regulations with countries that invest in between organized ports and private use maintenance of the country’s roads; science and research, facilitating the free terminals (TUPs), which ensure proper 57. Create a plan for identifying and trade; compensation of investments made; expanding roads that are currently used 64. Implementing a single electronic 48. Strengthen port management. Maintain in excess, in order to make it possible to platform for publishing environmental port management and administration develop expansion works in these routes permitting processes, facilitating the organized as a duty of the local port access, the search and making the authority; Innovation and Chemicals 4.0 process more transparent, eliminating 49. Resume the original duties of the Port 58. Create training and professional the need for publishing them in the State Authority Council (CAP). The Council qualification centers (technical level and Official Gazette; currently does not have a well-defined higher education) and, in the short term, 65. Publish a decree incorporating the role, and the need for restoring its facilitate specialized labor flow from Globally Harmonized System (GHS) for original duties is pointed out, such as the abroad, specialized in synthetic biology, classifying and labeling chemicals, an representative forum for supporting port aiming at ensuring the resources important tool for the process of safely management; necessary for research, development handling chemicals. 50. Ensure better conditions for and innovation and for industrial concessionaires to invest in port operation of renewable chemicals plants; infrastructure. Establish clear criteria for 59. Encourage the development of startup reversibility of assets invested by incubators in order to identify solutions concessionaires into port assets; in the chemical industry and share some successful results of the development and implementation of new technologies in other Brazilian manufacturing industries.
32 A different future is possible | Perspectives for the chemical industry in Brazil
Long-term solutions: four years or more Investment and diversification Some proposals for driving diversification in for implementation opportunities the chemical industry are: Raw material The Brazilian chemical industry’s search 1. Creation of the Executive Group of 66. Encourage the installation of new Natural for greater competitiveness corresponds Diversification in the Chemical Industry Gas Processing Units (UPGNs) next to to its disposition in contributing to recover (GEDIQ) to assess and prioritize pre-salt’s gas pipelines, with free access the national economy. This means actively investment and diversification to any gas producer in order to fully treat participating in the generation of jobs, opportunities for the Brazilian chemical the resource, including separation of income and wealth to the society as a whole, industry, with emphasis on chemicals with liquids contained in the gas (ethane, as well as taking advantage of investment higher added value, on the strengthening propane, butane and C5+ components). and diversification opportunities offered by and expansion of production chains and the sector. on the development and implementation Electricity of new technologies; 67. Encourage cogeneration, which is According to IBGE data, disclosed in the 2. Promote the creation of production hubs, strongly related to processes of the “Study on the Diversification Potential of in order to take advantage of the synergy chemical industry, with result the Brazilian Chemical Industry”, among the between the location of the new plants of optimization, and a more competitive segments with the best competitiveness the sector and the availability of its natural gas. conditions, attention is called to those inputs. With that, it is possible to increase to which the size of the Brazilian market competitiveness of products locally Logistics is attractive for investments in local manufactured through the integration of 68. Make the existing infrastructure of production. These segments are: cosmetics a greater portion of the production chain. different railroad networks consistent, and toiletries, agricultural pesticides, Some examples are the regulation of the ensuring the passage of cargo by railroad animal food additives and chemicals for oil special regime for investments in the gauges and other different specifications; production and exploration. Segments of fertilizer industry and the creation of a 69. Invest in the preservation of current the chemical industry that add value to local regulatory framework for use of networks for the transportation of raw materials can also attract investments, rare-earth elements and minerals for the hazardous products. The transportation such as petroleum by-products, pulp, chemical industry; of liquid bulks in the railroad, in many aromatics and renewable energy sources, 3. Promote the organization of cases, is prevented due to the state of like biomass. competitiveness clusters and hubs in preservation of the installed railroad renewable chemicals, taking into account network; According to the study, investment the possibility of making public-private 70. Perform road expansion works in current opportunities identified in some of the partnerships for financing a shared two-lane roads, aiming at ensuring chemical industry’s primary sectors can infrastructure (utilities, logistics, etc.) and greater safety to users; add up to US$47 billion by 2030, with a construction of a multipurpose pilot plant 71. Improve the laws and regulations strong impact on the deficit reduction in the (sharing machines and specialized labor); addressing the process for circulation balance of trade. 4. Construction of a biorefinery integrating a and blocking of the Chartering Systems traditional sugarcane mill and an ethanol (SAMA). Need for a clearer criteria in plant, using biomass as input in an blocking process, avoiding the existence agricultural region. of gaps that enable misuse of the laws and regulations; 72. Proceed with the plan for road concession. Resume the concessions model in order to make it possible to obtain investments and improvements in road transportation operations.
Innovation and Chemicals 4.0 73. Create innovation hubs – companies and ICTs that carry out researches in thematic areas in the interest of and approved by the Ministry of Science, Technology, and Innovation (MCTI), subject to tax benefits for equipment and material imports.
33
A different future is possible | Perspectives for the chemical industry in Brazil
The two possible futures
The adoption of proposals for the chemical industry presented in this report will increase the sector’s GDP by US$231.2 billion by 2030 – and this additional wealth will be divided between companies, workers and governments.
Going straight to the point, the proposals Added value of the chemical sector (US$ billion) previously presented are worth US$231.2 90 billion. This is the accumulated increment in 85 the chemical industry’s GDP – and, therefore, 80 in the country – by 2030, with the adoption 75 of the agenda suggested by Abiquim. 70 65 Below, the projections of several indicators 60 for two scenarios can be compared: one 55 scenario contemplating Abiquim’s proposals, 50 and another one, in which the proposals are 45 not adopted. 40 35 Added value 30 The presented proposals, if implemented, 25 Sceneario 1: WITHOUT proposal adoption 20 will reduce costs of the chemical sector and Scenario 2: WITH proposal adoption encourage investments in productivity. The 15 result is the recovery of margins and financial 10 results. Ultimately, this means an increase 2011 2015 2012 2017 2013 2019 2016 2018 2014 2010 2024 2021 2027 2026 2020 2028 2029 2025 2022 2023 2007 2030 2003 2005 2008 2009 2006 in the added value, that is, the production 2004 of more wealth for Brazil, as the added Sources: Abiquim, The Economist and Deloitte’s projection value is distributed between profit, salaries, taxes and payment of interest or rents. In this scenario, there is a virtuous cycle: good financial results attract more investments and increase in the production, which results in the generation of more wealth. With the adoption of these proposals, the added value will go from US$42.68 billion in 2018 to US$83.51 in 2030.
35 A different future is possible | Perspectives for the chemical industry in Brazil
Salaries Compensation for work in the chemical industry (US$ billion) The compensation for work, especially through salaries, can present an 30 accumulated growth of US$53.1 billion by 28 2030 with the adoption of the presented 26 proposals – another indication that the 24 strengthening of the chemical industry 22 benefits both the sector and the society 20 as a whole. 18 16 Taxes and fees 14 As it has already been explained 12 previously, the adoption of proposals – 10 which include the reassessment of tax 8 impacts on the sector – subsequently 6 CScenario 1: WITHOUT proposal adoption results in an increase in the collection 4 Scenario 2: WITH proposal adoption of taxes by public entities. It is expected 2 that, with the adoption of the solutions, 0 the chemical industry should increase 2011 2015 2012 2017 2013 2019 2016 2018 2014 2010 2024 2021 2027 2026 2020 2028 2029 2025 2022 2023 2007 2030 2003 2005 2008 2009 2006 its annual collection of taxes from US$14 2004 billion in 2018 to 27.4 billion in 2030. Sources: Abiquim, The Economist and Deloitte’s projection, based on data on the added value
Remuneration of the chemical industry to the government (US$ billion)
30 28 26 24 22 20 18 16 14 12 10 8 6 CScenario 1: WITHOUT proposal adoption 4 Scenario 2: WITH proposal adoption 2 0 2011 2015 2012 2017 2013 2019 2016 2018 2014 2010 2024 2021 2027 2026 2020 2028 2029 2025 2022 2023 2030 2007 2003 2005 2008 2009 2006 2004
Sources: Abiquim, The Economist and Deloitte’s projection, based on data on the added value
36 A different future is possible | Perspectives for the chemical industry in Brazil
Results With the presented proposals, the profit of the sector’s companies may increase almost four times, from US$3.3 billion in 2018 to 12.8 billion in 2030.
Profits and losses retained by the chemical industry (US$ billion)
15
13
11
9
7
5
3
1
-1
-3 Scenario 1: WITHOUT proposal adoption Scenario Scenario 2: WITH proposal adoption
-5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Sources: Abiquim, The Economist and Deloitte’s projection, based on data on the added value
37 A different future is possible | Perspectives for the chemical industry in Brazil
Interest and rents Interest and rents (% of the added value) In a scenario in which the proposals are adopted, payment of interest and rents by 54 52 the chemical sector gradually decreases, 50 from 29.6% of the added value in 2018 to 48 Scenario 1: WITHOUT proposal adoption Scenario 2: WITH proposal adoption 21.8% in 2030. This arises from a decrease 46 44 in general indebtedness of companies and 42 indicates an improvement in the financial 40 38 situation of these organizations. 36 34 32 Price of the national natural gas 30 One of the main challenges of the chemical 28 industry is the high cost of natural gas. There 26 24 is an inverse correlation between the added 22 value and the differences in the gas price. In 20 18 other words, when the gas price increases in 16 comparison with international prices, there 14 12 is a tendency of decreasing the added value. 10 According to the calculations, the variable 2011 2015 2012 2017 2013 2019 2016 2018 2014 2010 2024 2021 2027 2026 2020 2028 2029 2025 2022 2023 2007 2030 2003 2005 2008 2009 presenting greater influence in the results of 2006 2004 the added value was the gas price. Sources: Abiquim, The Economist and Deloitte’s projection, based on data on the added value
Added value x Variation in gas price (Ratio basis 100 = 2003)
220 Added value 200 Variation in gas price*
180
160
140 R2 = 0.7886
120
100
80
60 R2 = 0.6058 40
20 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sources: Abiquim, European Chemical Industry, Thomson Data, The Economist and Deloitte’s projection
* Variation in gas price – National price – International price
38 A different future is possible | Perspectives for the chemical industry in Brazil
Chemical industry’s GDP Chemical industry’s GDP (US$ billion) An increment of US$26 billion in the 2030 chemical industry’s GDP is expected should 105 the proposals be adopted. The accumulated 100 Scenario 1: WITHOUT proposal adoption increment in the GDP of the sector between 95 Scenario 2: WITH proposal adoption 2019 and 2030 may reach US$231.2 billion with the adoption of proposals. The 90 scenario is based on a projection of the 85 average growth of 3.43% per annum of the 80 Brazilian GDP by 2030, made by the British 75 magazine The Economist. The estimate also 70 considers the growth in chemical activity in 65 other countries, the number of operating companies in the Brazilian chemical industry 60 according to the General Employed and 55 Unemployed Register (CAGED) and the 50 indebtedness level of Brazilian companies. 45 Adopting the proposals will also allow jobs in 40 Scenario with more than the chemical industry to increase from 400 20 years of stagnation, thousand in 2018 to 763 thousand in 2030 35 virtually only following the – 225.2 more positions than the number of 30 growth of the economy positions generated without the measures 25 suggested by Abiquim. 20 15 2011 2015 2012 2017 2013 2019 2016 2018 2014 2010 2024 2021 2027 2026 2020 2028 2029 2025 2022 2023 2007 2030 2003 2005 2008 2009 2006 2004
Sources: Abiquim, The Economist and Deloitte’s projection, based on data on the added value
Average annual growth of the chemical industry’s GDP by 2030
5.75% with the proposals
3.11% sem propostas
By adopting the proposals, by 2030, Brazil will obtain an increase of...
US$ 231.2 billion in the chemical industry’s GDP
US$ 193.9 billion in added value
US$ 53.1 billion in compensation for work
US$ 63.6 billion in tax collection
225.2 thousand jobs in the chemical industry
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