Investment In Industrial Equipment Falls In Uruguay

Investment in machinery and industrial equipment fell 11.3% during the first trimester of 2015 compared with the same period in 2014 according to a report by Uruguay’s Chamber of Industry.

Among imported capital goods the report highlighted decreases in packing machines, roasting ovens for metallurgy and boilers.

“This behavior is in large part aligned with the poor performance of industrial exports [from Uruguay] which has been dragging for some trimesters and worsened at the start of this year” reported Uruguay’s Chamber of Industry.

The Uruguayan sector which showed the greatest increase in investment was food, tobacco, and alcohol where investment increased 87.9% compared the previous year. Excluding this sector Uruguay’s investment fell 24.8%.

The sector’s increased investment came mostly from companies in the milk and beverage sub-sector. Lower than usual levels of investment in this sub-sector during 2014 explains the dramatic increase.

This Uruguayan Business Brief is a summarized translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry. For more resources on Uruguayan Business visit the Uruguay Business Reports Store.

Uruguay’s Timber Industry Has Room To Grow

Uruguay’s current timber production could not support a third wood pulp plant

According to a report by Uruguay’s Office of Livestock and Agriculture Policy (Opypa), Uruguay’s timber industry will produce an average of 10 million cubic meters of wood to be processed into pulp. Timber for solid wood production is estimated to average 4.2 million cubic meters of which 71% is expected to come from pine and 29% from eucalyptus.

According to Opypa’s analysis, Uruguay’s projected timber production is insufficient to supply a third wood pulp plant. The agency recommends expanding timber plantings into several areas of the country that are well suited for it.
Opypa claims Uruguay has 2.6 million hectares suitable for timber production which are currently deforested. The majority are located in Uruguay’s center east region. Uruguay’s other regions also have room to expand timber production. Opya estimates in each of Uruguay’s regions only half the land suitable for forestry is currently planted on.

The report states that in 2012, the timber industry employed 12,000 workers. Of which a significant portion are classified as skilled workers.

In 2009, 45% of workers in Uruguay’s silviculture industry were classified as skilled compared with 24% in the other sectors Opypa monitors (ranching, agriculture, dairy, and grain).

Between the last two Opya censuses the number of firms in Uruguay whose primary income is from forestry has decreased by 230. This decline is at least partially due to consolidation within the industry. The number of firms under 500 hectares decreased by 419 hectares while the number over 500 increased by 189.

Challenges for Uruguay’s Lumber Industry

One of the principal concerns raised by Opya’s report is whether Uruguay’s forestry firms can meet the growing demand from Uruguay’s wood pulp industry for raw materials.

Uruguay’s new Montes del Plata wood pulp plant is expected to double the country’s production capacity and its wood pulp exports. The projected timber supply through 2030 is sufficient for the two plants. A third plant would require an increase in timber production.

Adding value to wood exports is another challenge. Uruguay’s wood board production is small but has increased recently, between 2012 and 2013 the value of these exports rose by 16%.

This Uruguay Business Reports news article is a translation from the Uruguayan newspaper El Pais. The original article is available here. Uruguay Business Reports translation by Donovan Carberry. Image is from Uruguay’s El Pais.

Montes del Plata wood pulp plant “should begin any minute”

Store Enso and Araucho’s new wood pulp plant may receive permission from Uruguay’s environmental regulator to begin operations this week.

The plant, which is ready to begin production, expects to receive permission from DINAMA, Uruguay’s environmental regulatory agency, to start operations this week.

An executive at the Finish company Stora Enso, which built the plant in Conchillas with the Chilean company Arauco, said Tuesday that the company expects to receive DINAMA’s approval by the end of the week.

“We could start literally at any moment. We expect very probably to have permission by the end of the week from the environmental authority” said Juan Bueno, the head of the wood pulp division at Stora at a speech to an industry conference.

In April it was announced that work on the plant in Montes del Plata had been finished and that the plant undergone tests and would be operational soon.

The only thing remaining is permission from DINAMA.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay’s exports to Argentina continue to fall with no end in sight

Uruguay’s latest export data, released yesterday, showed a clear increase in Uruguay’s total exports. Soy remained Uruguay’s top export. However, the data also showed a clear decrease in exports to Argentina, which has maintained strong restrictions on imports despite the changes it has implemented to its macroeconomic policies.

Uruguay’s exports increased 7.8% in May over May 2013, according to data from the Instituto Uruguay XXI. Uruguay’s exports have increased 5% between January and May of 2014. The total value of Uruguay’s exports in May reached $1,128 million USD, $81 million USD more than in May 2013.

Brazil remained the number one destination for Uruguayan exports despite a .2% drop between January and May. China remained the second biggest destination for Uruguayan exports. Exports to China fell 14.4% since January. The Nueva Palmira free trade zone received the third most Uruguayan exports. Venezuela, following a 33.5% increase between January and May, was the fourth most significant destination.

Uruguayan exports to Uruguay fell 16.3% during the first five months of 2014 when compared to the same period in 2013. The value of Uruguayan exports to Argentina decreased $33 million USD over the same period. Argentina remains the fifth largest destination for Uruguayan exports.

With Argentina “something chronic” is happening, Álvaro Queijo, the president of Uruguay’s Exporter’s Union (UEU), told the newspaper El Observador. “On one side trade is not good and on the other, Argentina’s changes to the exchange rate at the end of January caused [Uruguayan exporters] to lose competitiveness”. “That the official exchange rate has gone from $ 6 (Argentinean Pesos) to $8 which has changed the numbers a little. Whats more, the restrictions have not changed, they have remained the same; Argentina’s industry is very reluctant to buy imports”, explained Quejio.

Quejio does not believe that there will be any significant changes in the short-term to produce an opening for trade or an improvement in Argentina’s macroeconomic conditions. “This is a process that has been going on for some time, for some two or three years, with a continuing deterioration of exports to this country. If we compare it to 2012 the drop is bigger and if we use 2011 the decrease is even more pronounced”.

Quejio reported that the sectors most affected have been clothing, graphics, chemicals and plastics. He added that Brazilian demand does not make up for the fall in sales to Argentina. The decrease in exports to China, nearly 15%, can be attributed to the significant increase in exports to the Nueva Palmira free trade zone as most products are usually shipped from there to China.

Soy Stays In Front

Soy remained Uruguay’s principal export in May. Sales to abroad increased 14.7% over May of 2013 and represented 39% of Uruguay’s total exports in May. “Despite decreasing 2.8% over sales in May 2013, frozen beef was Uruguay’s second biggest export, making 9.3% of the total” reported the Uruguay XXI institute. Concentrated milk came in third with 4.9% of the total. Exports of live cattle saw the biggest increase in May. Sales of live cattle in May of 2013 did not even reach $300,ooo USD, in May of 2014 they topped $15 million USD.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Texhong to build a $250 million USD textile factory in Uruguay

Texhong, a Chinese textil company has acquired 160 hectáreas in San José, Uruguay and is awaiting authorization from Uruguay’s National Environmental Management agency (Dinama) to begin constructing on a $250 million USD factory.

Texhong’s site is located on the Route 1’s 46 kilometer. All of the factory’s production will before export, principally to Brazil and other countries in the region.

The director general of the San José local government, Francisco Zunino, told the Uruguayan newspaper El País that shortly the company “will begin to address construction; they have already been consulting businesses in the sector and they have an architectural firm designing the project”.

Zunino reported that the town is collaborating with the company negotiations with UTE, Uruguay’s state power company, since the factory will have high energy requirements.

The work will be done in three stages. In the first stage, which will begin once the project has received the necessary authorizations, Texhong will build a 40,000 square meters of storage sheds at an estimated cost $80 million USD.

The first stage will require a work force of two hundred people. One hundred and fifty of those will be from the department of San Jose (Uruguay’s administrative regions are called departments). Zunino explained that “the other fifty will come from China to train the local workforce”. When the project is finished, sometime in the next three or four years, the factory will employ six hundred people.

Texhong produces raw material for textiles that are later used in clothing industry. It is one of the main producers and traders of textile raw material in China. The proposed factory in Uruguay is Texhong’s first initiative in Latin America. They have eleven manufacturing plants in China, as well as factories in Vietnam and Turkey.

Texhong’s entrance into Uruguay will help revive the country’s textile sector, one of the industry’s most affected by Uruguay’s decline in competitiveness.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El País. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Lifan Uruguay will resume exporting the Lifan 320 to Brazil

Lifan’s Model 320 on display at car show in China. Model 320’s are produced in Uruguay for the South American market.

For two years, Brazil has prevented Chinese automaker Lifan, which produces cars in Uruguay for the South American market, from exporting cars into the country. Lifan now has 2,000 vehicles sitting in Uruguay which were produced for sale in Brazil. After receiving special approval from Brazil, Lifan will resume exports with a shipment of 70 model 320 cars in the next few days.

Brazilian authorities solicited a series of documents from Lifan to certify that 35% of the parts in Lifan’s model 320 are Brazilian, a requirement of the special decree signed by Brazilian President Dilma Rousseff that lifted the ban which had blocked Lifan’s imports for the past two years.

Lifan will ship 70 of these cars from Uruguay to Brazil in the next few days. Lifan has not been allowed to ship into Brazil for the past two years.

Pablo Revetria, the head of Lifan Uruguay told the Uruguayan newspaper El Observador that Lifan has until October 29 to move the 320 and 620 model vehicles currently in Uruguay into Brazil.

Asked what Lifan would do if they were unable to export the cars to Brazil, Revetria explained that some cars could be sold on the Uruguayan market and Lifan is “very far along” in Venezuela’s import approval process. “When that process is completed we will be in place to move an important amount of stock”, Revetria said.

This Uruguayan Business Reports news article is a summarized translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay’s executive branch seeks a permanent ban on importing used cars

In the next few days Uruguay’s executive branch intends to send a bill establishing a “definite prohibition” on importing used vehicles to the parliament.

The upcoming bill is the result of analysis by an interministerial commission (led by the Economy Ministry with representatives from the ministries of Industry, Transportation, Public Works, Housing, and the National Road Safety Unit) created to make a final decision on used car imports. There has been a ban on used car imports into Uruguay since 1959 but it has to be extended every few months.

The commission acknowledged that Uruguayan consumers would benefit from used car imports, however it found concerns about security, environmental standards and harmonization within Mercosur (all members have banned used car imports except Paraguay) outweighed those benefits.

The commission was originally scheduled to announce their findings on May 1. The ban’s last extension, which Uruguay’s parliament approved in 2012, is due to expire on the August 30, 2013.

The new law would end the need for further extensions.

The 1959 decree required the ban be re-approved every six months. In 2005, the law was changed to allow the law to be reauthorized for up to four years.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El País. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Chile’s Compañía Cervecerías Unidas buys Uruguayan brands Nix and Nativa

Compañía Cervecerías Unidas (The United Brewers Company or CCU) of Chile announced that it has purchased 100% of the shares in the Uruguayan company that produces the mineral water brand Nativa and the soda brand NIX.

This is the first expansion into Uruguay for the biggest beer producer in Chile and second biggest beer producer in Argentina. CCU is also the second biggest soda producer in Chile according to data supplied by the company.

The company is also the largest bottler of mineral water in Chile and participates in the distribution of other beverages like rum, pisco and liquor.

The deal was concentrated in Uruguay and involved Marzuel SA, Milotur SA, Coralina SA, and Andrimar SA, which each owned shares in the company which produced and sold both Nix and Nativa.

The acquisition “falls within CCU’s strategic plan which seeks to expand our operations into new markets” CCU announced.

The cost of the acquisition was not announced.

This Uruguay Business Reports article is a translation of an article that appeared in the Uruguayan newspaper El Observador. This article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Lifan reaches an agreement with Uruguayan manufacturer Effa to purchase factory in Uruguay

The Chinese auto giant finally reached an agreement with the Uruguayan auto manufacturer Effa Motors to acquire 100% of their manufacturing plant in Uruguay.

According to the CEO of Effa, Andrés Antoniux, they have already reached an agreement to sell the factory in Uruguay and are currently in performing due diligence which should be completed this month. When asked about the amount of the sale, the executive said there is a “confidentiality” agreement.

The Chinese automobile manufacturer Lifan will acquire 15 hectares that Effa owns along route 1, as well as 30,000 sqr meters of indoor space and more than 2,700 completed cars that the Uruguayan plant has in stock as a result of trade difficulties with Brazil. Effa was producing Lifan vehicles.

The group Effa is integrated in the majority of local capitals and regions. The principal shareholder is the Uruguayan entrepreneur Eduardo Effa.

Antoniux, Effa’s CEO, said that for now the Uruguayan business does not have other projects planned for auto manufacturing in Uruguay. “The truth is that is a tough feeling, because the vast majority of what we built here we built with 100% Uruguayan effort. Nevertheless, we understand that this [the sale] was the best alternative for continuing the project”, he explained.

Despite having some difficulties, Effa Motors group will continue production in Manaus, a the free trade zone within Brazil. El Observador has learned that the Lifan Industrial plant could begin to gradually resume operations later this month or early September. Today the plant has 250 workers who are on unemployment insurance.

The national industry director, Sebastián Torres, told El Observador yesterday that the Uruguayan government sent several documents that Brazil had requested to enable the reclassification of the company. With this reclassification, the business will be able to resume exports to Brazil under the automobile trade agreement between the two countries.

When Lifan announced their interest in investing in Uruguay they expected to invest more than $150 million USD. Lifan’s plans include investing in vehicle painting, transmission and motor assembly in order to produce new models for the whole region and comply with the minimum regional requirements for the automotive agreement with Brazil.

This Uruguay Business Reports news article is a translation of an article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay New Brief: Uruguay’s Industrial Production Falls 3%

The Uruguayan chamber of Industry reported that in the first trimester of 2012 Uruguay’s industry only used 63% of capacity, a decrease of three percentage points compared to the same period in 2011.

According to the report, the principal reason that businesses did not utilize more of the nation’s industrial capacity was “aspects related to the competiveness of the domestic market”.

Companies in the food, beverage, tobacco, paper and printing, chemical, and plastic industries all cited the domestic market as the primary reason for lower industrial production.

The trade group also reported that “nevertheless, it is worth noting that this indicates a weakening trend since each time less business leaders report this (the domestic market) as the reason they are producing below capacity”.

This Uruguay Business Reports news brief is a translation of a news article that appeared in the Uruguayan newspaper Unoticas. The original article, in Spanish, is available here. Uruguay Business Reports translation by Donovan Carberry.