In the second and concluding instalment of his two-part article, Daniel Moffat, Managing Director, Moffat Consulting & Technology, UK, continues to discusses the Latin American market for machinery imports. Having already discussed the various barriers that stand in the way of the would-be importer, he casts his eye on mining machinery and the rentals market, as well as drawing conclusions.
With mining accelerating and extraction under pressure to deliver raw materials to meet world market demand, it is believed that Brazil’s home market has been slow to support the demand for machinery in this sector. It has appeared recently that the import rules and tax levy have been relaxed and, in some cases, equipment has been exempt from the various restrictions, on the condition that it can be proven that the equipment is for mining projects.
The rental industry in Brazil is becoming an interesting and attractive proposition. It is predicted that this will be the next big-growth area. According to government figures, rental is growing at around 15% per year and provides a good revenue strategy for the home market as well as investment opportunities for major global manufacturing brands.
Due to the size of the country, rental could also prove attractive to the contractor, with its potential to cut costs because of the distances owned-machinery might have to be transported from project to project. Renting machinery for specific projects is a clearer and simpler process when compared to purchasing. With rental finance, valuations and inspections are not required; the rental company is able to manage its own logistics, as well as providing employment for a local labour force. Many opportunities exist within Brazil for businesses to implement rental strategies in association with local partners.
It is difficult to estimate just how big this market could potentially become, as conclusive global and localised statistical data is not easy to come by. The Association of Equipment Manufacturers in the US, in its report of ‘Exports by World Regions and Top 10 Countries’, stated that, in 2011, construction machinery exports to South America increased by 39%, with purchases worth US$4.3 billion. With Brazil dominating the construction machinery and equipment trade in South America, many global OEM’s are now choosing to locate themselves here, and using Brazil as the springboard for exports to other countries in the region, including Argentina, Chile, Peru, Central America, Mexico and even the US.
The Latin American market is clearly maturing and, as new construction equipment brands arrive in Brazil, the market is demanding better levels of after-sales support. Competition in the Brazilian market is fierce, and newcomers will be judged on their ability to deliver strong support as well as a good product. Indeed, local companies are regarding this as an important factor when evaluating prospective partners. Just seven years ago, there were around 10 manufacturers operating in Brazil. Today, over 30 brands are actively being imported or manufactured in the region with many of the more recent market entrants being Chinese. Since China’s internal market shrank by approximately 40% in 2010 – 2011, Chinese manufacturers have turned their gaze elsewhere, with Brazil being a prime target.
Chinese manufacturers are on track this year to become the second-largest global exporters of construction equipment, but it will take some time for them to pose a threat to established suppliers. In late 2011 construction equipment exports from the USA stood at US$153.2 billion global, with a 15.7% market share, followed by Germany (11.5%), Japan (10.8%) and China (10.2%). With he Far East emerging as a rival to traditional players like Caterpillar and Komatsu, Latin America could well become its proving ground.
Written by Daniel Moffat.
Edited by Jack Davidson.
Read the article online at: https://www.worldcement.com/the-americas/04102012/latin_american_machinery_imports_market_part_2_019/