By Patricia Perez, Economist, Latin America Pulp & Paper, RISI
SÃO PAULO,
July 2, 2010 (RISI) -
The past two years were very tough for the printing and writing industry as a cooling economic climate resulted in a deceleration in Brazil's demand growth. After presenting 7.4% annual increases in 2005-2007, demand dropped 6% in 2009, reflecting the local market downturn. Brazil is the largest market in Latin America for printing and writing grades, accounting for 38% of total printing and writing paper demand in the region in 2009. In terms of per capita consumption, while overall Latin America totaled about 9.6 kg per habitant, Brazil accounted for slightly higher figures, 10.7 kg per person, as economic growth and income are more essential than population as key drivers of paper demand.
Brazil is also the only significant exporter of printing and writing grades in Latin America and has managed to maintain a positive trade balance for these products since the 1980s due to its presence in the uncoated woodfree export markets. In 2009, in contrast to the lower demand level worldwide and the local currency appreciation, uncoated woodfree exports from Brazil increased 14% due to the extra output from International Paper's new Três Lagoas mill (with a capacity of 200,000 tonnes/year).
However, since the beginning of the decade net exports have been trending downward in Brazil. From 2003 to 2009, printing and writing imports to Brazil increased over 200% as a result of three major reasons. First, there was a lack of investment in new capacity, especially coated grades. Second, the current appreciation of the Brazilian Real has been stimulating imports and mining local paper producers' competitiveness. And third, according to the Brazilian Constitution, all paper destined to educational and informative purposes, such as books, newspapers and other periodicals, is exempted from taxes, in an attempt to encourage reading in the county. But, in recent years, part of the declared paper for those uses has been directed to other purposes, such as advertising and other commercial materials. While the duties for domestic paper sum 22% and for imported paper total 34-36%, the duty-free paper is totally exempted from any taxes - which consequently resulted in higher imports figures.
Patricia Perez works out of RISI's São Paulo office and can be contacted by phone at +55 11 3848-9051 or by email at pperez@risi.com.
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