Social unrest disrupts a country on the rise
Image courtesy of Ecopetrol
Before the pandemic, a growing middle class, prudent macroeconomic policy and a strategic position as the gateway between South and Central America made Colombia Latin America’s leading light and fastest-growing economy. Although the country’s economy has rebounded well after a disastrous 2020 (a fate suffered by every Latam nation), government measures to mitigate the economic impact of Covid have enflamed social tensions.
In April 2021, Colombians took to the streets to protest a proposed reform that would have lowered the threshold at which salaries are taxed, eliminating many of the exemptions enjoyed by individuals as well as increasing taxes imposed on businesses. The rallies escalated, and by the end of May, protesters had alleged more than 2,000 instances of police brutality, with over 50 having lost their lives.
Protests also brought the Port of Buenaventura to a temporary halt, impacting the flow of goods to and from the nation's largest Pacific seaport. “In total, approximately US$100 million was lost in the chemicals and plastics industries due to political unrest,” revealed Daniel Mitchell, president of Acoplásticos, Colombia’s chemical industry association.
Despite the turbulence, Colombia’s chemical sector witnessed a positive growth rate in 2020 due to its role in manufacturing disinfectants, alcohols, health products and plastics used in PPE and packaging for food. In 2021, the industry is achieving results even better than pre-pandemic performance. Comparing production figures from January to April 2019 to that of January to April 2021, basic chemicals grew 30%, other chemical products grew 11%, and plastic products grew 11%, detailed Mitchell, before noting: “The first semester of 2021 is already representing, in local currency, more than 75% of annual achieved sales the previous year.”
Vertically integrated companies, such as Colombia’s state-owned oil and energy company Ecopetrol, have been able to capitalize on rising demand without suffering the more severe impacts of supply chains that rely on imports. “We produce gas, have raw material feedstock and petrochemical assets, and we sell raw materials to our daughter company Esenttia,” explained Pedro Manrique, Ecopetrol’s vice president commercial and marketing, adding that the company has also been making use of its trading business to expand across the region.
““I am confident that Colombia will remain an attractive investment destination as the country has many positive aspects. For over 40 years, we have had a stable economy, stable governments and a disciplined fiscal regime.”
Daniel Mitchell, President, Acoplásticos
With regard to the energy transition, Manrique acknowledged that because oil demand will decrease over time, Ecopetrol is adapting its strategy to determine where it should invest: “The petrochemicals arm of Ecopetrol’s business is one area we expect to rise, with a target of two-digit annual growth in the coming years, doubling business volume by 2025 with the existing capacity.”
Colombian polypropylene producer Esenttia, part of the Ecopetrol Group, achieved record sales in 2020, according to president Juan Diego Mejía Mejía. “We shifted our focus onto exports, especially during the second half of the year, while guaranteeing supply to the national market, which enabled a speedy recovery,” said Mejía, affirming that this upward trend has continued in 2021.
Although plastics have been essential for food and medical packaging during the pandemic, the increasing green agenda and public move away from single-use plastics means that producers have to evolve. Mejía sees this as an opportunity: “Esenttia is working towards developing a much greener portfolio. We already offer green products such as masterbatches, biopolymers are being added, and we are building a factory to launch recycled plastics products by the end of next year.”
Oscar Santos Castro, president of CarboQuímica, the Colombian company that produces and commercialize chemical additives for the PVC, plastics, cosmetics, rubber and food industries, spoke of the influence the green agenda is having on his company’s product line. “We are in the process of developing recycled products that will be part of the circular economy and their carbon footprint will be considerably lower. This is our own technology that has already been installed in Cartagena,” he said, adding that each of CarboqQuimica’s business lines will have sustainable alternatives that will be on the market shortly.