The Only Way Is Up
Crisis, resilience and the route back to competitiveness
Discerning readers may have already noted the irony of the headline. Any expectations that 2025 might, finally, be the year that Latin America’s chemical and petrochemical sector would turn the corner and make substantial progress towards recovery, have not come to fruition. It follows the global chemical and petrochemical industries’ slide on a downcycle since 2022, in one of the longest global petrochemical and chemical industry downturns in living memory.
It is a story playing out across the region’s key economies. In Mexico, the host country for this year’s 45th annual meeting of the Latin American Petrochemical and Chemical Association (APLA), 2025’s chemical market has been defined by “caution and slower momentum,” according to Martín Toscano, Mexico president for specialty chemical manufacturer Evonik. Brazil’s chemical sector, the region’s largest, faces a “concerning” outlook for 2025, said André Passos Cordeiro, executive president of industry association Abiquim, as data shows declining year-over-year production and utilization rates in Q1 2025. In Argentina, Ariel Stolar, Pampa Energía’s petrochemicals director, put it bluntly: “Though 2024 was manageable, 2025 looks very difficult, with many companies likely to lose money.”
Juan Pablo Gazmurri from Chile’s ASIQUIM association observed slowing investment in chemicals there, held back by a restrictive permitting system; though he balanced this against a growing share of GDP. Colombia’s was perhaps the industry for which executives shared the most positive panorama: Ecopetrol’s Felipe Trujillo López expressed that he was “cautiously optimistic, amid local and geopolitical challenges.”
Against that backdrop, the new hope is that efforts to rebuild – to cut costs, maximize efficiency and boost resilience – will prove to be the medicine that can revive Latin America’s industry, re-establishing the region as a competitive node in the global chemical and petrochemical trade.
It’s not over yet
The causes of this difficult situation are no secret. Recent years’ simultaneous petrochemical capacity expansions by key global producers (namely the US with its shale gas-based polypropylene (PP) and polyethylene (PE) developments, and China’s drive for polymer self-sufficiency, diverting its would-be imports elsewhere) have depressed global prices. Meanwhile, as the highly-consuming middle classes of many Latin American markets have continued to grow, competition is fierce. “Latin America has emerged as an important destination market, with products from Asia, the Middle East and the US competing for customers,” assessed Jesse Tijerina, Head of Global Polymers, Oil, Fuels, and Chemicals for S&P Global’s chemical insights unit, which has squeezed margins for Latin American producers in a market flooded by overcapacity.
Piling on more pain is the widely held perception that the light at the end of this tunnel remains barely visible. “It is hard to think of another moment in which such a huge amount of surplus capacity has entered the global market. The recovery will take time,” advised Wagner Costa, partner at management consultancy Bain & Company.
Many of those asked for their expectation of when the good times may return could not muster particularly happy news: “This imbalance is expected to go on until 2028 or even further,” gauged Simone de Faria, Latin America lead at polymers intelligence firm Townsend Solutions, while Javier Sato, CEO of Argentina polypropylene producer Petrocuyo, concluded: “We anticipate that global demand will take until around 2030 to absorb current excess capacity.”
China, in particular, figured centrally in several chemical executives’ search for an explanation for their industry’s circumstances. “With state backing, vast scale, abundant raw materials, and falling shipping costs that make Latin America more accessible, Chinese producers will continue to be exceptionally competitive given their very low unit costs,” predicted Gabriel García Polignano, executive director of Argentine trucking company Celsur Logística.
The world’s 2nd-most populous country has successfully transformed itself into its most productive across several strategic sectors including steel, solar photovoltaics, rare earth elements and electric cars, while the Western world has steadily deindustrialized. Increasingly, this dynamic extends to petrochemicals: By 2034, China is expected to produce nearly half of global PP supply, and it already outputs a third of the world’s PE, per Argus analysis. “China’s aggressive chemical production and market oversupply are impacting the trade flows. The influx of low-cost Chinese chemicals is intensifying competition and further pressuring margins,” assessed Patrick de Heide, overseas director for chemical shipping group HOYER.
Other analysis turned inwards. “Latin America’s chemical and petrochemical sectors have faced a persistent lack of investment, leaving them reliant on imports,” underlined S&P’s Tijerina.
Pemex’s aging productive assets are the standout example of a region-wide tendency for underinvestment and deterioration. This domestic supply limitation has diminished petrochemical production scale, further reducing unit margins. Though Mexico’s government has promised new investment in the state oil company, it comes only following desperate calls from the sector for cheaper feedstock supply. Similarly, in Brazil companies like Braskem are seeking to diversify their feedstocks to improve competitiveness, coordinating major investments with Petrobras to cut through the headwind of high raw material costs.
Arguments for change point at protectionist policies, pursued by a number of countries across the region, including Brazil and, until recently, Argentina. “Protectionism leads to higher import prices locally to support domestic production. However, these costs are passed on to the supply chain, contributing to higher inflation, which in turn leads to higher interest rates, which is extremely detrimental to investment,” explained Townsend’s de Faria.
She illuminated what she called a “vicious cycle” for Latin America: high import tariffs, freight costs and expensive US dollar exchange rates, leading to low competitiveness and thus lower investment, which in turn encourages the reinforcement of those economic frictions as a shield. Yet, as the Argentine case shows, protectionist tariffs’ removal may be easier said than done: Their abolishment has exposed local producers to unfettered international competition, making it near-impossible for many to square the circle versus cut-price imports after so many years in a walled garden.
The overarching challenge for Latin America’s petrochemical and chemical industry, then, is to break out from this malaise, balancing competitiveness with resilience. Without decisive investment, structural reform and regional cooperation, the sector risks long-term stagnation in an increasingly globalized and oversupplied marketplace.
“PoQ.”
Name, Title, S&P
Weathering the storm
For now, many companies have elected to bide their time. Understanding that there will not be a rapid end to their current predicament, various firms’ strategies have pivoted toward cost-cutting, efficiency, and – the key theme, referenced with remarkable consistency throughout GBR’s executive interviews – resilience. “The chemical industry is currently experiencing a challenging phase in its cycle. Resilience is crucial in such a context, and those companies investing in enhancing their toolbox will be well positioned when the market enters a more favorable phase,” said Bain’s Costa.
This effort is playing out in different ways across the industry. For Petrocuyo, the chosen approach is to cut costs: “Our main challenge is managing costs amid shrinking margins across the petrochemical industry, a critical factor for survival. We remain focused on efficiency while maintaining a long-term view of future opportunities,” described CEO Sato.
Others, like Brazilian chlorine and PVC producer Unipar, are favoring a strategy of investing in their facilities, upgrading their technologies, expanding production and opening new sites – betting on the benefits of robustness and scale. In such circumstances, all-new business uncertainties, disrupting those investments and raising costs further, would be unwelcome. Enter US President Donald Trump’s import tariffs. A still-developing system of reciprocal and punitive tariffs has left virtually the entire global industrial system in a state of shock in 2025, as firms await a stable outlook in order to make long-term decisions. “Tariffs have added volatility to the global chemicals and plastics trade, disrupting flows of finished products, feedstocks, and derivatives,” assessed distributor and trader Tricon Energy’s Americas polymers director, Rafael Gerlein, adding: “Tariffs risk prolonging and unevenly shaping any recovery.”
“PoQ.”
Name, Title, Bain & Company
This does not make for a pretty picture. “Geopolitical uncertainty, including potential tariffs and regional conflicts, is causing major disruptions across chemical markets, dampening activity, liquidity and risk appetite,” evaluated George West, director of chemical intelligence for industry tracker ResourceWise.
The US is an important export market for Latin American chemical industries, including for Mexico and Brazil, whose respective 25% (still negotiating) and 50% (potentially rising) tariffs are acting as a major barrier. Furthermore, amid uncertainty, lower activity across various industries further risks dragging down economic growth, potentially further shrinking demand for petrochemical and chemical inputs. “What the industry needs more than anything is clarity on the tariff front so strategies can be developed to mitigate their impact,” concluded S&P’s Tijerina.
Still, the outlook is not universally negative. Although Brazil and Mexico stand out within the global tariff regime, their rates are the result of unique circumstances. For Mexico, the Trump administration’s desire for a harder southern border and reduced ingress of the deadly drug fentanyl; and for Brazil, Mr. Trump’s personal support for Jair Bolsonaro, sentenced to jail on coup-plotting charges. “Latin America’s relatively neutral geopolitical stance makes it less exposed to tariffs and other disruptions compared to markets like Europe,” believed Daniel Amador Torra, commercial director for distributor KH Chemicals.
There was even a suggestion from some quarters that Latin America is naturally predisposed to make the most of this challenging scenario. “Clients in the region have adapted to a state of permanent crisis. Historically, geopolitical tensions would have triggered purchases driven by fears of price hikes. This dynamic has reversed; clients are strategically leveraging lower prices to increase their stock,” illuminated Eduardo Arus, general manager for Latin America at distributor Snetor.
Arus’ remarks point to a deep sense of resilience among Latin America’s businesses. Indeed, Gina Fyffe, CEO of trader Integra, went further, indicating, perhaps, a path to renewal: “Resilience and innovation define the region. By leveraging local advantages and targeting niche markets, Latin American firms are adapting, building competitive strength despite difficult global conditions,” she said.
The road to recovery
And so, we arrive at the big question: “What next?”
Thankfully, there is good news. Seeking to finally free themselves from the years of challenges described, there is a newly emerging optimism in Latin America’s chemical sector. “The chemical sector appears to be re-entering an upward cycle. Most companies are concentrating on building resilience, and those efforts are likely to be rewarded. Although the moment is complex, it is also filled with opportunity,” said Bain’s Costa.
Similarly, Latin American sales manager for chemical producer Huntsman, Hermínio Muchon, spoke of a “hunger for business and growth across the industry,” in the face of market uncertainties. In a sign of the industry’s maturity, this optimism is paired with a pragmatic acknowledgement that the recovery will not be an easy task. “Global majors are rationalizing and optimizing production, closing down plants, and cancelling new projects. If this trend solidifies, recovery could speed up as soon as 2027 or 2028 due to an accelerated rebalancing of supply and demand,” predicted S&P’s Tijerina, anticipating the potential for a faster recovery as producers rationalize their assets and make the tough decisions that could push prices back upward.
Also acknowledged were the particular advantages of Latin America as a region. Many of the challenges its petrochemical and chemical industries are facing are not, after all, unique to Latin America, driven instead by global factors affecting virtually all regions and firms. Meanwhile, the region’s truly exceptional factors could prove instrumental to newfound strength: “Latin America benefits from proximity to competitive feedstocks, proximity to the US market, favorable trade agreements, and improving infrastructure, positioning it as a hub for investment. The region is both a growth market and a strategic base for the global industry,” asserted Tricon’s Gerlein.
Indeed, Gustavo Cienfuegos, managing director for Latin America at Topsoe, suggested this dynamic could already be in motion: “While global project development has slowed due to political challenges, Latin America maintains steady growth, with many projects in engineering aiming for final investment decisions soon.”
All that can be paired with new, cross-industrial trends that are having their own positive effects on the chemical sector overall. “Technological advances are unlocking new applications across the chemical sector. For example, while EVs were expected to reduce monoethylene glycol demand, they instead require more due to its use as battery coolant,” explained ResourceWise’s North American sales director, Steve Wilkerson.
In Latin America, such opportunities abound. “Latin America’s strong potential in data centers, food manufacturing, and paper, presents opportunities for growth in advanced technologies that help to reduce costs, improve efficiency, and ensure compliance with these industries’ demanding quality requirements,” suggested Luis Felipe Carrillo, SVP for Latin America at global water purification company Ecolab.
Latin America’s chemical and petrochemical industry still faces one of its toughest cycles in living memory, yet resilience, innovation and pragmatism are beginning to point toward recovery. While global oversupply and geopolitical headwinds remain significant, the region’s proximity to feedstocks and major markets offer distinct advantages. To seize them, companies and governments must prioritize investment, reform and collaboration. If they succeed, Latin America can transform today’s prolonged challenges into the foundation for long-term competitiveness, resilience and sustainable growth.