Brazil: Riding the Economic Waves

January 3, 2003

The Brazilian sector of dimensional stone gained, in the last few years, an incomparable attention from the Brazilian government, associations and consultants.
The Exterior Chamber of Commerce in Brazil selected 55 industrial sectors with great potential for export to be part of its Special Program for Exports. Of the ten considered priority, one is dimensional stone.
Each one of the industrial sectors selected Sector Managers to coordinate with dozens of other managers from different levels of public administration. The task was to create a complete document presenting the actual condition of the production network; identifying obstacles to making Brazilian products competitive; and presenting strategies to increase exports.
As a result of a study subsidized by ABIROCHAS – Associação Brasileira das Indústrias de Rochas Ornamentais – “Rochas Ornamentais do Século XXI” (compiled and organized by geologist Cid Chiodi Filho and Eng. Carlos Peiter, among others) gives a precise and complete view of the stone sector in Brazil and beyond. In this second article of a series of three in Stone Business, details from the study give new insights to the Brazilian stone industry.

By Roseli Perrone

1999 – THE TRANSITION BEGINS
In 1999, the international market for dimensional stone recuperated after the Asian financial crisis in late 1997. The Brazilian export during this period totaled $232.4 million with 983,600 metric tons, for a percentage growth of 10.4 percent in value and 5.1 percent in weight compared with 1998.
Two important factors appeared in 1999 in Brazil; first, the percentage increase of finished and processed stone grew faster than raw material, marking a major change in the Brazilian stone sector. And, second, the percentage increase in weight (36.7 percent) outpaced value (25.5 percent) of processed stone – the effect of high competition, fueled by China in the international market in the 1990s, which reduced prices for processed stone.
Brazil also saw an increase in the number of export companies of granite slabs from 89 in 1998 to 130 in 1999, as well as the number of Brazilian stone export companies from 371 in 1998 to 433 in 1999. The country also experienced segmentation of the stone sector in states with no tradition in the stone, such as Mato Grosso, Paraíba, Rondônia, Acre and Goiás.

THE SUCCESS OF 2000
The cycle of growth continued in 2000, but what was really interesting in the Brazilian sector was that 56.4 percent of the total stone export shipped as processed stone, with a value of $153.3 million. The growth solidified Brazil’s so-desired change in stone exports from raw to processed material.
In the external market, polished slabs have a value three- to four-times greater per cubic meter than the value of raw blocks. Final processed products (tiles and cut-to-size pieces) have a value six to ten times greater per cubic meter than raw stone. Brazil had an increase in 2000 of 14.6 percent in weight and 8.73 percent in value in processed stone from 1999 exports.
In 2000, 508 export companies in 22 states formed Brazilian stone’s export base. Espírito Santo, the state with the principal lodes of marble and granite, is responsible for 42.7 percent of the total Brazilian export value, and for half of the exports of processed stone. Rio de Janeiro moved ahead of Bahia to become the third-biggest exporting state; meanwhile, Minas Gerais balanced the decrease in export of raw blocks of granite with increased shipments of slates and quartzite.
During 2000, Brazil gained the position of second biggest exporter of slate (ardosia) in the world, ranking ahead of China and surpassed only by Spain. Also, during this period, Brazil jumped from 15th to eighth in the world for commercial transactions of special processed stones.

2001 – RETRACTION AND RE-DIRECTION
Estimates called for Brazilian stone exports to grow by close to 20 percent in value in 2001, considering the heated international market during the year 2000. Unexpected events in Brazil and other parts of the world, however, reversed the market and caused export values to drop – but only by a small 0.15 percent.
The economy in Brazil experienced recurrent inflationary pressure, high levels of foreign-exchange devaluation, and the economic crises of neighboring Argentina. In particular, it’s important to mention the energy crises that Brazil went through in 2000, as well as increased taxes imposed by the Federal Government.
Worldwide, the Japanese economic crises, combined with the stagnation of the European economies and the deceleration of the economic growth in the United States, jeopardized stone-export projections and estimates; the United States is Brazil’s biggest buyer of processed stones, taking 71 percent of exports. Even before Sept. 11, economic indicators made a strong case that the international market was in recession.
As a result of the economic recession in North America, both India and China – in heated competition for the international market – priced their products even lower. The below-real-cost strategy was a negative move, but it appeared to succeed.
In 2001, the median price for Brazilian processed stone dropped by 6.44 percent when compared to 1999. The total export of processed stone for 2001 was $168.63 million and 326,979 metric tons, which respectively represents 60.2 percent and 29.7 percent of the total stone export.

2002 – RECUPERATION OF GROWTH
The retraction of Brazilian stone on the world market in 2001 has already been reversed with an increase of 13.45 percent in value for exports during the first quarter of 2002. Moreover, the total of processed stone in this period totaled 64.4 percent of the total export, which represents a percentage growth of 4 percent in the first quarter of 2002.
The upbeat movement is reinforced by the growth of more than 5 percent of the North America gross domestic product during the first trimester, and by the warm-up of the economy in most of the buyer countries of the European continent. Projections of growth for 2002 are estimated at between 15 percent to 20 percent of value, recapturing the same growth trend seen before 2001.