Latin American firms eye Katrina rebuilding

/ Source: The Associated Press

From Mexican cement to Brazilian plywood, Latin American makers of construction materials see a business opportunity in the rebuilding efforts following Hurricane Katrina — and a chance to breach trade barriers that limit U.S. sales of their goods.

Many exporters hope Katrina will accomplish what Latin American politicians and business leaders have failed to do: Convince American authorities to lower or eliminate tariffs on imports from emerging economies.

Even if the trade doors slam shut after the U.S. Gulf Coast rebuilds, exporters see the current opening as a chance to build long-term business relationships with American buyers.

Already, Brazil's wood industry is poised to ramp up production, betting exports to the U.S. like plywood and floor boards could increase $500 million this year alone.

Mexican, Colombian and Chilean manufacturers of cement, bathroom fixtures, windows and ceramic tiles are hoping to tap into demand they say could last years during the rebuilding process.

U.S. officials signaled this week they may reduce high tariffs on Mexican cement and Canadian lumber, though any such effort is sure to draw opposition from some American lumber and cement producers who contend imports are being sold in the United States at unfairly low prices.

But trade experts believe the U.S. will be forced to reduce the trade barriers for at least a year or two to meet demand and stem price increases.

"That will mean Canada for lumber, and Latin America also has a lot of the most relevant supplies that are needed in the United States," said Gary Hufbauer, an economist and senior fellow at Institute for International Economics in Washington, D.C. "There will be tariff relief."

Brazil's wood industry was hurting before the hurricane struck, with manufacturers of everything from doors to window frames cutting production after the dollar weakened substantially against Brazil's currency and made Brazilian products more expensive in the United States.

But since Katrina, the price of Brazilian plywood has soared from $200 per cubic meter (35.3 cubic feet) to $300 this week, said Luis Carlos Barros, president of the Brazilian Wood Industry Association.

In southern Brazil, plywood makers are making plans to hire more workers to meet increased U.S. demand. The association, which had predicted $2.5 billion in exports of wood products to the U.S. this year, has bumped its forecast to $3 billion.

Later this month, the group will try to convince U.S. officials to eliminate an 8 percent tariff on Brazilian plywood imposed in July — using the hurricane's impact as justification.

Barros hopes a victory would lead to a permanent elimination of the tariff as consumers get accustomed to Brazilian plywood.

"I don't see why we should have this tax over the long term," he said.

Hufbauer and other trade experts doubt any temporary trade openings will last.

"As American industries come back on line, I expect the U.S. policies will come back on line," said Peter Morici, an economist at the University of Maryland and former chief economist of the U.S International Trade Commission.

Latin American exporters, he added, should only expect "a year or two of money." But he agreed exporters will likely make big money during that period.

In Mexico, Cemex SA — the world's third-largest cement company — will likely reap the most profits as it lobbies the U.S. government to get rid of an antidumping tariff in place for nearly a decade.

Negotiations to reduce or eliminate the nearly 55 percent tariff started before Katrina, but have intensified as demand for concrete rose after the hurricane.

Carlos Gonzalez, an analyst for the brokerage arm of Ixe Grupo Financiero SA in Mexico City, said eliminating the tariffs would save Cemex $32 per ton of concrete. He said the tariff didn't make any sense anymore, because much of Cemex's concrete is produced in the United States.

"It's absurd," Gonzalez said.

Elsewhere around Latin America, countries with cozier trade relationships with the United States anticipate they will build on already strong exports to the country.

Chile, which has a free trade deal with the U.S., expects to boost exports of wooden door and window frames and flooring by $50 million, said Rodrigo Diaz, a top analyst with the country's Asexma export association. Metal cable and pipe exports could also jump $50 million.

Colombian exporters as early as Friday will present the U.S. with a list of mostly construction-related products that could be provided for the Gulf Coast recovery effort, said Javier Diaz, president of the country's National Association of Exporters.

Despite tariff-free access to the huge U.S. market, Colombia's U.S. exports of construction products is relatively small. But Diaz said the hurricane recovery effort will give Colombian exporters an opportunity to build long-term partnerships with U.S. importers.

Barros, of the Brazilian wood industry association, sees opportunities far beyond the initial rebuilding.

Brazil for years has been sending picket fence products to the United States — even though the product is virtually never seen across Latin America's largest country because Brazilians prefer towering stone or cement walls to boost security.

"After Americans rebuild, they'll eventually want to make their homes pretty," Barros said.