DESCRIPCIÓN DE LOS PROCESOS DE PRODUCCIÓN

The transformation industry is very often considered as too fragmented to be subject to more effective control by the government, to the point that some high ranked officials suggest it is impossible to exert control. The difficulties are also derived from the enormous number of uses for petro­ chemical products. We do not agree that close control on the activities of those industries is impossible, since the suppliers of the feedstocks are very few and can have a systematic knowledge of their customers and what they are manufacturing. Control is important to avoid the growth of the black market for certain petrochemical raw materials, especially those segments of

relative shortage of the products. An illustrative example is the case of polyethylene (low density) of which there is a shortage in Brazil. Some companies receive the product and sell it immediately without processing to other companies in the black market. This is possible due to lack of control exercised by the three producers - Politeno, Poliolefinas and Union C a r bide.

3,9.3. Present Problems of the Transformation Industries in the North East

(a) Unbalanced Planning

The first and one of the major problems in the planning of the NPP lies in the fact that planning for the transformation industries were made after the planning of the basic complex and apart from it. It started too late. In this sense, the NPP, as it has been conceived, is at most a plan for a big industrial project rather than for a pole (see 2.2 and 2.4.5d).

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In fact, fundamental questions lie at the root of the whole project,

what needs the pole and its transformation industries sure trying to attend, what benefits they are bringing to the community must always be considered

in the development of the whole NPP in its several stages. Seeing that the enterprises come to offer goods and services for the conmunity, these

aspects should be thoroughly discussed. For a poor population such as the

North East only a few of the products based on petrochemicals feedstocks could be considered essential in terms of his basic needs of health, nutrition, housing, hygiene, education etc. Those industries provide a good service, however, in terms of jobs, in spite of the small number created directly. The ideal would be a marriage of both - essential goods and

services. As far as the consumer end industry is concerned, the external objective of its production is not prejudicial, what can be harmful is the

aspect of the products coming from the basic complex without further processing. The reason is that the former are important to build the industrial web

of new plants as included in the notion of growth poles. (b) Underutilised Capacity

This problem is more acute in Sao Paulo where the transformation industries are already well established, but there is a shortage of some petrochemical

feedstocks such as LD-Polyethylene. But even in the North East whose regional

industries absorb only around 10% of the pole output, many companies have had to reconcile themselves to run well below capacity due to shortage of feedstocks. It is an apparent contradiction that the government intends to back the develop­ ment of this industry in the North East and at the same time causes many problems for its growth. The first problem is to leave it with unutilised capacity by an insufficient quota of raw materials, since the policy of the pole is to provide feedstocks for enterprises all over Brazil not only in the NE, making the present national production fall short of the national installed capacity of the transformation industry. According to field research the

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majority of the plastic industries in the North East can increase output if a higher quota of feedstocks is delivered. In this group, we can put especially those companies processing polyethylene for domestic appliances, plastic bags, toys, slippers and sandals, for which there is an open market in the region.

(c) Payment Policy

Much more than the unutilised capacity for the transformation industries is the payment policy of the pole. Those small enterprises scattered

through the different states have to pay for their raw materials in 30 to 45 days. If we discount a week for transport, it leaves only 21 to 36 days

for payment, when they have to sell their consumer goods with credit of 90 to 120 days at the market. It is easy to see a continuous process of fast

decapitalisation. After a few months, they lack working capital to

operate their own businesses. That is one of the most serious disencouragement of the transformation industries in the North East.

(d) Prices of Feedstocks

At the beginning of the last pole some products were much more expensive in Brazil than in the World market, which made domestic prices much higher than imports. Brazilian policies, however, do not allow imports when there are available products or their similar in the home markets. That is a fair measure to protect the domestic industry but it produces additional problems to the consumers. Some companies have the price of their raw material increased in a disorderly fashion after the implementation of the pole. Fortunately, this is a temporary problem, because the instability of the world prices for oil have increased dramatically the prices of petrochemicals to the point that Brazilian prices are nowadays better than in the international market.

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majority of the plastic industries in the North East can increase output if a higher quota of feedstocks is delivered. In this group, we can put especially those companies processing polyethylene for domestic appliances, plastic bags, toys, slippers and sandals, for which there is an open market in the region.

(c) Payment Policy

Much more them the unutilised capacity for the transformation industries is the payment policy of the pole. Those small enterprises scattered

through the different states have to pay for their raw materials in 30 to 45 days. If we discount a week for transport, it leaves only 21 to 36 days

for payment, when they have to sell their consumer goods with credit of 90 to 120 days at the market. It is easy to see a continuous process of fast

decapitalisation. After a few months, they lack working capital to

operate their own businesses. That is one of the most serious disencourageraent of the transformation industries in the North East.

(d) Prices of Feedstocks

At the beginning of the last pole some products were much more expensive in Brazil them in the World market, which made domestic prices much higher than imports. Brazilian policies, however, do not allow imports when there are available products or their similar in the home markets. That is a fair measure to protect the domestic industry but it produces additional problems to the consumers. Some companies have the price of their raw material increased in a disorderly fashion after the implementation of the pole. Fortunately, this is a temporary problem, because the instability of the world prices for oil have increased dramatically the prices of petrochemicals to the point that Brazilian prices are nowadays better than in the international market.

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(e) Poor Market

The size of the North East market is undoubtedly a restriction on the development of the transformation industries in the region.

A manager of a 600 ton plant has synthesised the problem in a simple sentence. What is the purpose of creating more industries in the North East in our business - sleeping blankets - if we can deal with the whole

regional demand with our installed capacity? As many petrochemical products are typical of middle class, the only alternative is the external or inter­

national market. Lack of jobs, low wages, poor communications (roads)

made petrochemical products a luxury inaccessible for a miserable population. In fact, many industries throughout the North East have tried to penetrate the South East markets with good results up to now. The majority of the middle and large companies of this sector in North East have managed to put part of their output in the South East and also South markets, what must be seen not only as a commerical policy, but survival strategies. Of course, this aggression of the North East is commercially healthy, but the problem behind it is the extreme poverty of the region in general. As these industries are supposed to have a social impact in terms of jobs and industrial déconcentration, there is no point in stopping their growth, even, if their production is entirely for the external markets. The return would be gained in terms of income and wages. The problem in this strategy is that the South East industries are also running far below capacity due to the recession in the Brazilian economy, receiving also insufficient quotas, while the North East industries have received tax incentives to grow. The result, of course, is the export of unemployment from the NE to the SE.

(f) Lack of Experience

A lack of experience of the local enterprises on those segments of industries based on petrochemical feedstocks leads to a shortage of a clear understanding of all the possibilities of some products, such as

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polyethylene for instance, the exact dimension of the industry, the profita­ bility of its derived products. There is also a shortage of managerial know-how of

the sector. Managers do not feel at home to develop these -products, despite the good will and zest with which some enterprises come into the sector. The development of new products in petrochemistry needs a good know-how

and infrastructure. Some firms do not manage to develop new domestic appliances, for instance, because they do not have a good supply of tools or operators to produce some mechanical devices to give the petrochemical raw material' the shape they desire. The knowledge to make some plastic cables and a plastic shoe is similar but it needs a good mechanic instrumentist to shape the metal plates and sheets to trams form PVC and LDPE in those objects. A lack of skilled labour in the North East maikes this problem even worse. X have found these mechanics working on a part-time basis for several different firms because there are so few of them in the market. The size of

the North East market will not allow the processing of more than a small percentage of the NPP output. Under these circumstances, one has to think in terms of national or even international markets. There is an incongruence where the central units is planned in a national strategy and the trans­ formation industries have to be restricted to local boundaries.