Latin American Environmental Technology (LATTECH)
CASE NUMBER: 115
CASE MNEMONIC: LATTECH
CASE NAME: Latin American Technology Exports
I. IDENTIFICATION
1. The Issue
The U.S. Department of Commerce sponsored a Matchmaker Trade
Delegation to Argentina, Chile, and Brazil, December 1-9, 1994.
This matchmaker effort gave U.S. exporters (recruiting 40
companies) the opportunity to establish important contacts in the
markets for pollution control equipment and environmental
technology. Further, it was a mission directly following the Rio
agreements of 1992 United Nations Conference on Environment and
Development (UNCED) that affirmed the need to promote, facilitate
and finance enhanced access to environmental technologies to
developing countries through commercial channels.
2. Description
The growing concern about the environment as an important part
of the globalization process in the interdependent world economy
brings about more regulations and restrictions in Argentina, Chile,
and Brazil at the national level. This gives firms and industries
incentives to seek environmental technology, particularly pollution
control equipment, from developed nations to meet the new standards
and the requirements. The mission conducted by the Commerce
department has direct impact on trade and environment between
industrial countries and developing nations. It not only helps
developing countries to advance their technology and improve their
environmental conditions but also utilizes the growing markets in
these countries to extend U.S. exportations. The case illustrated
here focuses on the major pollution control equipment needed in the
above three countries, their environmental and economic conditions,
and the trade relations between these countries and the United
States.
This Matchmaker trade mission is part of a well-tested program
designed to match U.S. companies with potential business partners
in foreign countries. It provides direct access to key decision-
makers in Latin America's fastest growing markets for pollution
control equipment and environmental technology. On the one hand,
environmental concerns in these markets have spurred the demand for
multi-billion dollar projects such as waste and management
programs, especially incineration plants for both garbage and
industrial sludge. In addition, marketing opportunities in this
region are enhanced by the increased economic and political
stability and the trend toward liberal trade and investment laws.
On the other hand, U.S. economic interests in these markets have
intensified. Almost 60 percent of Latin America's imports come
from the United States, and in 1990, U.S. exports to developing
countries totaled more than $127 billion.
In Argentina, the government is in the process of
restructuring and defining environmental standards, regulations,
and enforcement at the federal, provincial, and municipal levels.
The creation of Secretariat of Natural Resources and Human
Environment (SNRHE) in 1991 made the task more focused. Purchases
of pollution control equipment alone are estimated to grow by 10%
in 1994, totaling over $14 million. The demand for services,
equipment and technology in Argentina is the following (see Table
115-1).
Table 115-1
Demand for Environmental Control Products in Argentina
General Pollution Control
Environmental consulting and engineering
Industrial waste treatment equipment
Hazardous waste disposal
Pollution control equipment for oil and gas development
projects
Controls for petrochemical production
Air Pollution Control
Smoke stack monitoring
Filtering systems
Motor vehicle emissions control equipment
Equipment for monitoring noxious gases
Water Pollution Control
Solid waste management
Hazardous waste treatment plant
Needs assessment for treatment plants
Sewage treatment equipment
River bed and bank restoration and maintenance
Sludge and debris removal
Feasibility studies
The Chilean market offers great potential for U.S. suppliers
of equipment to control air, water, and land pollution (see
CHILEAIR case). According to estimates of the National
Environmental Commission, $4 billion will be needed to handle
liquid industrial emissions alone. Large projects will include
water treatment plants for fish meal processing plants, and six new
water treatment plants for Santiago. Some companies have already
begun to invest in hazardous waste treatment and recycling systems.
Demand for incinerators is expected to increase due to their
aggravating effect on air quality. The following are other water
treatment projects currently under construction or planned for the
near future (see Table 115-2).
Table 115-2
Water Treatment Projects and Pollution Requirements
Projects
o Bio Bio River - water treatment projects ($8 million)
o Mapocho River - collector and interceptor
project ($12 million)
o Chuquicamata Copper Mine - Monitoring station
($21 million)
o Valparaiso - water treatment/transportation of
potable water ($141 million)
Requirements
Water quality monitoring equipment
Water treatment plants
Water pumps and filters for industrial use
Chemicals for water treatment
Air Pollution Control
Air quality monitoring equipment
Chemical plants to treat exhaust fumes from industrial
processes
Air pumps and filters for industrial use
Electrostatic filters for airborne particles
Catalytic converters for automobiles
Waste Disposal Management
Chemical plants to process sludge
Trucks and specialized earth moving equipment
Solid waste treatment plants
Vests and personal protection paraphernalia
In Brazil, Tiete River Basin Clean-up Projects is one of the
largest water pollution projects in the country. It includes the
construction of conventional sewage treatment stations and the
installation of interceptors and sewage collectors. Other large
projects focus on solid waste treatment and management. The lack
of residues is of great concern to local industry. The city of Rio
de Janeiro with a population of approximately 6 million produces
5,500 tons of waste per day and less than 10 percent of this volume
is processed by the existing recycling and composing facilities.
The environmental pressure gives the state the authority to close
down industries that do not conform to environmental standards.
Similar to the U.S. EPA's standards, firms in Brazil desire for
American suppliers of emission control equipment and catalytic
converters. The major demand for environmental services and
pollution control equipment is the following categories (see Table
115-3).
Table 115-3
Demand Categories for Environment Clean Up Technologies
Waste and Water Treatment Sanitation
Flow and liquid meters
Landfill management
Heat exchangers and cooling towers
Water quality monitoring and control systems
Water leak detectors, valves, pipe fittings, and analyzers
Incinerators
Sludge disposal and management (dehydration equipment)
Industrial filters
Air Pollution Control/Recycling
Emissions control and measurements
Systems compatible to EPA standards
Monitors
Recycling Technologies
Environmental Consultants
Pollution control
Environmental research
Project management
Waste management
Evaluating the symptoms and future potential from both sides,
Commerce Department decided that now is an opportune time to enter
the Latin American market. Most of the companies signed up so far
are small and medium sized firms including non-profit
organizations. Their participation in this event, combined with
the effort made by the Department of Commerce and foreign
commercial officers overseas, contributes to soothing the conflict
between trade and environment.
3. Related Cases
Keyword Clusters
(1): Trade Product = WOOD
(2): Bio-geography = TEMPerate
(3): Environmental Problem = DEFORestation
4. Draft Author: Z. Zhen Brayman
B. LEGAL Cluster
5. Discourse and Status: AGReement and In Progress
[INPROG]
A negotiated agreement was initiated between U.S. firms and
the U.S. Department of Commerce in terms of legal procedures on
conducting trade between the U.S. and importing countries. All
participants should sign an agreement with the Department of
Commerce to agree on certain criteria and conditions of
participation.
Currently Commerce Department is in the process of recruiting
U.S. companies to join the delegation. So far 32 companies have
signed the agreement. It is very close to the department's
original target with the possibility to enlarge the figure.
6. Forum and Scope: USA and BILATeral
7. Decision Breadth: 3 (Argentina, Chile, Brazil)
8. Legal Standing: TREATY
The U.S. environmental technology bi-lateral trade to South
America is directly following the agreement reached at the Rio
conference where the United States made the commitment of
increasing U.S. bilateral technological assistance to developing
countries, agreement between the U.S. and the three South American
countries, and the GATT regulations (see RIOTRADE case).
C. GEOGRAPHIC Cluster
9. Geographic Locations
a. Geographic Domain: South America [SAMER]
b. Geographic Site: Southern South America
[SSAMER]
c. Geographic Impact: ARGENtina
10. Sub-National Factors: NO
However, the case will involve projects in certain areas and
cities in each stop where local laws and regulations are applied.
11. Type of Habitat: TEMPerate
D. TRADE Cluster
12. Type of Measure: SUBSIDY
The U.S. Department of Commerce are sponsoring this trade
delegation and the trade specialists at the International Trade
Administration (ITA) are recruiting small and medium sized
companies to go to the region where foreign commercial officers
overseas will coordinate with the mission providing information
about the attending companies in the region.
13. Direct vs. Indirect Impacts: DIRect
14. Relation of Measure to Environmental Impact
a. Directly Related: YES Pollution Control Equip. [PCE]
b. Indirectly Related: YES Consulting services [CONS]
c. Not Related: NO
d. Related to Process: YES Pollution Air [POLA]
Particular projects in the region take years to complete and
will have an impact on trade measures during the process.
15. Trade Product Identification: Pollution control
equipment [PCE]
The product group also includes consulting services and
management services.
16. Economic Data
Table 115-4 shows various key macro-economic indicators for
the noted countries.
Table 115-4
Key Economic Indicators in Argentina, Chile, and Brazil
COUNTRY GDP Industry Unem. US Imp US Exp
Argentina 140 21.8% 6.4% 684(CV) 785(FAS)
Chile 27.3 20.6 7.0 1.4 1.5
Brazil 358 10.0 4.04 5.1 7.2
Notes: GDP is in $ billions, exports and imports are in $ millions.
CV indicates customs value calculations and FAS indicates Free-
Alongside Ship calculations.
Sources: International Financial Statistics Yearbook, April 1994,
South America, Central America, and Caribbean 1993, Europa
Publications Ltd., 1992, UN Statistical Office, Statistic Yearbook,
Vol. 38, 1990-91, and Industry Overview, "U.S. Industrial Outlook
1994", CD-ROM.
The following two tables illustrate the environmental
pollution conditions in Argentina, Chile and Brazil prior to the
mission. The Best Markets Reports for Pollution Control equipment
is based largely on information reported by 62 United States and
Foreign Commercial Service posts abroad in their individual Fiscal
Year 1994 Country Marketing Plans.
Table 115-5 shows key environmental indicators for the same
countries. It clearly shows that on basic measures there exists a
tremendous need for environmental technologies and services.
Table 115-5
Indicators of Environmental Pollution and Management
COUNTRY C02 CEMENT DEFOR CFC% H20% SANI%
Argentina 0.93 ... 6,091 0.39 45 64
Chile 0.71 ... 791 0.05 60 53
Brazil 0.36 950,000 10,974 0.71 93 65
NOTES: CO2 emissions are from 1990 and CFCs and halons from 1989;
1986 safe drinking water and sanitation data from 1988. The
measures include the following: fossil fuel/cement use is per
capita; annual deforestation level; CFCs/halons consumption as a
percent of world consumption; safe drinking water and sanitation
services as a percent of population.
Source: UN Statistical Office, Statistic Yearbook, Vol. 38, 1990-
91.
Table 115-6 shows the market sizes for certain types of
equipment for the three countries. It shows the potential for
exports. For example, if Brazil's current market for waste water
and treatment equipment is $100 million and 35 percent of the
population has not access to fresh water, then it is reasonable to
assume that this represents a potential of a $35 million market
over some period of time.
Table 115-6
Pollution Control Equipment Most Promising Subsectors
(estimated 1993 market size in $ million)
Argentina Chile Brazil
Air pollution control equipment N/A 50 100
Wastewater and sewage
treatment equipment N/A 42 130
Solid waste recycling equipment N/A 18 50
Clean technologies equipment N/A N/A 30
Source: Best Markets Report (BMR), ITA, 1994. (CD-ROM)
17. Impact of Measure on Trade Competitiveness: HIGH
Due to the environmental pollution pressure, governments in
these three Latin American countries have enacted or are in the
process of restructuring and defining environmental legislation and
regulations. This, coupled with deregulation and privatization
induces industrial sectors to seek environmental technology and
protection from developed countries. It is estimated that the cost
of handling industrial emissions, hazardous waste, and recycling
systems is high. The market potential over five years (starting in
1994) for Argentina was $14 billion, Chile $4.5 billion, and Brazil
$19 billion).
Tariff duties on these types of equipment are an issue. In
Argentina, it is 51 percent (33 percent import duties and 18
percent VAT); in Chile 29 percent (11 percent uniformed tariff on
imports and 18 percent VAT); and in Brazil, 53% percent.
18. Industry Sector: FABMET
19. Exporters and Importers: USA and BRAZIL
The United States exported $1.1 billion in environmental
technologies to Latin America in 1991. The U.S. accounts for 40
percent ($80 billion) of the world's export market in pollution
control equipment and technologies, according to the OECD (see
Table 115-6).
Table 115-6
Top 10 ET Importers from the U.S. (1993)
Top 10 $ Million
Canada 1,238.0
Mexico 1,000.0
Germany 710.0
Singapore 303.0
U. Kingdom 300.0
Italy 290.0
Taiwan 255.0
France 230.0
Australia 121.0
Chile 120.0
ET = Environmental Technologies
E. ENVIRONMENT Cluster
20. Environmental Problem Type: Sink Problems in general
The environmental problems discussed in this case is air and
water pollution and waste disposal technology and management, which
is mainly categorized as sink problems.
21. Name, Type, and Diversity of Species
Name: Many
Type: Many
Diversity: 56,215 higher plants per
10,000 km/sq (Brazil)
The large-scale of air and water pollution problems and waste
dumping into rivers in the region could threaten a multitude of
species. This can have substantial impact on many species that
live in rivers and oceans. Further, the pollution related
environmental damage such as global climate change would threaten
millions of species.
22. Impact and Effect: HIGH and PRODuct
As indicated at the beginning of the paper, massive
industrialization and urbanization in these countries result in
severe environmental damage. This includes air and water pollution
and waste management. The case has a positive product effect trade
on and environment from diffusing environmental technology for
pollution control equipment. It could produce scale effect as well
because the transportation of equipment may have a negative result
in terms of exacerbation of air and water quality and noise levels
across borders.
23. Urgency and Lifetime: MEDium and NA
24. Substitutes: RECYCling
The purpose of the environmental technologies is to produce
necessary substitutes to replace negative substances and chemicals
that damage the environment. It also provides recycling
technologies for more efficient use of inputs.
F. Other Factors
25. Culture: NO
Although there is cultural differences between the exporter
and importers in this case, no significant impact on culture is
involved.
26. Trans-Boundary Issues: YES
The case involves trans-border issues between the United
States and Mercosor free trade area. Whether there will be
problems involved in this area is not certain at this point. It
will be determined in the coming year.
27. Rights: NO
28. Relevant Literature
Bandyopadhyay, J., and Shiva, V., "Political Economy of Ecology
Movements", Global Space 71 May/June 1989, 42.
Best Markets Report (BMR), U.S. and FCS, 1994. (CD-ROM)
"Business in Latin America", The Economist Intelligence Unit,
July 11, 1994, 12.
Foreign Policy 88, Fall, 1992, 152.
Grossman, G., and Krueger, A., Environmental Impacts of a North
America Free Trade Agreement, Discussion Papers in Economics
#158, Princeton University, February, 1992, 1-20.
International Financial Statistics Yearbook, April, 1994.
"Industry Overview", U.S. Industrial Outlook 1994, the
International Trade Administration, U.S. Department of
Commerce. (CD-ROM)
Krueger, Anne O., "Economic Policies at Cross-Purposes", The
United States and Developing Countries, The Brookings
Institution, Washington, DC, 1993, 104.
Market Briefs, the U.S. Department of Commerce, 1994.
Repetto, Robert, "Economic Incentives for Sustainable
Production", G. Schramm and J.J. Warford, eds.,
Environmental Management and Economic Development, Johns
Hopkins University Press, 1989.
Skolnikoff, Eugene B., The Elusive Transformation, Princeton
University Press, Princeton, New Jersey, 1993, p. 135.
Skolnikoff, Eugene B., "The Policy Gridlock on Global Warming",
Foreign Policy 79, Summer, 1990, 77-93.
South America, Central America, and Caribbean 1993, Europa
Publications Ltd., 1992.
Telephone conversation with staff members at the U.S. Department
of Commerce, Latin America Division, July, 1994.
United Nations, Development Report 1993, 124.
UN Statistical Office, Statistics Yearbook 38, 1990-91.
World Resources Institute, World Resources, 1990-91.
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