Brazil is expected to be the world’s fifth largest economy by the end of 2012.
So it stands to reason that Pentair’s recent purchase of a Brazilian pool equipment manufacturer marks the company’s second foray into that country in as many years.In fact, acquisition is generally the only way of penetrating this growing Latin American market, experts said.
“Brazil historically has had a very closed economy,” explained Manuel Perez de la Mesa, CEO of PoolCorp in Covington, La. “As a manufacturer, the only real way to play is by having a presence there, and that includes final assembly. You can’t do business there by shipping products from the U.S.”
Sanford, N.C.-based Pentair announced April 4 that it had acquired Sibrape Industria E Comercio de Artigos Para Lazer Ltd. and its subsidiary, Hidrovachek Ltd. (Sibrape). The $20 million Sao Paulo-based company makes a number of pool products, including pumps and vinyl liners.
Terms of the deal were not disclosed, and Pentair officials could not be reached for comment by press time.
With a population of roughly 200 million and an expanding middle class, Brazil boasts a growth-oriented culture. Its tropical climate and burgeoning GDP place further value on the country as an important component of the international market.
Indeed, pool industry leaders familiar with Brazil are well aware of its potential. Though official figures are hard to come by, it’s believed that approximately 100,000 new pools have been built in Brazil each year since 2009, with an average annual growth rate around 5 percent, according to a top executive at a leading U.S. manufacturing firm who has studied the industry there. The vast majority (upwards of 75- to 80 percent) of new pool construction is residential, and most of those are mid- to low-end vessels, he added.
Brazil’s market also is fairly evenly distributed between concrete, vinyl liner and fiberglass, according to multiple sources. There are about three dozen pool product manufacturers assembling pumps, filters, lights, solar panels and more, making for a developed industry.
But, as noted by Perez de la Mesa and others, Brazil has for years relied on steep tariffs in a number of industries to protect domestic production. Everything from shoes to textiles to chemicals is subject to import duties that place foreign firms at a distinct disadvantage.
Still, the market’s vast size, economy and growth potential likely mean a number of top U.S. manufacturers and distributors will have to consider establishing a Brazilian presence in the not-too-distant future.