As anti-dumping duties remain high in Brazil, Hyundai Heavy Industries Ltd. has inaugurated its first plant there. The $175-million invesment is also Hyundai's first outside the Asian continent.
Opened last month and located in Itatiaia, the unit will produce 3,000 machines annually. By the end of 2014, the goal is to reach 4,000 units a year.
The site will be the base for the company’s operations in Latin America, with 40% of its production directed to the Brazilian market. The factory also will produce machines for other countries on the continent.
Production will be focused on wheel loaders, excavators and backhoe loaders. Next year, the company expects to produce container forklifts. The plant will create 500 jobs.
In spite of the global economy’s sluggishness, Choe Byeong-ku, president and COO of Hyundai's construction equipment division, is confident about the new plant's value. "The market has oscillations," he says. "We will overcome this phase.”
Hyundai’s goal is to reach $320 million in sales this year in Brazil, including imported machines. BMC, a dealer that represents the brand in Brazil, holds a 15% interest in the business.
Work, especially in infrastructure, has been booming along with the steadily expanding earthmoving-equipment market in Brazil. However, the country's aggressive anti-dumping policies make it difficult for importers to compete with companies such as Hyundai, which are setting up plants in the region.
According to Sobratema, a Brazilian construction trade group, equipment buyers must pay up to 14% duties on imported machinery unless it is made in China, in which case the maximum duty rises to 35%. With sales and other local taxes, the cost of an imported machine in Brazil can exceed 65% of its original purchase price. The taxes are partly an anti-dumping measure as well as a tool to spur employment in the region.
"The government has a dilemma," admits Mário Humberto Marques, Sobratema vice president, who says the group does "not agree" with the policy. "Industry in Brazil has suffered a lot, and it still suffers in spite of those barriers. I believe that these measures will change soon."
However, some loopholes exist in Brazil's tax structure. For example, the high taxes apply only to machinery categories, such as excavators, which already are built locally. Contractors who can prove otherwise for certain machinery types, such as specialized units only made in other parts of the world, can receive a government waiver in 60 to 90 days and are subject to a lower, 2% import duty.