Investment in Portugal, Plans for Europe 1992 Top CEFIC Agenda

Jun 19, 1989 - ... the state-owned chemical producer with a variety of interests from commodities such as fibers and fertilizers to specialties, inclu...
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Investment in Portugal, Plans for Europe 1992 Top CEFIC Agenda Chief investment target in Portugal's chemical industry is state-owned Quimigal, which will sell all its operations except fertilizers Patricia L. Layman, C&EN London

Foreign investment in Portugal's chemical industry and trends and problems in preparing for a single internal market in the European Community beginning in 1992 were the focus of discussions at the annual meeting of the European Chemical Industry Federation (CEFIC) held earlier this m o n t h in Lisbon. Referring to the opening of Portugal's chemical industry to foreign investment and ownership, one delegate at the meeting said it's a "come, see, and bid" situation for foreign chemical companies inter-

Metz: firms lead transnational effort

ested in widening their pattern of investment in Western Europe. Chief among the investment targets is Quimigal, the state-owned chemical producer with a variety of interests from commodities such as fibers and fertilizers to specialties, including plastics additives and precious metals. It was created in 1974 from three other chemical companies in an effort to gain some sort of economy of scale. But a host of crises fell upon the company: the two oil crises, collapsed demand, and bureaucratic decision-making incapable of moving as fast as the industry demanded. The result: Since its formation, Quimigal has been one of the major money-losing industries in Portugal. It still is losing money, concedes Pedro Nunes, a member of the board of directors of the company. But internal restructuring of the company, the decision by the Portuguese government to absorb a hefty share of corporate debt, and the state's restructuring of the company's major business, fertilizers, has improved the company's operations. "There have been no direct financial profits since 1977," says Nunes. "But if you forget the debt interest, Quimigal has been in operating ^profit since 1986." Moreover, the company, which last year had sales of about $650 million, "will show profit from 1991 o n w a r d s , " h e predicts. In the meantime, the company is—for all practical purposes—for sale. Only the fertilizers business, an industry of national strategic importance, does not carry a "for sale" sign. All the other operations could be negotiated for, Nunes indicates. A reorganization this February, creating separate new companies from the existing divisions, with the headquarters acting as a holding compa-

Chemicals are serious balance of trade deficit for Portugal 1987

$ Millions Exports Imports Sales

1986

1985

596 1718

586 1418

488 863

441 633

$1783

$1702

$1500

$1059

Note: Figures were converted from escudos to U.S. dollars on the basis of $1.00 equals: 1988, 144 escudos; 1987, 141 escudos; 1986, 150 escudos; 1985, 170 escudos. Includes organic and inorganic chemicals, fibers, fertilizers, explosives, resins, and pesticides. Sources: European Chemical Industry Federation (CEFIC), International Monetary Fund

ny, is expected to help any such negotiations. Also for sale are sites at the major chemical complexes owned by Quimigal—500,000 square meters of open land and 100,000 sq m of built-up land, which the company is attempting to turn into an industrial park. Existing amenities include road and rail links with Lisbon and the rest of Europe; a deepwater harbor; and water, steam, a n d electrical supplies—all the infrastructure elements that could appeal to prospective investors, Nunes says. The Quimigal restructuring follows closely after the Portuguese government's move late last year to invite tender offers for some of the other state-held petrochemical operations. Finnish petrochemicals producer Neste has already snapped up the polyethylene and polypropylene plants being sold by the state in a consortium with two Portuguese companies (C&EN, March 20, page 10). These plants had been owned by Empresa de Polimeros de Sines. Neste would also lease the ethylene feedstock supply. And when the industry and the state are ready, other nationally owned chemical interests will be privatized, government officials say. "Any investment is welcome," says one official in the department of June 19, 1989 C&EN 15

Business industry. ' O u r real priority is creat­ing links between national and in­ternational companies—for example,, with companies who want joint ven­ tures. We don't want just foreignL capital, but know-how and tech­nology. " The Portuguese industry has made1 significant strides back to health, notes Gunter Metz, vice chairmanι of the board of management at West: German chemical producer Hoechst,, and current president of CEFIC. InL his address to the meeting's gener­• al assembly, he offered his congrat­• ulations to the Portuguese chemicalI industry. "I believe/' he said, "that:

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the past five years have seen your industry take important strides forward." Such strides, he says, have been particularly important in helping Portugal's economic and political in­ tegration into the European Community. The EC, in fact, was at the heart of Metz's concerns during the assembly. CEFIC, he says, is looking beyond the single internal market of 1992, and has established a task force, CEFIC 2000, to identify issues that will be facing the industry by the turn of the century and ways the federation can address the issues.

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At the Lisbon general assembly of the European Chemical Industry Federation (CEFIC), the Finnish Chemical In­ dustry Federation introduced its "envi­ ronment initiative," presented to its government in late May, to put togeth­ er a body to fund environmental protection and cleanup throughout Europe, particularly the East bloc. The rest of the national representa­ tives from CEFIC clearly were sur­ prised by the initiative, as Gunter Metz, current CEFIC president, admitted dur­ ing a press conference. And he saw practical problems with the proposal. However, he emphasized, "if there is a possibility, we should use it—the environment is a European problem.'' CEFIC was presented the same pro­ posal put forward in May by the board of directors of the Finnish Chemical Industry Federation to the Council of State to create—with extensive inter­ national cooperation—a financing sys­ tem for environmental protection throughout the whole of Europe. Says the federation's working pro­ posal: "The effectiveness of the resuits [to reduce the emission of pollutants and the development of technology designed to spare the environ­ ments] is diminished by the fact that the situation is not the same throughout Europe. Emissions harmful to the environment are carried by the wind and water irrespective of national boundaries. Not all of the countries have been able to achieve even a moderate minimum level of environmental protection.

"The emissions derived from East­ ern European countries represent a particular threat to the future of the state of the environment in the whole of Europe. The socialist countries, with their economic problems, have not been able to invest sufficiently in envi­ ronmental protection during the past decades. "The need for environmental pro­ tection technology has become increas­ ingly apparent in both discussions at the company level and in the official working groups of the chemical indus­ tries of Finland and the socialist coun­ tries. It has also become apparent that information about suitable technology is not, in itself, enough. External fi­ nancing is also required. The prob­ lems are so immense that normal commercial financing will hardly suf­ fice. "Funds directed at environmental protection in the industry of Finland and a number of other European coun­ tries will bring about only a marginal improvement in the state of the envi­ ronment in the whole of Europe if the above-mentioned immense problems are not solved. "Finland proposes the establishment of a European Environmental Protec­ tion Fund, which would finance envi­ ronmental protection investments in those countries whose economic situ­ ation has so far not permitted it. This would provide a solution to the great problems threatening the environment in Europe in the very areas where the problems are most acute."

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Among the issues is centralization of decision-making within the EC. "No sooner have we become accustomed to the challenges of the single market liberalizations, than we are faced with the much more demanding issue of how far we should abandon our ingrained national prerogatives and cede an unprecedented degree of sovereignty to the center/' Metz says. Companies, Metz says, are leading the transnational movement. "Companies are beginning to think in terms of investing in different parts of Europe, when before they contented themselves with investing in different regions of their own country." However, national governments are the slow partner. "The process of Europeanization is not happening fast enough when it comes to national administrations, specifically in the area of environmental regulation," he warns. The authorities in EC member states "are, in fact, creating chaos in the chemicals sector by burdening us with wildly differing national environmental rules. These different national regulations are making it harder to tackle Europe's environmental problems and are liable to create trade distortions that will lead to fragmentation of the Common Market just at the point when we thought movement was at last in the other direction." One specific problem is waste management, which—rather than being dealt with on an international basis—is threatened by national controls, or the banning of transfrontier movement of waste. This would pose a threat to the establishment of specialized treatment plants now being proposed to serve the whole European industry. "Given the cost of setting up such facilities, it would be absurd to do so on a national basis," Metz says. CEFIC is banking in part on its corporate members, who are affiliated via the Assembly of Corporate Associate Members, to help with some gentle lobbying. "The ACAM members are of increasing importance—those companies are European, not national. We need their expertise for our negotiations with the European Commission and the European Parliament," Metz says. D

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