1 / 12

Deluxe Household Chemicals

Deluxe Household Chemicals. Report on Manufacturing in Chile. Political Economy of Latin America Mathias Schatt and Rob Sheldon. DHC: The Mandate. About Deluxe Household Chemicals The Problem: US Manufacturing too Expensive The Mandate: Find an Alternative Country Country Criteria:

celina
Download Presentation

Deluxe Household Chemicals

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Deluxe Household Chemicals Report on Manufacturing in Chile Political Economy of Latin America Mathias Schatt and Rob Sheldon

  2. DHC: The Mandate • About Deluxe Household Chemicals • The Problem: US Manufacturing too Expensive • The Mandate: Find an Alternative Country • Country Criteria: • Stable Enough Macro Environment • Favorable International Trade Environment • Low-cost, Sufficiently Skilled Labor • Developed Chemical Industry • Overall Benefits Must Outweigh Logistical Costs

  3. DHC: The Chile Report • Part I:Chile’s Macro Environment • 1) Nation and State • 2) Inflation and Foreign Exchange • 3) Labor Environment • 4) Infrastructure • Part II:Chile’s Household Chemical Industry • 1) Industry Landscape • 2) Potential Partners • Part III:DHC Logistics and Entry Strategy • 1) Joint Venture • 2) Foreign Branch & Capital Imports • 3) Logistical Partners

  4. Chile: Nation & State • President: Ricardo Lagos Escobar • Center-left Coalition • Commitment to Free Market Economy • Other Factors: • Market-oriented Economic System • Many International Trade Agreements • Few Restrictions on Foreign Investment • Small Number of State-owned Enterprises • High Domestic Savings Rate • Balanced Budget Part I:Chile’s Macro Environment

  5. El dólar trepa hasta los $75525 de Febrero de 2003 Chile: Inflation and FX • Banco Central de Chile • Grow Economy at Fastest Possible Pace • Maintain Inflation level between 2-4% • Considerable Volatility Against the US Dollar: lowest (Aug 9): 692.21 highest (Oct 11): 756.56 Part I:Chile’s Macro Environment

  6. Chile: Labor Environment • Unemployment Around 10% • Relatively High Investment in Human Capital • Good Local Education • 48 Hour Work Week • Lower Wages Part I:Chile’s Macro Environment

  7. Chile: Infrastructure Part I:Chile’s Macro Environment

  8. Chile: Chem Industry • Well-established: $578 Million in 2001 • Dominated by Large Foreign Firms • Possible Partners: • Quimicas Reno • Perez & Jacard • P&J is the Better Fit: Location, Size, Infrastructure, Foreign Experience Part II:Chile’s Household Chemical Industry

  9. DHC: Entry Strategy (A) • Sign JV Agreement with P&J • 3 Year Renewable Contract • Capital Improvements and Guaranteed Orders in Exchange for DHC Ops Manager at P&J • DHC Opens a Foreign Branch in Santiago Part III:DHC Logistics and Entry Strategy

  10. DHC: Entry Strategy (B) • Import Capital Through Decree Law 600 • Terms: • Minimum $1 Million Investment • No Capital Repatriation for One Year • Repatriate Profits Immediately • Unlimited Access to FX Market • No VAT Until Capital Improvements Done • 42% Tax Rate Set for 10 Years Part III:DHC Logistics and Entry Strategy

  11. DHC: Logistical Partners • Potential Partners: • CSAV: Global Shipper • Royal Vopak: Specialty Shipper • Royal Vopak is the Better Fit: Specializes in Chemicals, International Network, Small Shipments Part III:DHC Logistics and Entry Strategy

  12. Conclusion • Chile Meets the Country Criteria: • Stable Enough Macro Environment • Favorable International Trade Environment • Low-cost, Sufficiently Skilled Labor • Developed Chemical Industry • Overall Benefits Must Outweigh Logistical Costs • Main Point: The combination of Chile’s macro environment coupled with the presence of solid industrial and logistical partners makes it a good bet.

More Related