bittersweet industry

December was a particularly negative month for sectors such as baking industry, which fell 41%, as well as the drink which fell 11% year-on-year. There were also declines of between 10 and 14% in industries textile and clothing, as well as a 19% drop in the production of drink concentrates of Pepsi in Colonia Free Trade Zone. Another important drop occurred in the industry chemistry, with a year-on-year decline of 26%.

Other sectors, however, had a positive performance. The production of cellulose advanced 38% year-on-year, due to the start-up of the second UPM. In turn, production in the industry refrigerator advanced 8% year-on-year and the industry automotive 43% year-on-year in December.

How was the performance during 2023?

The December data completes the performance of the year 2023, which has implied important changes at the industrial level. The start-up of the second plant of UPM makes Uruguay is now the second world supplier of short fiber pulp (Eucalyptus), behind Brazil. Pulp production in the country is carried out under a free zone regime and is the culmination of a process of forest growth which has been going on for decades.

Likewise, an increase of almost 13% was recorded in the production of beverage concentrates, at the Pepsi in the Colonia Free Trade Zone. This company made recent investments to expand production, which is destined for the region. The impact of these industrial developments in the Free Trade Zone is unavoidable and if it had not been for these two items mentioned, the Industrial production in 2023 it would have had a fall.

Of course, there are also other sectors with good dynamism, such as the chemical industries (some of which also operate in the Free Zone) and the manufacturing of agrochemicals, which increased 8 and 12%, respectively. The industry cement factory It also had an interesting increase of 15%, and rice mills grew 15% in their production, after a difficult 2022.

Other industrial sectors had more modest advances in their average annual production. In the case of agroindustries, the poultry, ration manufacturing and industry dairy They advanced between 2 and 3%. The industry pharmaceutical its average annual production increased by 3%.

There were several setbacks, some of them important

On the contrary, other industrial sectors fell in 2023, some significantly. The industry automotive, which came from a growth cycle, fell 17% in 2023, largely due to the problems of the Argentine economy. The industries of clothing and tanner they fell 11 and 18%, respectively. The industry oil can fell almost 11% and sawmills reduced their average production by 15% in 2023. Industries graph and products cleaning and dressing table, both fell 13%.

Other sectors had more moderate declines. The industry refrigerator fell 3% and the wheat milling 2%. The malthouses reduced their activity almost 6% and companies bread makers They lowered their production by 6%.

All these declining items explain why the industrial sector – very relevant in the economy – has not had a significant boost in 2023, beyond the dynamics of companies in free trade zone and some other items.

Surely, many sectors that do not have fluid access to the promotion regimes of investments (the free zones themselves and the investment law) are suffering more than the rest from the problems of competitiveness that afflict the economy. Those who sell mainly in the local market faced tougher competition from imported ones; Those who sell mainly to consumers have also been especially complicated. Argentina, small or medium-sized companies highly dependent on the neighboring market, which is in crisis and even with payment problems.

The performance of the industrial core

In this scenario, the CINVE (Center for Economic Research) reported that the so-called industrial core (sector production excluding refinery, Pepsi concentrates and cellulose) fell by an average of 3.1% in 2023. It is a worrying decline.

The CINVE calculation is of interest because free zone companies have particularity, although they are part of industrial development; Without going any further, the development of capabilities that have involved the construction and operation of the cellulose They have allowed us to develop professionals in areas of industrial systems, welding, and construction, who would not be the same without that presence. Something similar for the beverage concentrate industry.

Thus, it seems clear that there are problems of competitiveness, that is, of costs relative to other countries that make the Uruguay more expensive and make it difficult for industries to stay in business and grow. Surely companies have part of the responsibility in terms of developing more capabilities and investments to improve; But industries – in general – are in sectors open to competition, local or abroad, so that – if they do not invest and act – they regress.

The problem is in the so-called “country cost”: local services, taxes and rates, and employment with low productivity, all of which come together to make the activity difficult. So – if there are no exemptions or promotions – it is difficult to sustain oneself in the current, general regime of the economy. And that worries.