Buy time: petrochemical giant Mexichem aims high across Latin America.

It could not have been a better year for Mexichem, the Mexican chemical and petroleum products manufacturer. It practically doubled sales to US$1.12 billion in 2006, thanks to two recent acquisitions that made it the undisputed leader in the region. Not only that, but the company is preparing to keep on buying capacity throughout Latin America.

In March Mexichem paid $200 million for Petroquimica Colombiana (Petco), one of Latin America's largest producers of polyvinyl chloride resins (PVC), the raw material for products made mainly for the construction industry. With this deal, Mexichem increased its chlorovinyl production capacity by more than 80%.

The same month, it put another feather in its cap by acquiring for $500 million a 100% stake in Grupo Amanco, a Latin American industrial conglomerate that produces pipes and fittings for the delivery of liquids, mainly water. Last year, Petco reported sales of more than $375 million, while Amanco posted sales of $800 million.

Both buys surprised the market. With them, Mexichem not only realized its objective of integrating into its structure companies that use its raw materials, but it also will nearly double its business. With the unification of the three enterprises, Mexichem hopes to close this year with sales of $1.92 billion.

The deals involve two masterful moves. With the acquisitions, the group consolidated its strategy to reduce risk associated with the chlorovinyl chain, which has raw-materials cycles of expansion and contraction, as well as taking a stronger position on the PVC market for water pipes. "Our sector is volatile, cyclical and extremely commoditized. To avoid cycles and volatility you have to be constantly growing. The other strategy is to reduce the cost of raw materials," says Ricardo Gutierrez, Mexichem's general manager.

The acquisitions dovetail into the internationalization that the company has been carrying out for the past two years and which has given it a presence in nearly all of Latin America except Bolivia, Paraguay and Uruguay. In 2005, Mexichem acquired Dermet, a distributor of raw materials for the food, chemical and pharmaceutical industries. Last year it bought Bayshore, a U.S. producer of PVC compounds.

Hand-in-hand. Part of the robust growth that Mexichem expects is due to the fact that most of the products it manufactures go to sectors that today are seeing a boom in the region, such as agriculture, construction, infrastructure, sewers and water management.

"To give you an idea, in Latin America there are 120 million people who don't have drinking water or sewers. That's the size of the market we face," says Gutierrez. While the growth in infrastructure and construction will be a constant in the region, he says, Venezuela and Ecuador are the countries that have most surprised the industry with demand.

At home, too, Mexichem will be plenty busy. Mexico expects housing starts to grow between 10% and 15% for this year. "The demand for new housing for 2007 in the main urban areas of the country is for 550,000 units," says Claudia Velazquez, market studies director for the real estate consulting firm Softec. Sixty percent of Mexichem's products are sold to the construction industry.

The synergy created by the prospects of booming customers and the doubling of Mexichem has made some very happy. La Esperanza Grupo Industrial, a Mexican distributor and seller of wood products, is among them, because its clients in the chemical and petrochemical industries use a great quantity of scaffolding and wood crates. "We are going hand in hand with them, and they compel us to continue growing and innovating. They really make us move completely," says Eduardo Diez-Gutierrez, general manager of La Esperanza.

To continue with its consolidation, Mexichem is studying the purchase next year of a factory that produces vinyl monomer, a raw material it currently buys. "This year's acquisitions were an excellent opportunity for Mexichem to grow and consolidate as a regional enterprise, but there is still much room for expansion," says Raquel Moscoso, an analyst with the consulting firm IXE.

MARISOL RUEDA * MEXICO CITY