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With everyone talking about growth in lubricant demand in China and India, it is easy to overlook opportunities in other regions much closer to home. One such region is Latin America.

Demand for lubricants in Latin America reached an estimated 913 million gallons in 2006, valued at close to $3.5 billion. The regions demand is dominated by Brazil and Mexico. Together these countries account for an estimated 550 million gallons, or 60 percent of the regions total.

In addition to its size and proximity to the United States, the Latin American market is also attractive because its changing. There are currently more democratically elected governments in Latin America than ever before. And although directionally these governments appear to be leaning left, many of their leaders understand the need to be pro-business and pro-investment if they are to deliver to their people. The leading mission of many is to bring structural economic reforms to improve the quality of life of their citizens. In some cases, as we have already seen in Venezuela, these changes may not favor an increased presence of U.S. brands. In other cases, however, it will.

Many countries in Latin America are also enjoying relatively robust economic growth. In fact, on average the regions economy has been growing at a rate of close to 5 percent over the past three years, and it is expected to continue growing at a rate of nearly 4 percent for the next three.

But if you target a market for growth in Latin America, you dont have to go any further than just south of the border, to Mexico.

Mexico is the second-largest market for lubricants in Latin America. It offers opportunities for U.S. lubricant suppliers for several reasons. First, lubricant demand in Mexico is forecast to grow at an average annual rate of close to 2.5 percent over the next five years. Second, structural changes have taken place in Mexico to open its market to more foreign competition. One such change came when the Federal Commission on Competition ruled that the contract between Petroleos Mexicanos (Pemex, Mexicos state-owned oil company) and Mexicana de Lubricantes (MexLub) was illegal because it established a monopoly on sales of lubricants to Pemexs service stations.

Pemexs subsequent contract cancellations, in 2003, opened up its nearly 7,000 gasoline stations to competition from multinational lubricant companies. Pemex opened the door to the market even further when it announced that it would not allow any of its franchised service stations to enter into a monopoly agreement with only one supplier of lubricants. Instead, they had to offer lubricant brands manufactured by a number of domestic and foreign suppliers.

As a result, multinationals now have an opportunity to capture market share and do their magic by building greater brand awareness in Mexicos consumer automotive market segment. The significance of this can be seen when one looks at the countrys product mix.

Unlike the U.S. market, where industrial lubricants account for close to 50 percent of lubricant demand and consumer automotive represents about 28 percent, demand in Mexico is split fairly evenly among the industrial, consumer and commercial automotive market segments.

Moreover, passenger car engine oil is by far the leading lubricant product type consumed in Mexico, accounting for close to 60 million gallons or 26 percent of the total. So if your brand is in front of the motoring public in Mexico, you can be sure its in front of a large population of decision-makers in the commercial automotive and industrial lubricant market segments as well. As a result, consumer brand awareness can be very advantageous, as demand for commercial and industrial lubricants in Mexico is also growing.

At the end of the day, the greatest opportunities for U.S. lubricant suppliers in Mexico will likely come from a change in the countrys vision. Mexicos newly elected president, Felipe Calderon Hinojosa, made it clear that he believes his country has decided in favor of the market and democracy. Furthermore, he added in a speech to the 2006 World Economic Forum, although the country has not yet reached the promised land, it is growing rapidly and by 2040 Mexico will become the worlds fifth-largest economy. According to some, this young Harvard-educated lawyer may have the mind and muscle to make it happen.

And if he does, Calderons free-market policies point to even greater opportunities for U.S. lubricant suppliers.

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