Latin American Window Market Rebounding

New study sees growth through 2007 with metal products remaining dominant
August 15, 2006
FEATURE ARTICLE | Statistics

After struggling through several years of economic downturn, the Latin American window market is rebounding. A new study from Interconnection Consulting sees sales recovering from a low of 23.8 million units in 2003 to reach 29.9 million by 2007.
The Vienna-based market research firm sees gains through most of the region. Some countries, including Argentina, Ecuador, Venezuela and Uruguay will see growth rates over 100 percent, as each country recovers from economic turmoil. Following a 5.9 percent increase last year, overall window sales for Central and South America are forecast to increase 6.6 percent in 2006 and another 7.4 percent in 2007 (Fig. 1). 

The largest markets, by far, are in Brazil and Mexico. Forecasts show sales in each country are to top 9 million by 2007. Projections say Argentina will see the strongest growth, but its sales are relatively small in comparison, at only 3 million units.
The IC Market Forecast Windows Latin America study sees continued declines only in Bolivia. Mexico will do extremely well because of new housing and tourist projects that its government recently adopted. The report points specifically to a housing program running from 2005 to 2007 with a budget of almost $10 billion. Venezuela and Peru are other countries concentrating on housing projects with similarly impressive figures, the report notes.
In Brazil and Argentina, commercial construction and infrastructure projects, fueled by strong private and public investments, will contribute to window sales growth. In Chile, the construction industry already represents the fastest growing sector of the economy. Construction spending was up 11 percent there in the first half of 2005, the latest period for which data is available.
Little remodeling and replacement activity
One unique aspect of the Latin American market is that, in every country, the vast majority of window demand comes from new construction. The market share of windows going into new homes and buildings ranges from 81.6 percent in Uruguay to 93.6 percent in Bolivia.
On average, renovation projects use only 11.4 percent of these windows. The market offers more growth potential as a result. The consulting firm sees window sales in the remodeling and replacement markets increasing 10 percent annually through 2007, compared with a 4 percent figure for new construction products. This trend will become even more important in the following years, the study suggests. By country, Argentina will see the largest growth in the renovation market, with annual growth of 26 percent. Mexico, on the other hand, reportedly should see only a 1.1 percent increase in this segment of the business.
Metal Products Still Rule
While vinyl has become the leader in market share in North America, metal is the preferred material for windows in almost all the countries of South and Central America, both in terms of quantity and value (Fig. 2). On average, metal windows account for 76.3 percent of the markets in these countries, with figures ranging from 71.9 percent in Chile to as much as 88 percent in Colombia.
Vinyl and combination windows are reportedly enjoying higher growth rates, however. Combination windows are gaining market share in Uruguay and Argentina, with change ratios of 17 percent and 31 percent, respectively. Other South American countries appear to be favoring vinyl windows, and their sales show a change ratio on an average of  14 percent. In Peru, vinyl window sales grew by 25 percent. In Brazil, those sales are up 36 percent and in Mexico by  23 percent. The study sees both vinyl and combination windows still as niche products, as most countries consider them expensive and only for premium housing projects in the private sector. In Ecuador, Peru and Chile, wood windows maintain a notable market share, but metal is nevertheless the undisputed leading material in these countries.
For the near future, the report sees several changes in the market. Residential building currently accounts for an average of 78 percent of the construction activity in these countries. In Brazil, about 87.1 percent of all the constructed facilities serve residential purposes. In Colombia, the figure is 81.5 percent and in Argentina 83 percent. The residential side of the business will continue to grow, but nonresidential demand will account for a larger portion of the market. New shopping centers are in the construction or planning phases in almost every country, as are more leisure, hotel and tourist facilities. The report already sees gains on the nonresidential side in Chile, as well as Uruguay. Nonresidential construction is growing over 10 percent a year in Chile, and accounts for 30 percent of the total market there.
Looking closer at the industry itself, the report notes that Latin American construction companies typically prefer buying windows directly from the manufacturer. In some countries, retail and distribution companies are gaining ground, but estimates show direct sales accounting for roughly 90 percent of the business. Luis Lodeiros, an Interconnection market consultant, notes that in nearly every Central and South American country, two or three manufacturers dominate the market. That is true especially for aluminum windows. In the PVC window business, he sees European companies moving into countries like Mexico, Brazil, Argentina and Chile.
Finally, the study suggests window prices are recovering from their crisis years of 1999 through 2002, when they were declining in many markets. In 2005, prices increased and the market research firm forecasts they will continue to rise through 2007.
The IC Market Forecast Windows Latin America study provides detailed market and sector analysis for Central and South America. It contains both quantitative numbers and values for 2002 through 2005, and forecasts through 2007. The report specifically covers the window markets in Mexico, Guatemala, Colombia, Venezuela, Brazil, Ecuador, Peru, Bolivia, Chile, Uruguay and Argentina. It is available for the whole of Latin America, as well as for select countries. Information about purchasing the study is available by contacting the market research firm at www.interconnectionconsulting.com.