'Best Lubricants in the World' May Not be Best For Latin American Market

    LITTLE FALLS, N.J., April 27 According to a study hot off
the presses by Kline & Company, BUSINESS OPPORTUNITIES IN THE LATIN AMERICAN
LUBRICANTS MARKET, 2000, demand for lubricants in South America is forecast to
reach nearly 850 million gal, valued at $6.6 billion, in 2004. Although demand
in this region is not expected to skyrocket, there will be positive growth,
and Kline's study points to a number of interesting business opportunities for
lubricant manufacturers and marketers in Latin America. To pursue these
opportunities, however, marketers cannot compete with the same paradigm used
in North America or Europe.

    If marketers simply assume that the most advanced API or ACEA lubricant
formulations can be marketed in Latin America based on superior performance,
they will likely run headfirst into several harsh realities about the region,
including vehicle age, fuel sulfur levels, and economics. Most are well aware
that engine oil performance is generally tied to vehicle age, engine make, oil
drain intervals, and severity of duty. However, Wes Cosgriff, a Kline &
Company associate, notes that "The Latin American market reminds us that fuel
sulfur also has a strong say in what makes a 'quality' engine oil." The fuel
sulfur levels in Latin America are significantly different than those in North
America and Europe; consequently, the definition of "quality" engine oil is
also quite different.

    The sulfur content of diesel fuel in Brazil ranges from 3,000 to
10,000 ppm, as compared to only 500 ppm in the United States in 2000.
Argentina's average sulfur content in diesel fuel is 2,500 ppm, which is five
times higher than that of the United States. Therefore, API-specified
lubricants are designed to handle a much lower sulfur/acidic combustion
by-product contamination level (i.e., engine oil total base number
requirement) in the U.S. market. According to Cosgriff, "Although these
API-approved lubricants-for example CH-4-may appear to hold a competitive
advantage in a country such as Argentina, where a few of the major lubricant
marketers are not API-licensed, the API products may not actually perform as
well on the acid neutralization issue, particularly when tested against
products from such Latin American marketers as Petrobras, Ipiranga, Repsol
YPF, and others."

    One of the most important distinctions that must be made about lubricant
performance in Latin America is not a lubricant's ability to perform in the
most advanced low-emission engines, but rather its ability to provide
protection based on the quality of available fuel in the region. Lubricants
must be able to protect both old and new engines that burn high-sulfur fuels.
This issue applies to both gasoline and diesel engines but is certainly more
pronounced in diesel engines.

    Cosgriff is also quick to note that "Although fuel sulfur levels can
redefine what 'quality' means, certain regions of Latin American do ascribe
quality to brand names." In fact, BUSINESS OPPORTUNITIES IN THE LATIN AMERICAN
LUBRICANTS MARKET, 2000 reveals that such multinational brands as Castrol,
Pennzoil-Quaker State, Havoline, and others are considered to be superior in
quality to some domestic engine oils and are the products of choice in newer
vehicles.