Environmental investment firm Circulate Capital is investing $250 million provided by some of the world’s largest consumer goods manufacturers, recyclers and other supply chain players to build plastics recycling infrastructure overseas. After pioneering in Southeast Asia, the Singapore-based company is now tapping into Latin America, seeing an opportunity to further grow an emerging market.
Southeast Asia was an early focus because it was an emerging region and one of the world’s largest producers of plastic waste. Circulate and its corporate partners – including PepsiCo, Procter & Gamble, Dow, Danone, Chanel and Chevron Phillips Chemical – have now built a solid portfolio there and are looking to replicate this work in Latin America, where similar dynamics exist – high levels of plastic waste and very low recycling rates, which mean missed opportunities, particularly for consumer goods companies that are required to clean and reuse the packaging they bring to market at the end of its life.
Latin America, like other developing countries, is increasingly interested in promoting a circular economy. Circulate has identified more than 700 companies in this plastic waste-plagued region dedicated to recovering and recycling the material.
The plan is to invest $70 million in the region, with the first investment going to Polyrec, a spin-off of Colombian flexible packaging manufacturer Litoplas. This operator has placed itself at the top of the list of candidates because of its location, the materials it recycles and its personality, says Christian Urazan, partner at Circulate Capital.
Based in Colombia, a major city on the Caribbean coast, the company is ideally positioned to ensure a constant supply of raw materials both from the interior of the country and from the surrounding islands, thus meeting the undersupplied demand for recycled materials.
Polyrec’s focus is on Flexible plastics are among the most problematic and widely used materials in the world and the fact that this is the sister company of an established Latin American flexible plastic packaging company also played a major role.
“They understand the importance of recycling, especially recycling this material. We work with a knowledgeable group of industrial companies that have extensive experience in this sector and this region,” said Urazan. says.
Polyrec operates three plants in the Caribbean and central Colombia with a total capacity of 9,000 tons per year, mainly focused on polyethylene and polypropylene packaging, with plans to increase production to nearly 30,000 tons per year over the next three years.
“The plastic problem in Colombia reflects a widespread reality in Latin America: we are adopting solutions designed for countries in a developing context,” says Julian Coymat, CEO of Polyrec.
“Our mission is to build close collaboration between all links in the supply chain to ensure that flexible plastics become part of a circular economy. By transforming these materials, we not only contribute to protecting the environment, but also create jobs for recycling communities, thereby achieving positive social and economic impact,” he says.
About 60 to 80 percent of the capital will be invested in countries that are ready for expansion – Brazil, Mexico, Colombia and Chile. The remaining funds will go to countries that the company calls “frontier countries”, whose plastics recycling sectors are less developed but where significant untapped potential is still expected.
Awareness of the accumulation of plastic waste has exploded since around 2018, when the first images of plastic islands, marine animals entangled in plastic, and dead fish and birds with their intestines filled with the material went viral.
Plastics have become something of a pariah industry. Many everyday items are wrapped in plastic and end up on beaches and elsewhere at the end of their life.
Increased awareness of this reality among consumers and businesses, as well as laws encouraging recycling, were the main reasons this issue came to the table, says Urazan, who began his career as an executive at a flexible packaging manufacturer.
“I started to wonder what we were going to do about this problem. This megatrend had become a threat to the industry. They had to think about designing packaging to be recyclable or replacing materials.”
The impact investor he works for today has focused his attention on promoting growth across the entire supply chain.
Circulate’s primary focus is on processing – an important but single piece of the puzzle in a complex matrix. To fill in the gaps, it also uses established partners who play a role at every stage.
Collection will be a critical link and will require a lot of work. In fact, across borders, the biggest challenge is obtaining enough material for processing.
“The closer you get to the source, the waste, the fewer actors you have,” says Urazan.
Against this background, supporting informal waste collectors in Latin America, who form the backbone of waste collection, has been declared a priority.
“They are a large, organised population and play an important role in the social and economic landscape. Therefore, supporting them in their development and growth is a central part of our work. The main benefits are better training, safety structures and a safety culture, and good and fair working conditions,” he says.
The initial investments are catalyst capital investing in high-risk projects, but Circulate sees this decision as a smart strategy.
This sector needs seed capital to establish deep roots and produce demonstrable results to eventually secure traditional financing, Urazan says.
Circulate holds minority stakes in companies – between 20 and 45 percent. The goal is to influence the leadership of these companies, help them develop further and then pass the baton on.
“We want to ensure that the companies grow but can also operate independently after we leave,” says Urazan.
It’s about helping an emerging sector do good while breaking new ground. But the rewards don’t just extend to these startups.
Urazan says: We want to acquire shares in companies with high growth and impact potential and then exit in five to seven years when they have matured, significantly increased their plastics processing volumes and become more valuable. We see this as a way to support emerging companies while capitalizing on great opportunities for us and our partners.”
