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On the contribution of the Industrial Used Machinery Trading to the Global Economy


By César Rodríguez, March 31st, 2016

MachinePoint Used Machinery started trading in 1997 with plastic film used machines, to later expand its trading activities to sheet lines, thermoforming, injection molding, pipes and tubes, blow molding, beverage filling lines, preforms, caps and dairy machinery. MachinePoint Group is now also growing Industrial Engineering and Industrial Corporate Services companies within the group. MachinePoint have traded hundreds of used machines around the globe since 1998.

Every machine traded creates further trade, economic activity, jobs and wealth wherever it is installed. So, the 2.000 machines sold in the last 20 years by MachinePoint Used Machinery could have created 20.000 direct and indirect jobs scattered around the Globe and contributed to correct somewhat the problem of wealth distribution in the Planet.
But what is the contribution of the used machinery industry to the Global Economy? It may only mean a 10 to 20% -varying from industry to industry- of the Capital Equipment Invested per year, but this is not a negligible amount especially if we consider the multiplying effects on other investments and job creation at destiny. I would like to make a clear distinction between machinery replacement programs and liquidations.

Replacement Programs are especially beneficial for all participants. Every machine installed creates on average 10 jobs at destiny, and at least it will increase productivity in origin and liberate space, capital and labor for other more productive and competitive investments. Take the sale of a used filling line of Coca-Cola from Europe to a Company in Africa to fill-up water. Coca-Cola converts scrapping costs directly into bottom-line EBIT as the equipment is fully depreciated, it liberates free space for more efficient production equipment; dozens of technicians and professionals and several companies will participate and benefit from the transaction, some dismantling, packing, loading or slashing; others manufacturing the molds, spare parts and labels for the new product; and others installing the machine at destiny. Few jobs might be lost in Coca-Cola, if any, as a newer technology will surely require less personnel; however, intermediaries and shareholders shall benefit and many jobs shall be created in Africa -benefiting consumers who will see the price of drinkable water more accessible, its quality increase and the economy grow with new jobs-. In the future, this company in Africa might be able to acquire brand new European technology to continue progressing towards higher productivity and creating more jobs and contributing to wealth distribution. This is a very-positive-sum game for most parties involved and for society, and the market where MachinePoint Used machinery operates. Under this scenario potential customers are invited to see the machine running, to check how it was operated and maintained and can therefore make a more informed investment decision. MachinePoint is often requested to take care of all operations from dismantling to transporting, assembling and installing again.

Liquidated used machines appear in the market due to market forces that illustrate the process of industrial mutation –using the same biological term as the Austrian economist Schumpeter does- that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, and incessantly creating a new one (1) . In this situations the Company selling the used equipment is the victim of the negative evolution of Productivity Factors, be these direct or indirect labor demand and supply evolution, capital cost or changes in the external conditions of regulations, raw materials, other supplies, demand or other competitive forces. If the Company reacted soon enough to these forces, selling one equipment might be enough to correct course, but if the Company does not react soon enough it may collapse entirely in a few years destroying a lot of value in the process. Value of the liquidation is more difficult to see in origin, and the acquisition of these equipment is a lot more uncertain which is why prices are especially attractive in liquidations. In this situations only specialized engineering Companies or the Machine Manufacturer himself can take the responsibility to review and reinstall the equipment with some guarantee that it will work.

Hundreds of Dealers and Auctioneers participate in this business offering little or no value after selling these machines. MachinePoint Engineering wants to participate in this industry building new plants or complete factories with new machinery or with good opportunities appearing in the market once the investment project has been approved.

REFERENCES:
(1) Schumpeter, Joseph A. Capitalism, Socialism and Democracy. Routledge, 2013.

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