Circulate Capital to Build Recycling Infrastructure in Latin America

Environmental investment firm Circulate Capital is deploying $250 million, provided by some of the world’s largest consumer packaged goods companies, recyclers, and other supply chain actors, to build plastics recycling infrastructure overseas. Having set the stage in Southeast Asia, the Singapore-based firm is now moving into Latin America, seeing opportunity to take a budding market further.

Southeast Asia became an early center focus because it was an emerging region and among the largest generators of plastic waste globally. With a robust portfolio now established there, Circulate and its corporate partners—Chevron Phillips Chemical, Danone, Dow, Mondelēz International, and Unilever—want to replicate this work in Latin America because it has similar dynamics—high plastic waste generation and very low recycling rates, which translate to untapped opportunity, especially for consumer packaged goods companies who are called on to clean up the packaging they roll to market once it reaches the end of life, and see that it is reused.

Latin America, like other developing hotspots, is becoming increasingly vested in advancing a circular economy. Circulate identified more than 700 companies in this plastic waste-strapped region dedicated to recovering and recycling the material.

Plans are to deploy $70 million in the area—with the first investment being in Polyrec, a spinoff of Colombian flexible packaging converter Litoplas. This operator rose to the top of the candidates list for its location, the materials it recycles, and who they are, says Christian Urazan, a partner at Circulate Capital.

Being based in Columbia, a major city along the Caribbean coast, means it’s well positioned to secure a consistent feedstock supply both inland and from surrounding islands to meet underserved demand for recycled content.

Polyrec’s focus on flexible plastics, among the most problematic and commonly used materials worldwide—and that it is the sister company of an established Latin American flexible plastics packaging company—both weighed in big too. 

“They understand the relevance of recycling, and specifically of recycling this material. We are partnering with a knowledgeable group of industrial operators with broad experience in this sector and region,” 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. Plans are to bump up production to nearly 30,000 tons annually over the next three years.

“The challenge of plastic in Colombia reflects a common reality in Latin America: we are adopting solutions designed for countries in a development context,” says Julian Coymat, CEO Polyrec.

“Our mission is to establish close collaboration between all the 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 preserving the environment, but also create jobs for recycling communities, generating a positive social and economic impact,” he says.

About 60 to 80 percent of capital will be invested in ready-to-scale countries— Brazil, Mexico, Colombia, and Chili. The remaining monies will support what the company calls frontier countries with a less developed plastics recycling sector but seen as having significant untapped opportunity.

Awareness of amassing plastic waste has exploded since around 2018. That’s when the first images went viral of plastic islands, of sea animals entangled in plastic, and dead fish and birds whose guts were filled with the material. 

Plastics became like the new pariah industry. So many things you use day to day are wrapped in plastic, and at the end of their lives they were showing up on beaches and elsewhere.

Heightened awareness of this reality among consumers and corporations, as well as laws to promote recycling, were the main forces that brought this topic to the table, says Urazan, who was an executive for flexible packaging manufacturers earlier in his career.

“I started asking, what are we going to do about this issue? This megatrend had become a threat for the industry. They needed to think about designing packaging for recyclability or else replacing materials.”

The impact investor he works for today has turned its attention to facilitating growth of the whole supply chain.

Circulate’s primary focus is processing—an important but single puzzle piece in a complex matrix. So, to fill in the gaps, it will also deploy established partners with a role to play at each stage.

Collection will be a critical link, and one demanding a lot of work. Getting ahold of sufficient material to process is actually the main challenge across the borders.

“The closer you get to the source, which is waste, the less players you have,” Urazan says.

With that understanding, a carved-out priority is supporting informal Latin American waste pickers, the backbone of collections.

“They are a large, organized population, and they become important players in the social and economic landscape. So, helping them develop and grow is a key part of what we are doing, with the main benefits being a better education, safety structures and a safety culture, and good and fair labor conditions,” he says.

The initial investments are catalytic capital, which takes on high-risk projects, but Circulate sees this decision as a smart strategy.

This is a sector that needs startup capital to grow deep roots and to generate outcomes they will need to show to eventually secure traditional funding, Urazan says.

Circulate holds minority stakes in companies—between 20 and 45 percent. The intention is to be able to influence how these operations are managed to help them mature, then to pass the baton.

“We want to ensure companies grow, but that they will be able to operate on their own when we leave,” Urazan says.

It’s about helping a budding sector do good as it forges relatively new terrain. But the payback extends to more than these startups.

Says Urazan: We want to acquire equity of companies with high growth and impact potential, then exit in five to seven years when they have matured, have significantly increased their plastic processing volumes, and become more valuable. We see this as a way to support emerging business while tapping into great opportunity for us and for our partners.”