This article originally appeared on Forbes.com.

Brazil’s chemical industry has grown significantly over the past 15 years, but an increasing portion of growth is due to imports—an alarming trend for chemical companies and the businesses that depend on them.

Prior to 2007, the industry’s trade deficit ranged from $6 billion to $9 billion, but by 2014, it had risen to $31.2 billion. Two main factors contributed to the deficit. First, domestic consumption grew faster than production, as rising income spurred chemicals consumption, which outstripped corresponding investments in local production capacity. And second, the import of high-value chemicals grew faster than exports, in part because Brazilian companies are better positioned to produce lower-value commodity chemicals.

Left unchecked, this trend could threaten the sustainability of Brazil’s chemical industry. Rising imports of finished products often correlate with lower domestic production of the chemicals used in those products—for example, in tires, textiles and toys.

Other developing markets have experienced similar severe trade deficits within chemicals. Mexico has seen net imports rising from $7 billion to $9 billion in the early 2000s to nearly $20 billion in 2013. For 14 relevant chemical segments in India, net imports in 2014 amounted to 7.9 million tons, corresponding to approximately 18% of apparent consumption and a 67% increase compared with imports in 2010.

Slowing and even reversing this trend will require chemical producers to diversify and emphasize higher value-added products. They will also have to increase integration and diversification of existing commodity chains and develop new technologies.

Several chemical segments provide an opportunity for Brazilian firms to play a larger role in the global market, providing that business and policymakers can work together to reduce the competitive gaps that hinder investment. And other segments in which Brazil is already competitive could flourish with further investments in new technology. Bain & Company estimates that these opportunities could amount to between $33 billion and $47 billion by 2030, and could reduce the trade deficit by between $22 billion and $38 billion per year. The segments with the greatest potential could generate as many as 19,000 new jobs over the same period.

Brazilian chemical companies can build on several competitive advantages:

Strong local demand. This applies to agrochemicals, chemicals for oil and gas exploration and production, and cosmetics. For example, more than half of agrochemicals are imported into Brazil because registration of new agrochemicals products can take years, particularly for products that will be produced locally. Improvements in this process could unlock significant investments in local capacity, benefiting the agribusiness sector with a local industry capable of supplying local agrochemicals needs faster and more cheaply.

Competitive and available raw material. Where local raw materials exist that can add value to commodities, producers to seek to export these higher-value chemicals. These segments include cellulose derivatives, which find their way into tobacco and cosmetics; food additives for animals; and aromas and fragrances. In the latter sector, companies have difficulty in accessing local biodiversity due to existing regulatory restrictions, lack of incentives for R&D on alternative production routes, and the imposition of regulations on the shelf life of products currently classified as food.

Potentially competitive raw material. These chemicals could be competitive with better access to local raw materials and encouragement of new investments in production capacity. They include petrochemicals, using the pre-salt reserves of hydrocarbons, and oleochemicals, which include fats and other materials made from plants and animals. The state of Bahia, for instance, shows potential for expanding local cultivation of castor oil plants with new investments in irrigation, mechanization of production and genetic improvements to increase crop productivity.

Raw material that would be competitive with emerging technology. Access to local raw materials could make chemicals in this group competitive if emerging technologies continue to develop. They consist primarily of biomass chemicals such as sugarcane and soybean oil. The market for chemicals produced from renewable sources could represent as much as 10% of Brazil’s chemical industry by 2020, provided the industry invests about $20 billion in new technologies, products and processes.

A pathway to growth in the chemical sector.

How to make progress in each of these areas? We have identified key competitive challenges and their respective proposed solutions.

• Sign long-term production-sharing contracts to give chemical producers access to oil and natural gas from the government’s pre-salt reserves.
• Streamline registration and approval processes for the production and commercialization of chemicals, especially in the agrochemicals segment.
• Encourage investment in agricultural and industrial segments to unlock the potential of bio-based chemicals—for example, in the construction of biorefineries close to sugarcane ethanol infrastructure.
• Encourage investments in logistics infrastructure that supports local chemicals commodity chains, such as railways, roadways and maritime transportation.
• Increase efforts in technological innovation, with strategic priority given to the primary focus segments and biomass chemicals.

Despite challenges, examples from other markets show the effectiveness of encouraging the development and diversification of the chemical industry. India developed a strong fine chemical industry (pharmaceuticals, crop protection) by promoting the development of generic alternatives to patented molecules. Investments in education and research centers fueled a supply of talented chemical engineers. Brazil can diversify its chemical industry through investments in segments where it can leverage the local market and raw materials to become competitive.

Written by Rodrigo Mas, José de Sá, Fernando Martins and Mark Porter, partners in Bain & Company’s Global Chemicals practice. Mas, de Sá and Martins are based in São Paulo, while Porter is based in London.