Considerations for leather in uncertain economic times16 November 2009
The Brazilian leather industry is one of the engines of the local economy and its importance may be evaluated by the amount of foreign currency entering the country from leather exports (US$1.8 billion in 2008), a contribution of more than 7% to the Brazilian trade balance as well as 50,000 jobs.
Although tanning is one of the oldest activities in Brazil with its origin dating back to the XVII century, it was only in the last twenty years that it started to grow as a formal sector, getting strong and becoming a major player in the demanding and competitive international economy. This feat is the result of private investment seeking to leverage and modernise the Brazilian industrial sector, in line with an international market survey which was set up in the year 2000 with the Brazilian Trade and Investment Promotion Agency (ApexBrasil). During the period of partnership with ApexBrasil, the sector has continuously added value to exports.
In the past two decades, the Brazilian leather sector anticipated the changes required by the market. Up till then, 70% of the leather produced in the country was geared to the footwear industry. Today, 60% goes to the automotive and furniture upholstery sectors.
In spite of the constant agility and high level of creativity of the Brazilian leather industry, the sector went through a lower activity period in 2008 and the beginning of 2009 as a result of the global economic crisis. In fact, as forecast by the sector, 2008 shipments added up to US$1.88 billion; that is 14% lower than shipments in 2007 when they reached US$2.2 billion.
The Brazilian leather industry is doing its part by adopting measures to adjust to the new economic context, seeking to keep the markets that have been conquered with a lot of hard work along the years. But, unfortunately, the performance of the leather sector has been affected by Brazil's high interest rates, excessive bureaucracy, precarious infrastructure and, mainly, a shortage of working capital.
The current crisis has some similarities with that of 1929 but the attitudes of the governments of the world's main countries have shown the strength of
partnerships under President Obama's new and healthy leadership supported by regional leaders such as President Lula of Brazil. The synergy has strengthened the commitment for resumption of economic growth.
The Brazilian leather sector looks to a future full of hope before governmental interaction. The Brazilian government is doing its best to prevent the current crisis from deepening in the country. In order to stimulate the economy, taxes will be adjusted and programs such as the housing program, which aims to build one million new homes, are underway while infrastructure projects are being sped up. All this has led, for example, to the recovery of the Brazilian automotive sector, which is favourable to the leather industry.
The main nations must do their best to fight protectionism, which may interrupt the recovery of the economy and preserve their financial systems. Together, these factors are most likely to inject oxygen into the global economy so that the demand for leather is increased.
In this uncertain scenario, daring planning and caution in the execution of projects are of the essence. It is with those ideas in mind that the Brazilian Leather program has been revitalised by modernising its image and publicising Brazilian leather through an updated image of quality as well as respect to the environment and increasingly focusing on socio-economic results.