Brazilian government moves to boost value added leather exports
In a bid to encourage the export of higher added value leather goods, the Brazilian government has said it will underwrite the financing of certain types of high value hides.
According to Augusto Sampaio Coelho, president of CICB - Centre for the Brazilian Tanning Industry - the concept is aimed at ‘ironing out’ the peaks and troughs seen in Brazilian leather prices in recent years – fluctuations that have done so much to discourage tanners from taking a longer term view by exporting their output as finished items.
The rationale is that by providing a stable source of supply, the scheme will give tanners the extra time and element of predictability they need to add value to their products.
Under the new scheme, a credit line of approximately R$250 million (US$ 70 million) will be extended to the industry. The government has fixed an 8.75% annual interest rate with a maximum stocking period of 90 days for wet blue and 180 days for crust and finished leather.
Crucially, credit will only be extended to tanners who pay cattle breeders for better quality hides. Technicians at EMBRAPA - Brazilian Company for Agriculture and Cattle-Breeding Research - have prepared a hide grading table where grades are set according to the presence (or absence) of defects on the hide. A clean hide totally devoid of defects would be worth extra money to the breeders who would get paid for the hide and the meat separately. The table also sets an amount of money that will be paid according to the hide grade achieved. At present, the extra cash ranges from R$13.00 ($ 4.00) to R$6.00 ($2.00) per hide.
Some experts believe the programme may lead to the abolition of the 9% duty on wet blue exports as, in theory, it will become more profitable to sell wet blue locally than exporting it. This would inevitably result in more raw materials becoming available and a larger local production of higher added value leather.
