The Brazilian leather trade has reacted with dismay to the government’s recent decision to phase out the 9% duty that applies to the export of wet blue. 

Camex, the Brazilian Chamber for Foreign Trade, has approved a resolution that will see the duty reduced from its current level to 7% in 2004, 4% in 2005 and its complete elimination by the end of 2006.   The chamber cites ‘disappointing’ growth in footwear exports.

Introduced in December 2000, the duty is widely credited with the fantastic increase seen in Brazilian finished leather exports, which were previously hamstrung by the country’s supply of wet blue being snapped up by overseas buyers.

Cézar Müller, President of AICSul – Association of Tanners of the State of Rio Grande do Sul - Brazil’s largest producer of finished leather for export and a major supplier to the domestic footwear sector - described the government’s decision as a backward step.  "The wet blue export duty was adopted because the tanneries agreed to it. Last October a survey was carried out and 70% of the companies decided that the 9% duty should be kept in place.

“The government has demonstrated its lack of concern for a sector that generates wealth and jobs for the country.  We are going back to a time when we were denied fair access to raw materials that are rightfully ours.”

In the three years the duty has been in place,  Brazilian finished leather exports have risen 230% from $138.7 million to $458 million, with the duty being viewed as the main engine for the growth.   The industry had been expecting the same rate of growth over the next three years, reaching the $1 billion mark by the end of 2006.  In that wet blue only fetches a third of the price of its finished counterpart however ($30 a piece vs. $90.00), those projections have now been thrown into disarray.

Cézar Müller asserted that the Camex decision would only serve to create unemployment and, at the same time, prevent the generation of new jobs. Only 300 new jobs were created for every one million units of wet blue produced, he explained, increasing to 650 for crust and 1,000 for finished leather. And it was, one million manufactured products were enough to support 25 to 30,000 jobs.

Brazilian leather exports January/November

Amadeu Pedrosa Fernandes, President of CICB – Centre for the Brazilian Tanning Industry and Vice-president of the International Council of Tanners, said the decision was at odds with the stated aim of President Luiz Inácio Lula da Silva, which was to reduce unemployment.   It had also been taken without the necessary consultation.  In his estimation,  instead of preparing the country for development, the Camex decision would take the country back to colonial times.

In a recently issued document, Abicalçados – Brazilian Association of Footwear Manufacturers outlined the benefits brought about by the duty.  These included  a greater willingness among European tanners to negotiate the elimination of duties that apply to the import of Brazilian finished leather, footwear and leather goods, plus increased interest from European tanners in setting up joint ventures with their Brazilian counterparts.

Heitor Klein, Managing-Director of Abicalçados, said Brazil should not relinquish the competitive advantage brought about by the duty  -  especially in view of the opportunities presented by the recent BSE case in the US.   “Giving up such an important negotiation tool as the wet blue export duty is commercial naiveness to say the least”, he emphasised.

Comparison of wet-blue and finished leather export growth

Adding his voice, the governor of the state of Rio Grande do Sul, Germano Rigotto, has sent a formal appeal to President Silva requesting that the Camex decision be reversed and the current 9% duty be maintained until December 2004.  This would allow the repercussions of the duty elimination plan to be more widely assessed before its implementation.

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