Hide export slumps (-25%); Wet Blue leading the slump with -47.5%
In value the slump is -4.6%
The trend is not encouraging

 

The export of the four main types of bovine hide arrives at the end of the fifth month of 2008 showing a slump of around 25% regarding the same period of 2007. The export of such quantity is a high result not expected at the end of 2007. The Wet Blue export slumps significantly (-47.5%), equivalent in quantity to less 3,658,603 hides. According to experts, the reasons already mentioned by COUROBUSINESS in previous edition are still present, among which it highlights the increase of Brazilian costs because of the assessment of Real with regard to dollar. Brazilian costs, compared to those of its competitors, in U.S. dollars, each day would be higher. To this reason is joined the increase in production of leather in other countries. In traditional markets which purchase from Brazil, the slump is worrying: Italy (-27%), China (-21%), Hong Kong (-38%) (see table 5).

It must be highlighted that only these three destinations represent around 75% of the total quantity exported by Brazil. In Hong Kong, where it is registered the higher slump, there is the biggest Brazilian promotional effort of sales to Asia. The Apex, Brazil’s trade promotion agency, keeps using funds compulsorily raised from Brazilian companies in order to carry out these actions. The question is whether the results of the application of these resources are being correctly assessed regarding the trade promotion in the hide segment, as well as the footwear export. What is the relation of U.S. dollars invested in trade promotion and export increase? The society also needs to be informed by Apex about the durability of these actions in a certain time horizon. The export in value fell by 4.6% due to the increasing performance of the mean price, specially Achieved hide, which has the higher added value, which mean value increased 21.3% and reached around US$ 100/unity. (Table 1, 2 and 3, below).

Table 4 shows that the extraordinary slump of the Wet Blue quantity exported in the first five months of 2008 had an effect in the participation framework of each type of exported bovine hide. For the first time the total quantity exported of the two hides of higher added value – Crust and Achieved – was more than 60% of the total, reaching 64.4%. If the participatory structure shown in Table 4, below, remains without loss of the total market, situation in which the market loss of Wet Blue is balanced by new markets for Crust and Achieved, the better for tanner industry and for the country.

Table 5 – Main Destinations – shows a framework of permanent concentration which has been established over the years. The top ten destinations (in quantity) represent 88% of the total. Another relevant data if this table; the U.S., an important purchaser of Crust hide, reduced by 26% the purchase of Brazilian hide in the period. Among the 10 main destinations, Asia finally took the lead with 54.66% of the total, followed by Europe (28.92%) and North America, with 3.43%. Identifying those markets, by country, and focus trade promotion on those which the trend and vocation is the purchase of products of higher added value, should be the basic requirement for application of public resources. It is not known whether this requirement is taken into account.

Table 6, which describes the export by NCM, shows another indicator on which the trade promotion should address. The reference is to the kilo value of the main exported bovine hides: Achiever Hide, US$ 17.87 per kilo; Crust Hide (Semi-Achieved), US$ 15.05 / kilo; Wet Blue Hide, 15 kilos, US$ 3.34 / kilo; Wet Blue Hide, 7 kilos, US$ 3.29 / kilo. In the first five months of 2008, Brazil exported 27.9 million kilos of hide of US$ 17.87 / kilo; 11.3 million kilos of hide of US$ 15.05 / kilo; and 52.3 million of hide of $ 3.29 / kilo.

The challenge presented is how to reverse or mitigate this historical trend that leads the country to export the higher quantity (in kilograms) of the lower value product. The magic solution of the government, as always moved by pressures which are legitimate or not, is that one that provides greater convenience and, also, any additional resource, in other words, there is, by way of Export Tax, a rate of 9% on cheaper hide. In the first five months this effect would have yielded to public coffers about US$ 19 million.

The Agreement APEX-CICB, for each year, should represent little more than tenth of that value. Does the agreement focuses on a commitment to encouraging the exporters of hide of US$ 3.29 / kilo to invest in technology, new plants and market prospect to jump toward the hide of U.S. 17.87 per kilo? Neither the segment nor the government (except the National Treasury) benefit from the taxation on the hide of US$ 3.29 / kilo, of which result in previous chain can harm the rural producer. The bias of taxing as punishment and not to care about effective and lasting changes at medium and long term is strange.