Francisco Santos: FootweaR national industry X asiaTIC industry

 

“The national industry is, in the western countries, the unique industry capable to compete at a global level with the Asiatic footwear”.

 

In this edition, Courobusiness has interviewed Francisco Santos, founder and president of COUROMODA, Ibrafe International Relationship Vice-President and Vice President of WSFO/ World Shoe Fairs Association, in Paris.

  COUROMODA, shall hold its 34 th edition in January 2007. It is the major shoe fair of Latin America, and shall have 1200 companies exhibiting in an exhibition area of 80.000 m² . Disclosed in more than 90 countries, it should receive the visit of more than 4.000 international purchasers.

 

COUROBUSINESS: Twenty years ago, the Brazilian footwear industry has exceeded the barrier of US$ 1 billion in export. From that time up to the current date, oscillatory moves were recorded. What should be done for the export to exceed the barrier of US$ 2 billions / year in export and maintain itself above this level with growing annual taxes?

 

Francisco Santos: The balance of exports in 2006 indicates that the segment is in the correct path. Export, in value, will be equal to 2005, and there is a strong evidence that we will grow again in 2007, when for sure we shall exceed the US$ 2 billion barrier. Modern industries, updated modeling, higher added value, and quick logistic are starting to make the difference in the direct comparison with the Asiatic competitors. Diversified labor, abundant raw material and displacement of production within Brazil, with the development of new clusters, indicate that our country is the unique competitor in the western countries that can compete with the products from Asia.

COUROBUSINESS: The footwear commercial promotion abroad is in the correct path? What should be done to export higher added value footwear? Which countries should we seek?

Francisco Santos: The commercial promotion of the Brazilian Footwear has experienced an important impulse these last four years, mainly thanks to the financial support offered by APEX-Brasil, which makes participation of the local companies in the most varied events of the world, more economic. What previously was a high cost, funded by the companies and by a few sponsors, such as Couromoda, is now more affordable to the industry and has expanded the marketplaces that were reached. A reflex of this fact is that many countries nowadays buy our footwear. What was previously concentrated in the American market, which in the past had bought 80% of our exported production, today is scattered in 124 countries, although the United States, Argentina and United Kingdom are still buyers of 60% of what the country exports. Export is still concentrated, but has largely reduced the dependency of only one country.

Courobusiness:  What is the role of the Brazilian Fairs in the communication process of the Brazilian Footwear and the attraction of new purchasers?

 

 

Francisco Santos: I would say that it is a very important role. Couromoda, specifically, has always been present in the International promotion during these last 30 years, looking for new sales opportunities in all the continents. Its presence includes the organization of Brazilian stands in the main footwear fairs of the world, with a stimulation to creation of own brand, inviting international buyers and opinion makers to visit the fairs in Brazil, and this has been happening since the time in which this was not thought about as a public policy.

Just in time, nowadays, the role of APEX-Brasil in the commercial promotion in the foreign markets includes the fairs that are held in the country, not only in the footwear segment but also in all the segments of our economy. But to obtain better results of this “twin set” it would be important to have the APEX-Brasil also valorize the national events several of them with more than three decades of life and a large experience in each of the segments object of large size national fairs. This is, without doubt, the huge capital in commercial promotion expertise that is not being used and that could be an important step in the support to the important work performed abroad. I believe that APEX-Brasil, in its on-going evolution, shall consider this aspect in its schedule covering the next few years.

 

COUROBUSINESS: Any other suggestion as related to the work developed by APEX-Brasil?

 

Francisco Santos: Another point on which we are betting, when inviting important buyers and/or distributors to visit our fairs, would be to take them to get acquainted with the excellent industrial structure present in the Brazilian footwear segment. I believe that APEX-Brasil could also adopt this procedure. The Europeans, specifically, do not wish partners for only one purchase. They want to know the structure of their partners, they want deeper partnerships, and this always give positive results and long term business, and which tend to perpetuate.

 

COUROBUSINESS: Going back to the international market, what parallel do you do between the footwear industries of Europe and those of Brazil?

 

Francisco Santos: The European situation should go through a very rapid reduction in production of footwear in that continent. This for sure could also be a highly favorable point for Brazil. With the industry disappearing in France, Italy, Spain and Portugal, important doors are being open for our shoes in all the countries of Europe. We have space enough to sell using distributors, store chains, but we can also establish partnerships with industries that have well known brands and their own chains of representatives, in addition to the capital to associate themselves to the Brazilian industries. This aspect requires deeper analysis, because, going back to the beginning, Brazil is for sure, due to the reasons already mentioned, the largest and maybe the major western competitor in condition to compete with the Asiatic products.

 

 

FOOTWEAR: ABOUT CRISIS AND CRISIS

 

Roberto Nogueira Ferreira

Member of the Deliberative Council of SEBRAE Nacional,

of ABDI and of APEX-Brasil

 

It was assumed that the common place condition has assigned the state of crisis to the footwear industry. Not to be unfair with the Portuguese language neither with the footwear industry, I have decided to refer to the Houaiss. My interest was the economic concept: “Serious conjunctural unbalance between production and consumption, causing the degradation of prices and/or of the currency, wave of bankruptcies and unemployment, business commitment disorganization”. Crisis according to Hoauiss could also be the word used to mark a transition phase between a boom of prosperity and another of depression or vice-versa. Houaiss has several other concepts for crisis according to medicine, sociology and psychoanalysis, where maybe, is better classified the so called crisis in the footwear industry, because from the economic point of view it is impossible to generalize.

About this subject, an article in the Diário de Franca dated December 11, 2006 contests that so called crisis, assuring that it is not the consensus in Franca. Businessmen, syndicalists and analysts, uncommitted as related to their employment, this means, completely independent, certainly evaluate differently, but there is no path that appoints towards a solution for the conjunctural crisis. Serious structural problems exist, some lasting for quite a long time, and which were disguised by the favorable exchange rate and by the oppressing behavior of China.

Some punctual elements should precede to the lamenting professionals:

 

1. There is no record, in the history of the Brazilian footwear industry, of an industrial overthrow in a significant scale resulting from internal or external problems. To the contrary, the history records a recovery and adequacy to new realities.

 

2. There is no space for pessimism, defeatism or any adjective in this meaning, for a segment that exhibits figures extraordinarily surprising in a historic vision of three decades:

 

•  1970 – Export of US$ 8 millions; 4 million pairs, at an average price of US$ 2,19.

•  1980 – Export of US$ 387 millions; 49 million pairs, at an average price of US$ 7,89.

•  1990 – Export of US$ 1,107 (One billion, hundred and seven million dollars); 143 million pairs, at an average price of US$ 7,74.

•  2000 – Export of US$ 1,547 (One billion, five hundred and forty seven million dollars); 163 million pairs, at an average price of US$ 9,52.

•  2005 – Export of US$ 1,887 (One billion, eight hundred e eighty seven million dollars); 189 million pairs, at an average price of US$ 9,98.

 

4. The global market confirms China as a first class player in the low value footwear market. Its production advances internationally and competition for the American market is getting tough. Exchange Rate Issue? Not only this. The development of prices in China is not aware of the market economy in the capitalist concept. Everything favors the Chinese manufacturer, making it, in a given range of the market, a fearful competitor. This would in part explain the presence of "Brazilian Industries" in China. Brazil loses when transferring employment to China. This would also explain, the migration of companies located in the southern regions to the northeastern region, looking for a "Northeastern China".

 

5. In a deeper analysis, a crisis generally results in gains in productivity and the footwear industry is historically an evidence of this fact. In spite of all the considerations as related to the exchange rate issue, export in 2006 will reveal at the end, that the results are at the same levels of 2004 and 2005, this means : export in the amount of US$ 1,8 (One billion and eight hundred millions) 180 million pairs exported, at an average price of approximately US$ 10/pair.

 

6. There is a slight effort for qualification of the export of footwear (search for markets with a higher average prices) because such "crisis" is located in a niche of a low average price market, specifically the USA marketplace. The export programs continue concentrated in a few companies. It would be better if the benefits would be socialized, because they are funded with resources from all of us.

 

7. Export to the USA of the Brazilian footwear was, during several years, the greatest force of the Brazilian exports achieving levels higher than 80% of the total. In 2003, it dropped to 64,2%; in 2004 to 56,6%; in 2005, 50,2%. In 2006 it should be below 50%. The crisis results in the manufacturer-exporter searching for new markets and higher average price. These are gains resulting from crisis.

 

8. Brazilian import of footwear would not as yet be an important component, seen as a whole, and under the vision that the foreign market is a two ways path. Brazil has exported approximately US$ 1,8 billion in 2004, 2005 and 2006. Imported US$ 65,2 million in 2004 and US$ 115,4 million in 2005. Comparatively, this is not an issue to be afraid of, but in 2003 we have imported US$ 30,6 million from China; in 2005, US$ 78 millions. It is an accelerated import that increased from 5 million pairs in 2003 to 9 million in 2004 and 14 million pairs in 2005.

 

9. For a country that produced 755 million pairs in 2004 and 725 million in 2005, comparatively the Chinese import looks non-relevant But we should not neglect. We should analyze what is being imported, who is importing, if it is a Brazilian production located there or not. To ask for application of a tax on the Chinese imports is an unthinkable simplification, because this is not the actual problem.

 

10. Another important comparative data - and which reveals the strength of the footwear industry and of the internal market - is the apparent consumption that has increased from 484 million pairs in 2002 to 552 million in 2005. The consumption per capita continues low, maintaining itself to approximately 3 pairs.

 

11. The footwear industry is living the China challenge - similarly to all the other global players - and an exchange rate reality that incites a new production and trading logistic. The industry shall overcome this moment as it overcame all the others in which conjunctural and structural difficulties have crossed its path. There are economic problems with serious social effects, although localized. Several are related to the exchange rate issue and are being inflated, once more, by a fiscal war that takes from some to give to others within the same territory.

 

12. To the commercial boom felt during the years of 90, the footwear industry responded with additional export and special attention to the internal market, inhibiting the presence of mass consumption imported products. To the entry of China, the industry responds with a search of new markets, stimulation to the participation of a greater number of exporters and the preferential commercial promotion in markets having a higher added value.

 

13. China is obtaining the major part of the global growth in footwear export. According to the SEBRAE-RS, during this decade, exports have grown approximately US$ 48 billions of which 52% went to china and 17,5% to Brazil. There is a lot to do in this field. COUROMODA appoints France as a marketplace still open for business with high price and quality.

 

14. We cannot mention a crisis in a segment that has an extraordinary internal market, an on-going and growing presence in the international market, and an industry technologically prepared. Low investments were made in brands and maybe this is the main mission of the governmental and non-governmental programs, which, some times, are lost in bureaucracies and specific corporate interests without additional commitments with the country, and become more important than the companies and the segment.  

roberto@rnconsultores.com.br