Brazilians Bank on Local Demand

SÃO PAULO, Brazil — Despite global economic turmoil, Brazilian footwear players were upbeat at Couromoda last week that a healthy domestic business can help offset export losses in 2009.

“Right now our country is in better shape than any other to face the crisis,” said Brazilian President Luiz Inácio Lula da Silva at the show’s opening ceremonies.

Brazil’s footwear retailers enjoyed 4.5 percent sales growth in 2008, according to Couromoda, and closed the Christmas season with inventories low — good news for the country’s manufacturers, who supply 96 percent of the domestic market.

However, optimism about domestic sales has been overshadowed by economic turmoil beyond Brazil’s borders and competition from China, which has reduced footwear exports.

Of the 780 million pairs of shoes Brazil produces annually, 180 million are shipped abroad, according to the Brazilian Association of Shoe Manufacturers. From January to November 2008, exports decreased 7.6 percent compared with the same period in 2007.

During that period last year, the U.S. — Brazil’s biggest customer — accounted for 22 percent of the country’s footwear exports, purchasing 33 million pairs, a 26.2 percent drop compared with the same period in 2007.

While the current economic situation is making business with the U.S. more challenging, Peter Mangione, outgoing president of the Footwear Distributors and Retailers of America, pointed out that an unstable exchange rate has hindered Brazilian exports for more than a decade.

In spite of the currency challenges, some Brazilian manufacturers at Couromoda believe they can compete against China with superior raw materials, designs and technology. “The crisis is affecting everyone, but for the last five to seven years, Brazil has been working to produce better-grade shoes,” said Marcelo Paludetto, production and sales manager for the Brazilian brand Democrata. “That means we will be less affected than countries that offer a low-priced product alone.”

Another export strategy has been to target regions less affected by economic woes. “We have seen a growing demand for products with a design differential, especially in Russia and the Middle East,” said Juliano Svizzero Reghini, marketing manager for Dumond, a Brazilian brand of women’s footwear.

While only a handful of American buyers attended the show, a number of U.S. companies were on the floor looking to cash in on Brazil’s vibrant economy. “Right now, it is easier to grow in Brazil’s growing market than in America’s closed market,” said Ricardo Gracia, who will begin manufacturing and selling running shoes in Brazil this year.

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