Leather goods - Argentina's brand new vision
"Leather is one of Argentina's oldest and most traditional industries," revealed the shopkeeper from behind a stack of brown leather hides in his packed Buenos Aires store. "Hundreds of years ago the primary reason to rear cattle was for their valuable skin - the meat was mostly just a by-product," he continued, as another satisfied tourist left his store with two leather handbags in tow.
Modern day Argentina is altogether different, where cattle are reared for their meat and leather is the by-product. The average Argentine will consume more than 65 kilograms of beef per year, more than anywhere else in the world. To this end there are currently 60 million cattle roaming Argentina's vast pampa grasslands and just over 12 million cattle are slaughtered every year to satisfy the growing appetite of both the internal and international markets. As a result, there is a lot of skin to deal with, raw material for a thriving leather industry.
Hiding to nothing?
There are around 200 Argentine tanneries that process all of the raw hides provided by the meat industry. In 2006 these tanneries produced more than 45 million square metres of tanned full grain leather, to secure Argentina's place as the world's fifth largest producer. Twenty per cent of this remains in the domestic market, to be manufactured into footwear, furniture and automobile upholstery. The remainder is exported, with the bulk of it leaving the country as tanned hides, to be turned into finished goods on arrival at their destination. China, the United States and Italy are Argentina's three largest buyers, and in 2006 they helped boost sales to nearly US$1 billion; Argentine beef exports in 2005 totalled US$1.3 billion.
The leather industry employs some 60,000 people and appears strong, but experts within the trade are frustrated that it is far from fulfilling its potential. "Argentina has never had the political stability or economic conditions to develop a decent leather manufacturing sector like the Italians," says Eduardo Wydler, President of the Argentine Chamber of Tanned Leather. "There is no confidence to invest, so we are left with a very primary based industry," he adds.
The past fifteen years typify Argentina's economic and political rollercoaster. In 1991 the Argentine peso was pegged one-to-one against the US dollar, making exports expensive. In 2001 the country went into economic meltdown as the peso was forced to devalue by one third. Yet since 2003, Argentina has been experiencing 10 per cent growth every year and exports are competitive again.
Despite the current favourable economic conditions, however, the industry still faces political uncertainty. In 2006 the government banned beef exports in an attempt to control inflation. Not only did this have a negative impact on the cattle industry, but leather also suffered from a drop in raw supplies and an estimated 5000 jobs were lost from the sector. The export ban has been relaxed since March this year, but is still prominent enough to pinch the supply of raw skins.
Argentina is now trying to capture the market that it has for so long given away. Last year the country exported US$60 million worth of tanned hides to Italy, which were then manufactured into top quality, high value goods to be sold on world markets. In 2007, a new scheme has been launched to take the market for themselves.
"We are trying to develop an Argentine mark to compete with countries like Italy and we are going to market it professionally," said the President of the Argentine Chamber for Leather Manufacturing, Raul Zylberszyein, of his scheme to increase exports of manufactured leather by 25 per cent to US$100 million this year.
Some in the leather industry have begun to stir and a clutch of people are beginning to realise the immense potential of a country that couples a world class tanning industry with a weak currency. For just over two years, a savvy young twenty-something New Yorker has been developing a top end leather store, Qara, in the chic Buenos Aires district of Palermo. Amanda Knauer has created a fashionable brand and exports it to the US, with plans to export to Europe in the future. "In 2004 the exchange rate was good, the economy looked favourable and I saw an opportunity to export to the US," said Knauer. "Argentina was just exporting hides, so I decided to add design and target a market - something the Argentines haven't done yet."
Argentina prides itself on its farming prowess and rightly so. There are few places in the world that rear their cattle so extensively and professionally to provide the leather industry with such an exemplary raw material. But, after years of bad politics and an unstable economy, Argentines have been wary of manufacturing finished products. Yet, while it seems to have taken a young American woman to show the way, if her example is followed, experts are agreed that Argentina could well be rivalling the likes of Italy for the top name in leather in ten years from now.
Date published: May 2007
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