Leather suppliers not crying over Argentina
By Joan Gunin -- Furniture Today, February 3, 2002
HIGH POINT — Leather exporters and suppliers doing business out of Argentina do not expect to feel much effect from the country's currency crisis, largely because they routinely trade in U.S. dollars.
The devaluation of Argentina's peso in January spawned unrest including frozen bank accounts, bank closings and the installation of a new president, Eduardo Duhalde. Lately, the currency rate has fluctuated between 1.4 and 1.8 pesos per dollar.
While hides are paid for in U.S. dollars, the local workforce is paid in pesos that have been devalued by about 40%.
Most leather exporters — who all deal on a global stage — say that neither leather nor the chemical components used in the finishing process have been affected by the domestic tumult, since they are priced in U.S. dollars. Some exporters, including Americraft and Arpel, say the fiscal restructuring could even prove advantageous.
Conditions in Buenos Aires are slowly returning to normal, according to Diego Beverstein, sales manager for Fonseca U.S.A. "The worst is over."
"The savings will be minor on the hides, but the labor is paid in domestic currency (peso), " Beverstein said, noting that cut-and-sew work is heavily dependent on labor. "We may have a small advantage."
Luis Moreno, president of Arpel Leather and co-owner of a tannery in Argentina, is among those expect little impact. He said the devaluation would not affect his business as an exporter, but could affect import businesses because it would increase costs.
Moreno said prices for anilines or pigmented hides could rise because the chemicals used in processing are imported, while labor costs could decrease due to devaluation. "Some tanneries may take advantage of this to increase — or to decrease — prices as they see fit," he said. "Even so, because we deal in U.S. dollars, we are actually going to maintain prices on the same level."
Alluding to recent street rioting, Moreno added, "The people
of Argentina have found a way to be heard through the pots and pans. But if everything settles down (i.e., no civil war), it will be beneficial in the long term."
Luke Reed, sales director for Americraft Leather, agreed with the long-term outlook. "It will be beneficial for everyone. Basically, it's just going to be less expensive for us to do business there."
But he too was wary of chemical suppliers who might take advantage of the situation to push through price hikes. He predicted a round of pricing adjustments.
Reed admitted his deliveries were "affected slightly" in the wake of recent bank closings (they have since reopened). "There have always been general strikes, and the usual lags with customs."
At Anthem Leather, whose tannery partner is in a Buenos Aires suburb, President Bob Wilson said his U.S. dollar-driven export business has had "virtually no disruption. We haven't missed any deliveries." Rather, he said, it is the individual workers in Argentina who will likely suffer.
"Raw hides are purchased and sold in U.S. dollars so regardless of what happens, prices may go down," said Joelle Young of Leather Services of America, which initiated a business program with an Argentine source this summer.
Young said manufacturers may be skittish but added that Argentina is such a strong supplier of leather hides and cut-and-sew that manufacturers should not be too concerned. She said now is the time for Argentina to initiate more export programs, perhaps with rebates and/or subsidies.
"There will be more interest in exportation because the U.S. dollar will be worth more. It will benefit us indirectly," said Young.
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