11/16/2016 15h40

Footwear industry manages to create jobs amid recession

Valor International

The footwear industry is one of the few in manufacturing that has been creating jobs in 2016. From January to September, it formally hired 20,400 more workers than it dismissed, according to the General Register of Employed and Unemployed Workers (Caged), against 4,300 net hires a year earlier.

The balance raised the number of workers in the sector, which was 283,100 in 2015, to close to what it had in 2014, when it formally employed 309,300 people — thus contributing to reduce the negative balance in 12 months (9,100 as of September).

This performance owes in part to the growth in exports, which compensates some of the domestic contraction, and also to the substitution of imports, which have gotten more expensive as the Brazilian currency, the real, devalued. One of the cities that had more new jobs, in fact, is devoted almost exclusively to the domestic market.

Shoe manufacturers in Nova Serrana, Minas Gerais, created 4,794 jobs in the period, nearly 70% of the total in the state and more than twice as many as the 2,000 jobs created between January and September 2015.

Only Franca, in São Paulo, hired more in the footwear industry: 5,042. Only 2% of the shoe production in Nova Serrana, which reached 105 million pairs in 2015, is exported, says Pedro Gomes, president of the Inter-Municipal Union of the Footwear Industry of Nova Serrana (Sindinova).

That, he says, is a result of the productive reorganization that the sector has been undergoing in the region for the past three years. Traditional manufacturer of sports shoes, Nova Serrana has been increasingly dedicating itself to low-cost women’s shoes made of synthetic fabric, which already account for 65% of its output. “Four years ago, sports shoes were 80% of the total,” Mr. Gomes says.

The shift, Mr. Gomes says, was facilitated by the region’s productive structure, made up mainly of small and medium-sized firms, which would have an easier time adapting their facilities. The growth in hiring, however, is not yet an effect of growing production, since that is close to the level of 2015, but of improvements that lowered the manufacturers’ cost.

About 10% of the 830 shoe makers in Nova Serrana take part in the program Brasil Mais Produtivo, a sort of consulting service provided by entities such as Sebrae for companies to gain efficiency and reduce costs “with what they already have at home,” Mr. Gomes says.

Crômic Femme is one of them. Savings in merchandise shipping costs made possible by the revamp in some processes allowed the company to increase its workforce by 20%. Today it was 120 employees, who produce 40,000 pairs a month, says Júnior Cesar Silva, who, with his brother, manages the business since 1993.

The company has no longer been producing sports shoes for a little over a year. Sneakers were its specialty since its foundation. After the 2008 crisis, Mr. Silva says, traditional brands, which had made big orders to Asian suppliers and feared having surplus merchandise in developed markets, substantially cut their sneakers’ prices in Brazil. “It became difficult to compete.” Crômic Femme began this change producing gladiator sandals. The decision of increasing the number of workers came from the intention of diversifying its portfolio of higher value-added products, such as boots and Annabelle sandals.

Since the domestic market was receptive, exports have not yet been back on Crômic Femme’s radar. In 2000 and 2001, about one-third of its production went abroad, Mr. Silva says. The volume started to fall when Argentina, then the top destination, increased its restrictions, and with the Chinese competition gaining ground. “In 2004, we could sell shoes at $6.50, price closer to that of China, $5.50. In 2016 our average price rose to $13, against $7 of the Chinese.”

The current exchange rate, close to R$3.40 to the dollar, is not yet sufficient to ensure competitiveness for Brazilian shoes abroad, says Heitor Klein, president of the industry trade group, Abicalçados. He argues that R$3.45 to R$3.55 to the dollar would be a good level.

Yet even if the industry continues facing adversities, the launch of new collections in July and August yielded good contracts both domestically and internationally, Mr. Klein says. Abicalçados makes no output estimate, but for exports it projects an amount close to the $960 million of last year.

Rio Grande do Sul, where the footwear industry is traditionally an exporting one, managed to reverse the 131 net layoffs of the first nine months of 2015 and created 4.153 jobs this year. Marcelo Clark Alves, president of the Commercial, Industry and Services Association of Novo Hamburgo, Campo Bom and Estância Velha, cities that are among the leaders in hiring for the footwear industry, says the creation of jobs is in part because of the reorganization of the sector. “Many small firms closed down since last year and the bigger ones have been absorbing part of the skilled labor,” he says.

The region known as Vale dos Sinos, he says, has been increasingly replacing leather with synthetic fabrics of low value-added. The consequences of what he reckons as a loss of strength of the footwear industry appear in the declining number of manufacturers. In 2006, more than 50% of the trade group’s members dedicated to the industrial activity. Ten years later, 55% of the 1,200 members come from the services sectors.

Like Nova Serrana, Franca — known for men’s leather shoes — has been seeing an increasing number of companies also investing in the women’s market, now target of 20% of the production, says José Carlos Brigagão do Couto, president of Sindifranca, the local trade group. Despite the growth in hiring this year, he points out that the number of workers employed by Franca’s footwear industry, about 22,000, remains distant from the average of 2013, which was 28,000 jobs. The forecast of exporting 3.3 million pairs — 11% of the expected output, of 30 million — is only a fifth of the record 15.5 million of 1993.

In terms of jobs, Mr. Couto criticizes the Michel Temer administration’s postponement of the reform that would give more flexibility to labor relations — reducing, as a result, costs for employers — and says it could avoid the seasonal cuts that the sector usually makes in the last quarter. “These layoffs are meant to reduce the labor debts,” he says.