Wet-blue tax explained

At PAL, Amadeo Fernandes, vice-president of CICB, the Brazilian Association of Tanners, said his country's imposition of an export tax on Brazilian wet-blue was in retaliation for import taxes applied in Europe to Brazilian goods. The tax, which is 9%, is applied to countries outside the Mercosur area and he said that while he fully supported the principle of a free market and Brazil was always open to discussions on the subject, for a truly free market their own products should not be burdened with overseas taxation. The one year wet-blue tax may well be renewed when it expires in November 2001. Brazil exports 16 million hides of which 11 million are in the wet-blue. Italy is the major customer, taking between seven and eight million hides/year. Finished and crust leathers to Europe attract an import duty of 6.5% while shoes are penalised by a tax of 14%. In the US, the tax on Brazilian footwear is 7-8%. Speaking at Couromoda, CICB president, Roberto Scarabel said that Brazil's 7,000 footwear and leathergoods producers were very happy with the new tax as it should make them competitive outside Mercosur. Most CICB member tanneries were also pleased with the tax because it encouraged production of leather beyond wet-blue. Latin America accounted for 55 million hides/year in a world availability of 270 million; in other words, 25% of the world supply. And within Latin America Brazil is a big player. To put this into perspective the Mercosur countries, Argentina, Brazil, Paraguay and Uruguay, with 48 million hides, represent 18% of the total; Argentina and Brazil between them account for 16% with 44 million hides and Brazil alone provides 32 million or 12% of the world's availability and has a cattle population of 180 million. There are 500 tanneries in Brazil, 80% of which are medium and small. Of these 35% are running at less than capacity and of the 2,000 footwear factories who make 450 million pairs/year 30% are under utilised. Brazil defends their policy by explaining that there are 170 million people in the country of whom 12% are unemployed. The country, therefore, needs to create new jobs by adding value to their leather and finished products. While they would like to achieve a free market for everybody they need assurance that other countries will also abide by the same principles.