Agricultural strike hits tannery sector

29 July 2008

A four-month agricultural strike in Argentina has had a devastating effect on the tanning sector. The action by producers of grains, (mainly soya beans), was sparked by the government's decision to raise tax on soya exports to 44%, up from 35% in March and 27% last October. This is in addition to a 33% tax on profits.

The strike provoked truck drivers to block main routes from agricultural areas to cities and ports as the conflict has left them without work. The road blocks in turn led to a fuel shortage in many areas, resulting in a gradual strangling of deliveries. Many slaughterhouses could not receive cattle on the hoof, with the knock-on effects of raw hide shortages to tanneries. Transport companies were reluctant to send their vehicles on long journeys since they could be caught up in the blockades and have difficulty finding sufficient fuel to return to base. Produce caught up in the blockades rotted in transit and millions of litres of milk were dumped in lakes and rivers. In March 2008, when the strike began, 500,000 raw hides did not make it into the leather production chain. However, Argentina processes around 1.2 million hides per month and the initial shortage was offset by stocks being moved to keep production going. This enabled tanneries to continue their operations and hence fulfill contractual obligations to their clients both domestically and internationally. However, as the truck drivers' protests intensified it became increasingly difficult to deliver leather earmarked for export to the port of Buenos Aires. Larger tannery groups with more than one processing plant were able to compensate for shortages by trucking supplies of raw materials and reduced expenditure to a minimum to try and ride out the storm. However, for smaller companies, the lack of raw materials caused layoffs of operatives as cash flow was squeezed. Chemical suppliers were also prejudiced both in terms of late payments for deliveries made and a decline in orders as production of leather fell. The leather shortage has also affected local producers of footwear and leathergoods. By mid-July, the intensity of the conflict was such that the government itself voted to reject the presidential decree which increased the grain and soya export tax from 35-44%. To all intents and purposes it looks as if tension has subsided and the country can now get back on an even keel after four months of rising prices and mounting bad debts.

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