Mauricio Herzovich (MH) is a professional journalist who, for 25 years working from his base in Buenos Aires, concentrates on the leather, footwear and leather goods sectors.
Besides editing local and international magazines in the sector, and contributing numerous in-depth articles, Mr. Herzovich was the pioneer in providing information on-line in Latin America, as far back as 1998, when he launched his web site cueroamerica.com. He also hosts a radio programme dedicated to the sector in Buenos Aires which brings news and views to the industry once a week.
He reflects on the effect of the cyber information revolution as it has impacted the way in which news and information are disseminated in the leather sector. He shares his views also on the outlook for the international leather market in the medium term.
Q. Since the Argentinean Leather Goods Chamber (CIMA) has been exhibiting at APLF Fashion Access in Hong Kong, have you observed, or do you have information of, an increased internationalisation of Argentinean leather goods in other countries?
MH: We can see clearly how this sector has used APLF as the linchpin to reinsert itself into world markets. After the dark days of the1990's, when Argentinean monetary policy caused a loss of competitiveness for local products with high added value, the leather goods sector came out of this period badly diminished and under-capitalised. CIMA, with the help of the Argentinean government's "Fundación Export.Ar" hatched an export plan to recover lost markets. There is no doubt that this has yielded sustained results. Commercial missions and medium to high-end products are well received even in demanding markets such as Japan and this year exports should reach US$100 million. In such a short space of time, it's been a very good result. Other Latin American industries such as Colombia also have the possibility of being international suppliers and could learn from this experience.
Q. Regarding the leather goods/fashion accessories consumers in South America or Argentina in particular: Have you observed the same trend as in Europe and Asia with a growing importance of fashion accessories in consumer spending patterns?
Mauricio Herzovich: Mass media, including the Internet, cross national frontiers every day. Information arrives immediately to all corners of the planet. Consumers, led by those with buying power and the desire to be 'up to date', know all about latest fashion trends. Even allowing for cultural and idiosyncratic differences in each country, nowadays Latin Americans follow fashion trends little differently from European centres. Those who have less buying power, or are more conservative, go at a slower pace but always end up in the same place. I believe that it has always been like this, at least for almost a century - which is the length of time my family has been involved with this industry and leather goods.
Q. Many large Argentinean tanneries have contracted most of their production to leading automobile manufacturers as leather seating becomes more commonplace. Do you consider that this trend will be reversed some time in the future or is it here to stay?
MH: I'm not a specialist on this subject and I hate making predictions – one of my grandparents won the lottery twice but, unfortunately, I did not inherit his intuition!
Nevertheless, I respect the people who know about this matter and many are certain that automobile upholstery has a promising future. Automobile manufacturers are including leather upholstery in an increasing number of models
and what was previously regarded as a luxury in understood more as something to do with comfort. This means that consumers who are looking for performance in the products they purchase, as well as those who want to optimise their investment, decide that their automobiles should feature leather upholstery and fittings. This does not mean that all is wonderful in the world. This increases demand, includes varying qualities and forces prices higher, both for raw hides and finished leather. In other words, besides the demand for quality, tanners are under pressure to reduce prices. It's probable that there will be an increase in the commodity value of some articles and this will obviously result in winners and ……losers.
Q. Brazil's cattle herd has been growing for many years whilst the number of cattle in Argentina has remained stable. What are the reasons for this? Has the fact that the annual kill in Argentina is steady made Argentinean finished leather less competitive in world markets - taking into account recent government interference in the meat and leather supply chain?
MH: The differences between Brazil and Argentina can be traced to two main reasons. Brazil has maintained an unchanged policy of national development and exports for 45 years. And, of course, Brazil is much larger than Argentina.
Argentina, on the other hand, with rare exceptions, has been governed by deliberate actions or omissions which benefited specific economic groups. That was when they were not actively organising the systematic economic looting of the country: such as in the 1990's!
Recently, increase in prices for agricultural products coupled with the advanced technology used in Argentina has produced an exponential development in agriculture. This has resulted in many cattle ranchers choosing this higher yielding activity and moving away from cattle rearing.
The other ingredient is the pressure on international meat prices which is now beyond the purchasing power of many Argentineans but who, nonetheless, still try to maintain their high meat consumption of around 70 kilos per year. This has impacted on the inflation rate and other economic variables and has caused the State – sometimes in desperation and incorrectly - to intervene in the slaughter house sector which is concentrated in a few hands and is very export oriented.
Despite this tension in the market place which has had an adverse effect on hide prices, the Argentinean tannery sector has managed to maintain its level of exports and fulfill its customer commitments. This has also been possible due to modern technology and entrepreneurial efficiency, which allowed the sector to grow even during the economic shipwreck of the previous decade.
Q. Some 20 years ago it was common to be able to buy Argentinean footwear in Europe and the US. This is now not the case and exports appear limited to neighbouring South American countries. Do you see any change occurring in this situation bearing in mind that the peso at 3.1 to the US dollar should, in theory at least, make Argentinean footwear more competitive abroad, especially in niche markets?
MH: The US dollar/Argentinean peso is currently around 3.1 but you have to take into account that "all that glitters is not gold". Since this level of exchange came into being about three years ago, internal costs have risen sharply and have undermined this relationship.
Labour costs have increased generally and even more so for salaries of specialised personnel required to manufacture medium and high-end products, which can be
exported. The aforementioned collapse in the industry in the 1990's resulted in another phenomenon: the loss of specialised personnel, which takes time to be trained. This limits production increases. Another important factor is that Argentina is now an important tourist destination and the tradition of Argentinean leather and workmanship ensures that hardly any visitors go home without buying footwear or leather goods. A large part of local production is "exported" in this way. The Argentinean Footwear Chamber with government support is working very hard, participating in some international fairs and sending commercial missions abroad to promote exports. In terms of actual sales abroad, 30% goes to Chile and the rest to a wide variety of countries in South America, USA and Europe, including Italy.
Q. Do you consider that the advent of internet has had a direct influence on the decision making process in the leather industry and how does this fit in with the sales and marketing opportunities offered by international fairs?
MH: In the last fifteen to twenty years, cheaper communications and travel costs, as well as the breadth and facilities offered by the Internet, have all changed the course of commercial relationships. In particular, the Internet has made links easier and more flexible for a minimum cost. Today you can speak, write, send images all over the world almost instantaneously just for a few cents. It's amazing. For example our portal www.cueroamerica.com/receives more than half a million visits a year from more than 100 countries and every day I am in personal contact by e-mail with businessmen and professionals all over the world. However, speaking face to face and seeing and touching a product will always be an essential part of the leather industry.
Q. Finally, how do you intend to develop your internet activities to give an even better service to the industry? Does this depend on changes in the leather industry itself in the medium term and do you have any firm views on how the industry could change by the end of the decade?
MH: The possibilities the Internet gave me of being in constant touch with the world changed my way of thinking and, in some way, my identity as well. Nowadays, I do not feel bounded by regional limits and in order to look at reality – especially in this industry – I try to place myself on any place on the planet and look at it in accordance with the needs and interests of each region.
I don't believe that one can think like a Chinese, a Pakistani, an Australian or a South African, but I try to loosen my roots a little at least to be able to comprehend other realities. I believe that in this way I can better transmit information about companies and people wherever they are. The limits will be set in the interests of the readers and defining what is really useful for their businesses. Everyone knows that being informed at the right time is essential. Internet media and fairs are the only means which facilitate this and so the future is on our side. Since the world is dynamic and ever changing it is normal that products and markets suffer fluctuations. But, the hides of animals have been united with human beings since the very beginning and it is for this reason that I am certain that with imagination and technology - which always surprise us - the future of the leather industry is extremely attractive.
Information released on 22 May, 2007
