“Made in Brazil” is slowly evaporating…

Textile Industry
A total of 208 workers were fired this week by Textil Itatiba in São Paulo, and further layoffs are planned for next week, when the remaining 380 employees will know if they will also join the unemployment line.

According to Estadao, it was the third round of layoffs by the textile manufacturer in less than a year. The plant, which grew to nearly a thousand workers, should be closed down and merged into another plant in Minas Gerais. The company claim that it has been in financial trouble for some time because of competition from cheap Chinese imports.


At the height of Brazil’s biggest economic boom in a generation, the Schmidt Bros. shoe factory in the southwestern city of Campo Grande was shutting its doors last spring and sending thousands of employees packing.

“Hopefully, most of the workers are finding new jobs in the shoe industry,” said Heitor Klein, director of the Brazilian Footwear Industries Assn., “because they had become highly skilled workers after spending their lives there.”
Klein puts much of the blame on cheap imports from China, which he accuses of dumping goods at under-market prices by simply routing them through other countries, violating international trade laws.
No one questions that the worst affected industries are certainly textiles and shoe producers. There are cases of Chinese imports wiping out Brazilian firms. Then, according to experts, the Chinese came to Brazil and recruited the unemployed shoemakers and brought them to China. They wanted to learn what Brazil had learned in the ’70s: how to make a shoe fit the American foot.

Brazilian flags: Made in China

According to Gabriel Eliozondo at Al Jazeera, Bandeiras Sukets, a small flag-making factory in Sao Paulo says that the work of making the Brazilian flag is quickly an evaporating profession inside Brazil. Local flag makers are being put out of business thanks to cheap, low-quality imports of Brazilian flags from China.
“We have been in the Brazilian flag making business for over 15 years,” said the owner. “There used to be flag making places all over this area, it was a good business, there was a lot of work for everyone, but not today. Because of the entering into the market of the Chinese. They have disrupted a lot of our local business. It’s very difficult now.”

On a recent day in central Sao Paulo, high quality, locally made Brazilian flags were selling for roughly $30-40. A low quality Chinese knockoff was going for as little as $3. For Brazilian flag makers, that type of pricing disparity means one thing: Game over.
Unfair competition strategies 

According the Roberto Lerner Barth, president of the Commission for the Defense of Brazilian Industry, China has several strategies in place to deal with unfair competition claims. One is to create false certificates of origin. For example, before sending products to Brazil, they will send the shipment to India or Malaysia, and get a new certificate of origin. This is to avoid the anti-dumping surcharge that Brazil imposes on Chinese products. 
Recently, the Brazilian government said it will investigate whether China is shipping shoes to Brazil via Indonesia and Vietnam in order to avoid paying an anti-dumping tariff. Brazil says China practices disloyal competition with its low-cost footwear exports and since last year it has been levying a tariff of $13.85 per pair.

Watch out, Brazil

The trade surplus with China may show Brazil in a good light in terms of exports, but the numbers mask the fact that that there is actually a record trade deficit in terms of manufactured goods, according to a study by influential business group FIESP (Federation of Industries of São Paulo State).

“The relationship with China is important for Brazil, but from the point of view of industry, it’s abysmal,” says FIESP. ”The trade balance is only favorable because of the large quantity of commodities exports and high international prices.”
Imports of Chinese manufactured goods outpaced exports by $23.5 billion in 2010, up sixty percent over 2009 – in stark contrast to the situation just eight years ago when Brazil was exporting more manufactured goods.
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