- The Washington Times - Monday, May 24, 2004

SAO PAULO, Brazil — As top government officials left last weekend for a five-day trip to China to expand trade and political ties, Brazil’s clothing and shoe manufacturers viewed the growing relationship with trepidation.

Brazil is renowned as a center of fashion design. Fashion-conscious Brazilians provide an eager market for makers of clothing and shoes. Most apparel sold domestically is made in Brazil, not in Asian countries, but China is quickly changing that. Shoes and fabric are among the top seven products China exports to Brazil, according to the government Trade and Development Ministry.

Between January and April this year, 1,035 Brazilian companies exported goods to China, compared with 940 in the same period last year. Meanwhile, 3,534 Brazilian companies imported Chinese goods, including shoes, in the same period, up from 2,779 in 2003.

Although shoe manufacturers say they have a better product and can compete with Chinese-made apparel destined for international markets, they agree with concerns on the factory floor.

“Of course we are worried about China,” said Jorge Luis Martins, director of a shoemakers union in Franca, a city in Sao Paulo state noted for its handmade shoes. “We know they have cheaper labor than ours, so it’s unbalanced competition.”

China has no minimum-wage law, and workers are often made to work long hours, according to Meg Davis, a China specialist at Human Rights Watch in New York.

“We are in favor of relations with China, but this country has to protect our labor laws,” said Mr. Martins, who would favor raising the cost of cheap Chinese imports by imposing tariffs. “We don’t want to be importing shoes made by people earning $2 a day,” he said.

Shoemakers unions are already reacting to China’s growing influence. They took shoe manufacturers to court over outsourcing practices. Outsourced labor is paid less and has no legal rights, so unions are calling for shoemakers to abide by standard labor practices when outsourcing.

Groups like Fundacao Abrinq — the Abrinq Foundation, a child-labor watchdog — say Brazil could capitalize on its image as an apparel producer operating under fair-labor laws.

“Some companies could absolutely tell consumers their product is better than a brand-name product from China because it was made without child labor,” said Edmilson Selarin Jr. of the Abrinq Foundation.

“They could do it, but Brazil still does not have a squeaky-clean image. We are not 100 percent confident that outsourced labor does not use children, because outsourced workers work at home,” he said. “It is hard to monitor.”

Brazil is the third-largest shoe manufacturer in the world. China is No. 1, followed by India. “We used to make shoes for JC Penney and Sears, but now part of that market has moved to China and Asia in general,” said Marcelo Paludetto, sales manager at Democrata Calcados (Democratic Shoes).

Democrata has 1,400 employees, making it one of the largest shoe manufacturers in Brazil. It makes about 7,300 pairs of shoes per day for upscale domestic and foreign markets, selling under its own brand name. The average laborer at Democrata earns $350 per month. A pair of Democrata shoes sells for about $80.

Nowadays, they are competing globally by making shoes for men’s footwear companies like Kenneth Cole, but Mr. Paludetto knows that China does so as well.

“China is a both blessing and a curse,” he said. “We surely can’t compete on the mass-market level. Shoe design is where we’re strongest.”

Labor unions are concerned that as commercial ties expand, Brazil will be flooded with Chinese goods. When Brazil first opened its doors to foreign clothing and shoemakers in 1992, roughly half of the shoemakers in Franca went out of business. In 1990, there were 32,000 jobs in shoemaking. In 1994, it was down to 18,000. Today, it has recuperated to about 23,000, according to labor studies.

Given Brazil’s persistent employment problems, a contracting job market owing to the government’s efforts to develop closer ties with China would be a shot in the foot.

Brazil has some of the strongest labor laws in the world, including a law that gives all salaried employees an extra month’s pay at the end of the year. Brazilian law permits a 44-hour work week, nothing longer. But labor unions worry that labor reform will soon allow companies to make their own rules during union negotiations, which could not be challenged in federal courts even if they violate federal law.

“It’s either a question of lowering profits — which isn’t going to happen — or cutting labor benefits,” Mr. Martins said.

Trade Minister Luiz Fernando Furlan said at a press conference in Sao Paulo that the government had no plans to protect domestic shoe and clothing manufacturers from Chinese competition.

“For these manufacturers, the niche to fill is making product for internationally recognized brands,” said Mr. Furlan, who is currently in China. “Brazil can sell its image overseas as a fashion maker, and compete against China with our own designer products.”

On the factory floor at Pura Mania, a trademark clothing company in Londrina, Parana state, a 45-minute flight west of Sao Paulo, Cleuza Ghisleri Morais said China does not worry her. “There’s not a lot of pressure here. Nothing out of the ordinary,” she said.

Mrs. Morais manages about 20 seamstresses. Pura Mania has 400 employees and 30 stores in shopping malls around Brazil selling moderately priced clothes to a young, urban market.

She’s not worried about cheap labor either. “We work for little pay, too,” she said. “But our product is better than theirs.” Mrs. Morais said her last raise was in September. She earns about 800 Brazilian reals per month — roughly $267, a typical working-class income in Londrina.

Pura Mania’s factory is a testament to the “Made in Brazil” mentality. A stack of blue denim lines one wall. Hundreds of rolls of fabric crowd the factory floor. All the material is made locally.

Pura Mania has jumped on the export bandwagon, selling in Portugal and France this year for the first time. Chelby Nabhan Filho, 27, the company president, said labor would inevitably feel more pressure if Pura Mania tries to compete with China abroad.

“We will have to negotiate with labor. It’s hard to know what we will have to do,” he said.

“Clothing and shoe manufacturers are solid sectors,” said Luiz Marinho, president of the Central Workers Union, a national organization with close ties to President Luiz Inacio Lula da Silva.

“We don’t want to see labor costs forced downward,” Mr. Marinho said. “It’s cheap as it is.”

The Brazil-China relationship may prove to be more cooperative than competitive. China is interested in Brazilian agriculture and raw materials. To ship more Brazilian food to China, Beijing intends to invest $4 billion in large infrastructure projects like railways, roads and ports, something Brazil has wanted to do for years.

The two countries will decide on investment projects this week.

“Our move toward China is more than trade. It’s a strategic political partnership,” said Edmundo Sussumu Fujita, a Brazilian diplomat traveling in China. “We are in lock step on issues related to world trade and on promoting a permanent seat on the U.N. Security Council for a developing country.”

Brazil has played its China card since Mr. Lula da Silva took office Jan. 1, 2003. The new administration has paid particular attention to increasing Brazil’s international reach, moving away from the days when the country’s main focus was Washington and domestic matters.

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