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Major brands prefer Uruguayan leather

Interview - November 16, 2016

What gives Uruguayan leather its high quality and competitive edge in international markets? Álvaro Silberstein, General Manager of Paycueros, the Uruguayan arm of Sadesa, looks at the importance of adding value to Uruguay’s raw materials and explains what keeps the company’s quality hides in high demand from some of the world’s biggest names in the footwear and automotive industries.



Uruguay's GDP has been growing in the last 10 years with a rate of 5-6% annually and now it seems that is going through a stage of milder growth, with a forecast of 0-0.5%. What should be supported in Uruguay to improve its growth?

We have always thought that Uruguay should grow by relying on its export sector. That is precisely our vocation as an exporter. In the case of hides, Uruguay does not have a market of significant consumption (the demand for footwear and leather goods manufacture is too small in relation to the number of hides produced), and therefore the strategy is to add value to domestic raw materials and export them to the world.

Adding value means processing these raw materials, adding knowledge, technology, design, and business intelligence. In Uruguay that is valid in the meat, dairy, forestry chain, and is especially applicable in the leather industry.

This new situation of slower growth should be seen as a new opportunity to look again at export markets, and how to create the conditions for growth based on those exports. We have the conditions to do so because we have raw materials that will continue to be in demand in the world, and the ability to convert and add value that may be appropriate for the country through exports.

The agro-industry sector impacts almost 12% GDP and employs 47% of industrial employees, but one of the challenges for Uruguay is to improve productivity to compete internationally.


What does Paycueros mean for Uruguayan industry?

Paycueros is the Sadesa company in Uruguay. Sadesa is an international leather company that produces and sells to the world’s leading footwear and automotive industries.

Sadesa produces about 4 million hides a year in six plants: two in Argentina, one in Uruguay, one in Paraguay, and two in Thailand. It has approximately 3,800 employees in different parts of the world, and it has a network of sales offices in China, Vietnam, Indonesia, India and the USA, from which we promote our products to the world leaders of the footwear industry and automotive sector.

Paycueros is the company in Uruguay. It has a plant in the city of Paysandu, where about 760 employees work, and where it processes about 35% of the hides produced in the country. It generates annual exports of about $100 million.


When you talk about the quality of Uruguayan leather, what part has to do with the industrial process and the breeding of cattle and their genetics?

It has to do with race, it has to do with the climate and the conditions in which animals live in the countryside.

Meat producers in Uruguay are export oriented. That makes the type of animal to be very even, and that the age of slaughter is very standardized.

The vast majority of meat companies operating in Uruguay are exporters. Many also sell in the local market, but are basically exporters. Therefore, they are very technologically updated. That makes the extraction of hides in the refrigeration very good; all machining, no knives. The hides are removed very healthily and that is also very important.

In addition, with the type of pasture we have and the type of production that is done, hides do not suffer as much as in tropical areas. In these areas, hides come with more bites, with more problems, which then affect the value of the material. That makes Uruguayan and Argentine hides a sought-after commodity in the world.


Leather is a product that is in the lower rankings in terms of export volume, yet is sixth in value. How much of the final price is value added by tanneries such as Sadesa?

The raw material is approximately 45% of the product cost. The remaining 55% is composed of chemicals, labor, energy, development, amortization of investments, logistics, financing, etc.


Within the Uruguayan leather industry, what are the goals of Paycueros? How far can you go?

We aim to supply the world's leading leather consumers, specifically those dedicated to the footwear industry and automotive sector. It is a constant challenge and we are doing quite well.

Today we are the largest suppliers of major brands in the world of sports shoes (Adidas, Nike, Rebook) and other shoe companies such as Clarks and Geox; plus we participate in the supply chain of leather for the automotive industry.


What do Sadesa leathers have that makes those brands choose them?

A very intense and long-term work process, from product development to execution, delivery and after-sales service to factories.

We have a specialized product engineering team working together with manufacturers to develop products for each customer. Usually two years before each season, we receive from our customers and other sources, what are the fashion trends and customer needs are. Depending on the category or the customer, sometimes it comes down to fashion trends and other technology needs. For example, in the case of football, the leather may need to have particular water absorption characteristics, or have certain abrasion qualities with the ball to produce more friction for a greater effect, or have a specific feel.

Based on these trends, we develop our product and make presentations to our customers. These presentations resulting in the designers and developers of our customers choosing our products, developing their models and putting together seasonal collections. It is a very important job, which usually begins two years before each season, and that pays off in the long term.

Obviously it is critical to control products, processes, and deliveries. We are a small link in the production chain, and therefore it is part of our company culture to fulfill our commitments to delivery and product quality.


70% of footwear is made in Asia. You have a market share of 90% of Uruguayan exports to Thailand. The footwear industry is mainly located in Asia. To supply this industry, you have to be close to customers to meet the delivery times. What are the challenges facing Paycueros to keep growing?

In Uruguay we know that our supply of raw materials depends on the development of the meat industry. Our raw material availability and our level of activity depend on the slaughter of cattle in the country.

The meat industry has the capacity to operate 3 million head, while current the slaughter rate is little more than 2 million cattle a year. Given the insufficient levels of lambing that are occurring, the relatively high percentage of killing of cattle and growing cattle exports, our forecast is that growth in production will be very moderate in the coming years.

Our focus continues to be improving the quality of our products, in design, technology and performance as a supplier. In terms of volume, we will adapt to the availability of raw material.


One of the most talked about subjects in the media is waste that industry can generate. How does Paycueros work on reducing its environmental impact?

Sadesa has an environmental policy called SAFE (Sadesa Friends of the Environment), and we meet in our production. Particularly in Uruguay we have an effluent and solid waste treatment plant, which is a model in the country. We are permanently monitored by the control authorities, such as DINAMA and the Municipality of Paysandu. We comply with ISO 14001 quality certifications that are renewed periodically.

In addition, Sadesa is part of an international organization called the "Leather Working Group", LWG, which was formed by the leading tanning groups in the world and the leading brands of footwear and leather goods, and whose objective is to generate protocols to standardize best practices in the tanning industry.

As a member of this body, Sadesa plants are audited periodically, complying with environmental protocols, job security, and analysis of restricted substances in industry. Compliance with these protocols and audits is necessary to qualify as a supplier of leading brands.


As president of a leading company in the sector, chairman of a chamber of companies in Uruguay, what would be your message to the Uruguayan business sector?

I think the message for any sector is to aim for the best results, and work permanently with a focus on fulfilling these aspirations. You have to work constantly, trying to target the best results in terms of the products we make, our cost efficiency, the quality of customers we serve, and what values we are targeting. Many times we risk content with mediocre results, because of the limitations the environment imposes on us, and that's what we have to try to avoid.

We think we have a very important opportunity to further develop the industry and continue to add value to the raw materials that we have.


And speaking on a little more personal level, what makes you proud of your work, your management?

I like to see the results of all the effort we make in the company. I am fortunate to travel, to be in touch with customers and see our products in the market. To see our leather in top-grade footwear, in the best, is a source of great satisfaction. It is important to convey that to within the company, so that all the people responsible for the company’s success feel the results of their combined efforts.