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Published August 25, 2008 09:47 AM

Uruguay: Organic Wool Has Become the Great Challenge

There is a strong growing demand in the world for "organic" wool and consumers are willing to pay a bonus, which is a promising advantage for Uruguay and its textile industry, said Pedro Otegui, one of the country's leading wool and textile exporters.

During a conference in the framework of the opening this week of the 2008/09 wool clip season and the Salto Agro Show, Mr. Otegui said this has become "a great challenge for Uruguay", and the textile industry should take advantage of this opportunity, not only because world wide there's a growing demand for organic produce, but also because in the coming quarter of a century the global population will increase well over 1.5 billion people.

"Consumers are increasingly demanding quality and relief that what they are buying does not alter or cause harm to the environment", said Otegui who anticipated this will force radical changes in wool farming and in the industrial process of textiles.

"As a company we are in the process of obtaining an organic industrial license. There's a long protocol to comply which should allow textiles, working with organic wool, to supply them with the necessary certification to a market willing to pay for the extra bonus", said Otegui.

However Otegui also pointed out that in some areas of Uruguay there's a comparative advantage for organic wool production, "but not for the whole of the clip, but a reasonable percentage".

As to the current industry demand, Otegui insisted that Uruguay must emphasize fine and medium fine wool. "We know some farms are already moving towards the organic certification process, so we estimate that not too long from now, we should be able to supply the world Uruguayan wool stamped with the organic seal".

Uruguay's flock falling: 10 m. sheep; 42 m. kilos of wool

Uruguay officially inaugurated this week the shearing season announcing the 2008/09 clip should reach 42 million kilos, but farmers and representatives from the textile industry warned about falling competitiveness, soaring costs, an adverse exchange rate and a burdensome tax reimbursement system.

According to the Uruguayan Wool Secretariat, SUL, the wool industry in Uruguay will have this year an annual turnover of 360 million US dollars, involving 60.000 jobs from camp to the final industrialization of the fiber.

During the brief ceremony in the north of the country, Salto, SUL president Gerardo Garcia Pintos said that "changes imposed to the tax reimbursement system which does not return the net transfer of what sheep farmers pay are having a negative effect on competitiveness and furthermore dent the social impact of sheep rearing".

Garcia Pintos warned that Uruguay has a rapidly decreasing sheep flock, although "far more efficient", which according to the latest SUL census is expected to drop to 9.7 million head. He also claimed that while this happens "the government seems more intent in privileging foreign investors".

"Many times we hear speeches about how Uruguay looks after new investors, but they seem to forget a huge investment in land, sheep, technology, textiles supported by 10 million sheep in which Uruguayans have been investing for decades", underlined SUL president.

Garcia Pintos also called for the elimination of a 1% sheep sales tax collected by regional governments which he insisted should be an only time levy. Uruguay recently approved an overhaul of the taxing system and "it's time to eliminate this levy which dates back to over half a century".

Speaking for industry Pedro Otegui, a leading textile exporter called for a more "rational and realistic" exchange rate. Since 2005 the Uruguayan peso has appreciated almost 40% against the weakening US dollar.

"The meager value of the US dollar, the increase in taxes, public utility rates and a lowering of the tax reimbursement system are increasingly punishing sheep farming and industry. And this is particularly intense when all the production is exported and there's no domestic market to help absorb, with an unprecedented appreciation of the peso, the consequences of dollar inflation", underlined Otegui.

He added that many of the government's latest decisions are forcing farmers to consider abandoning their activities and industry to relocate or find some new undertakings. Otegui also mentioned that in recent weeks the US dollar has experienced a strong recovery against the Euro and the Australian dollar, "but overseas clients won't pay for our inefficiencies, be them productive, monetary or financial".

Juan Manuel Bartaburu president of the Salto Rural Association which hosted the inauguration said that even having 10 million sheep (against a flock of 26 million a few years ago) should not be a problem if "we produce fine wool and top high quality lamb".

He added that Uruguay should follow on the steps of New Zealand which applied state of the art technology and expertise to convert the sheep, wool and lamb industries.

"We must learn to live with other productions, those which help the soil rest and recover, and we should not be afraid of some kinds of grain agriculture", said Bartaburu.

The opening and cattle show which follows had on the occasion a very low key representative from the government, the head of the regional Agriculture Ministry office, Jose Tadeo. Usually it's the minister or his deputy who preside over the ceremony.

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