Nervous workers, union leaders and manufacturers in this southern Brazilian valley are waiting to see if the proverbial "other shoe" drops in Washington.
That "other shoe" involves an American proposal to restrict sharply imports of leather shoes, a move that local leaders say would cause severe unemployment in a region that depends exclusively on sales to the United States and would feed an emerging nationalist stance among politicians against repayment of this nation's huge foreign debt.
Small shoe factories in the Sinos Valley of Rio Grande do Sul employ 120,000 workers and are responsible for 85 percent of Brazilian shoe exports to the United States, a business that brought in $835 million last year and is the nation's eighth-leading foreign currency earner.
Since 1980, exports have tripled, and this prosperous town has become a regional magnet for job seekers, last year exporting 130 million pairs of leather shoes and helping guarantee local incomes almost three times the national average.
But industrialists and union leaders say all that is threatened now and that 60,000 workers will be dismissed immediately and exports reduced by half if President Reagan decides on either a quota or import duty recommended by the U.S. International Trade Commission in response for a relief request by the beleaguered American shoe industry. A ruling is due before September, and Brazilian officials say it could come this week.
Orlando Muller, president of the Shoe Workers Trade Union here, foresees "very serious social convulsion" resulting from the 60,000 layoffs in a region where about 800,000 related jobs in construction and machine assembly also depend on footwear exports. "There's nothing else in the valley -- it's totally devoted to shoes," Muller said.
"The U.S. administration must treat us either as an ally or an enemy. If the barriers come down on our exports, then the U.S. is no longer our friend," Muller said. "We shouldn't peacefully accept U.S. policy if our protector won't give us a reasonable chance of survival."
Another 10,000 layoffs are predicted in Franca, a small town in Sao Paulo State responsible for about 15 percent of exports. "It would be very easy for the radicals to take advantage of this and create social agitation or a nationalist movement blaming the U.S.," warned local industry leader Sebastiao Burbulhan.
An appeal from Muller and other labor leaders was delivered to the White House by a representative of the Inter-American Garment Workers Federation underlining "the fatal consequences" of a ruling against Brazil.
Brazilian President Jose Sarney also wrote to Reagan urging him not to impose quotas or tariffs.
Underlining its high-stakes approach, Burbulhan said Sao Paulo's state shoe industry also retains as consultants in Washington Langhorne A. Motley, a former U.S. assistant secretary of state for Latin America, and Norman Bailey, a former White House economic adviser.
In June, the ITC recommended a sharp limit on shoe imports by the United States during the next five years. This would cut imports from several nations by 35 percent -- hundreds of millions of pairs of shoes.
The U.S. shoe industry has dropped from 215,000 employes in 1970 to about 120,000 today. Forecasts indicate that the import restrictions might save 30,000 jobs. But keeping out imports also has been estimated to cost the American consumer $1.3 billion to $2.5 billion because of the higher cost of American shoes and imports from other countries.
On a visit last week to Novo Hamburgo, Commerce Minister Roberto Gusmao said he expected a relatively favorable decision from Reagan, temporarily reducing fears of major unemployment.
Despite confidence here that the ruling will represent a compromise, industrialists know pressure on Capitol Hill means the issue is likely to resurface. "The shoe case is a clear example of the need to toughen our relations with the U.S. over the foreign debt," Luis Octavio Vieira, president of the state's industry federation and a shoe exporter, said.
The Reagan administration, Vieira said, has "achieved a miracle by uniting workers, businessmen and government in a front against the United States. How do they expect us to pay our debt if we can't even export shoes -- which are just raw materials transformed with cheap labor? The U.S. doesn't have a strategic vision of what's happening, and they're going to lose us one day."
Shoe industry leaders here say they can prove that Brazil's imports in no way threaten American jobs because no similar shoes are made in the United States, and they say that barring cheap imports will hurt American consumer interests and spur inflation.
Businessmen are concerned at the rising emotional level. "We want to see our shoes in American show windows, not in the politicians' rhetoric," said Ernane Reuter, whose U.S. exports last year topped $60 million.
"I don't believe the ITC is persecuting Brazil. They're trying to protect jobs but should understand the technical merits of the case and realize we are not competing. We fill a gap instead of taking away jobs," exporter Francisco de Assis said.
Brazil's emergence as a shoe producer has been at the expense of Italy and Spain, and manufacturers say they cannot understand why developing nations with low labor costs should not occupy this space.
Former commerce and industry minister Pratini de Morais, who created export incentives for the shoe industry, said the issue is rapidly "lifting the smoke screen off the foreign debt problem."
"U.S. protectionism is provoking a renewal of economic nationalism here," said Morais, former chairman of the Brazil-U.S. Business Council.
Morais said that interest repayments now take 50 cents of every dollar exported and that barriers proposed by the European Community and the United States will provoke unwillingness to repay debts or accept new investment.