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Gaucho Company Closes Its Doors After Accumulating Millions in Debt, Crisis with Clients, and Pandemic Impacts, in Addition to Facing New Tariffs Imposed by the United States That Have Hit the Brazilian Footwear Sector Hard.
The footwear industry Sophisticated Woman, based in Três Coroas (RS), halted production on Monday (15), revealed the Zero Hora newspaper.
According to the publication, the company announced that it will file for bankruptcy this week after accumulating R$ 18.3 million in debt.
The shutdown of operations results in the dismissal of 77 workers, according to the local union.
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The management states that this month’s salaries will be paid, while severance funds should be registered as labor credits.
Closure and Dismissals in Três Coroas
The internal announcement was made to employees on Monday morning.
According to the company, the decision follows an “unsustainable” financial situation and follows failed attempts to renegotiate with creditors.
The Três Coroas Shoemakers Union reported that 77 employees were dismissed and guided the workers on procedures to ensure their rights in Labor Court.
Management reiterated that salary payments for this month would occur between September 15 and 16.
Production and History of the Company
Founded in 2012, the Sophisticated Woman operated as a manufacturer for national brands and once produced 3,700 pairs per day.
Before the closure, operations had been reduced to about 1,500 pairs daily.
The company had approximately 80 employees in its recent workforce, a number that varies depending on the source — the union mentions 77 dismissals, while reports from management mention “about 80” workers.
How the Crisis Formed
The imbalance began in 2018, when one of the main clients stopped fulfilling payments.
Starting in 2020, the pandemic reduced demand, and the factory operated at half capacity.
In 2022, the situation worsened with the bankruptcy of two significant clients.
The following year, the floods of 2024 in Rio Grande do Sul caused new logistical and commercial losses.
In 2025, the impact of the U.S. tariff increase on Brazilian products added pressure on footwear exporters’ margins and extended the series of shocks the company had been absorbing since before the pandemic.
The Effect of the U.S. Tariff on the Footwear Sector
The 50% total tariff on goods from Brazil was confirmed by executive order from the U.S. government on July 30, 2025, which led the Brazilian Association of Footwear Industries (Abicalçados) to warn about the feasibility of sales to the North American market at such a level.
By the end of August, the measure had been in effect for a month, while Brazilian authorities discussed damage mitigation and support for exporters.
Although the overall impact on the Brazilian economy has been classified as “modest” by technical assessments from the federal government, the footwear industry is one of the most sensitive to tariff increases in the U.S., the main international destination for the sector.
For the Sophisticated Woman, which operated as a supplier for brands with a presence abroad, the increased costs of accessing the North American market added pressure to an already fragile business due to client defaults and recent shocks.
Signs in Foreign Trade
Data from Abicalçados indicates that, in August 2025, Brazilian footwear exports to the United States dropped 17.6% compared to August 2024, with a slight revenue decline during the period.
The movement reinforces the view that the 50% tariff acts as a significant barrier to sector sales to the largest importing market in the segment.
Next Steps and Labor Rights
With the factory closed, management is preparing the protocol for the bankruptcy filing in the competent court later this week.
The guidance provided to employees is to gather documentation, monitor procedural deadlines, and seek support from the union.
According to the company, this month’s salaries will be paid in the coming days, while the severance funds will be requested as labor credits in the process.
This format is common in bankruptcy cases, when liabilities prevent immediate agreements with former employees and suppliers.
Regional Impact and Effects
The closure of the Sophisticated Woman adds to the difficulties faced by manufacturers in the Vale do Paranhana and other footwear regions in Rio Grande do Sul.
In addition to increasing export costs to the United States, local companies are still managing the consequences of climate events, such as the 2024 floods, which impacted infrastructure and logistics.
Sector representatives and the state government have been meeting to evaluate support alternatives for the industry, especially regarding the new U.S. tariffs on Brazilian products.
As the company formalizes its request in court, the central question remains for the sector: what measures can truly reduce the impact of the tariff and preserve jobs in the footwear regions of Rio Grande do Sul?
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