Textile and apparel industries of Costa Rica, El Salvador, and Guatemala have emerged as significant developmental forces that are contributing to the revival of the region's economy. According to a statement released by the Guatemalan Exporters Association (AGEXPORT), export shipments from the country have increased by 8 percent in 2014, with articles of clothing accounting for 11 percent of the share in the exports that reached US$10.833 billion. The progress made by Guatemala's textile and apparel industry is mainly attributed to its rising exports to the United States of America.
Guatemala Strong growth rate
The typical composition of the Guatemala textile and apparel market includes industries manufacturing yarn, buttons, labels, apparel, and fabric, besides providing logistics services. The extensive approach of the textile and apparel industry in Guatemala makes it one of the best-established textile sectors of Central America. The current 4 percent contribution of textile and apparel to the country's GDP and 19 percent contribution to its industrial GDP have come on the back of free trade agreements signed with the United States of America, Mexico, Taiwan, the European Union, Panama, Chile, Colombia, Ecuador, El Salvador, Taiwan, Belize, Venezuela, and others.
The growth rate in terms of retail textile and apparel was extremely strong in 2014, spurred on by rapid urbanization in the country. Several malls and shopping centers have developed in Guatemala City, Mazatenango, and Quetzaltenango, playing a major role in boosting apparel retail. The retail growth began with the non-apparel sector like agriculture, but with the entry of apparel and footwear giant Forever 21 in June 2014, Guatemala's apparel retail got a new lease of life. Another bigwig in apparel retail, H&M, has a manufacturing plant in Guatemala. Moreover, with higher disposable income, Guatemala's consumers have started exploring expensive apparel brands.
After the FIFA World Cup 2014, overall clothing retail growth has also improved. Retailers took advantage of Guatemala's football craze, with apparel specialists selling team jerseys in addition to clothes and accessories inspired by participating teams playing in the World Cup. The sector has succeeded in carrying forward the growth momentum achieved during the World Cup. Guatemala's major textile and apparel export markets deserve credit for this, as they continue to push higher exports into markets of the United States of America, countries of Central America, Mexico, Canada, and others.
Advantage, Guatemala
Guatemala's apparel exports mainly include tops and trousers for men, women and children, synthetic fabric and other material. Guatemala is recognised as an important source country for raw materials like synthetic fibre fabrics, knitted fabric, special blended fabrics, dyed yarn, twill, special purpose fabric, Oxford fabric and several other yarns and fabric. Renowned brands like Donna Karan New York, Guess, Adidas, Tommy Hilfiger, Old Navy, Gap, Nike, American Eagle Outfitters, Abercrombie & Fitch, Hollister, Polo Ralph Lauren and others are engaged in producing apparel in the country.
One of the reasons behind that is Guatemala's textile and apparel manufacturers offer quality assurance, besides focussing on faster delivery of products to important clients within two months. Timely delivery is likely to attract more brands to the country. In addition to this, the country enjoys being in a strategic location, with access to both the Pacific and Atlantic oceans, which makes it a preferred option for its export markets. The skilled and low-cost labour force in the textile and apparel sector also gives Guatemala an upper hand over other countries.
The country also supplies duty-free synthetics, which has managed to attract sourcing managers. A good number of synthetic fabric producers dedicated to making performance wear are grabbing market share in Guatemala.
India's trade ties
Among the total exports of fibre to Guatemala, Asia ships 10.92 per cent of the volume, with India representing 1 per cent of the share. Fabric imports by Guatemala from Asia accounts for 60.73% of the country's total fabric imports. India's share is 2 per cent in that Asian trade with Guatemala. Total yarn imports by Guatemala from Asia account for 33.08 per cent of its total yarn import volumes, of which 14 per cent comes from India. Guatemala also imports 28.38 per cent of its total trimmings from Asia, and India's share is 3 per cent of the purchases.
The simple facts that Guatemala is the largest textile and apparel sector in Central America and the country profoundly relies on imports to fulfil more than a third of its raw material demand, implies that there is a huge potential for India to further boost trade ties with the country. India imported textile and apparel goods worth US$ 26 million to Guatemala, which is around 5 per cent of its total imports. Guatemalas textile imports mainly include fibres, yarns and fabrics, rather than finished products and apparel.
India established an embassy in Guatemala in 2009. Since then, Guatemala is working on attracting India's investment in the textile and apparel sector. The trade potential between the two countries is enormous, especially in this segment. Yet, the two countries need to work on reducing trade barriers to ensure that balance is restored in commercial exchange. Currently, imports from Guatemala to India (including textile products) are merely around US$ 20 million, while exports from India to Guatemala are tenfold higher than that value.
According to Doing Business Report by the World Bank, Guatemala was ranked at 79 out of 189 economies in the 2014, which is an indication that India and other countries will find more room for growth in Guatemala and its textile sector in the near future.
Growth obstructions
The snags for Guatemala's textile sector are similar to those in many other developing countries. Corruption, frail intellectual property protection system, snail-paced and complicated bureaucratic and administrative actions are some factors that are forcing developed countries to make a cautious approach. These factors apart, Guatemala also has to fight its lack of security measures for foreign manufacturers and textile units and social inequalities if it is to survive competition from other nations and pull in investment.
"The industry keeps improving every year but not as fast as we would like it to," says Sergio de la Torre, Guatemala's economy minister.
Guatemala is facing growing opposition to the Investment and Employment Act, which has been momentarily suspended. The Act calls for providing differential wage options. According to state representatives, if it permanently suspended, several foreign companies will desist from making investments in the country.
"In order for these companies to invest in Guatemala, they need to be granted a number of benefits, including the possibility of paying less than the minimum wage established for the rest of the Republic and tax privileges, through the Investment and Employment Act which is pending approval in Congress," points out Sergio de la Torre.
Guatemala has been considered one of the best countries to invest in the textile and apparel sector in Central America, but it still needs to address thorny issues. However, its geographical location, cheap and skilled labour and quality assurance work in its favour.
References:
1. Investinguatemala.org
2. En.santandertrade.com
3. Slideshare.net
4. Thebluemoonmedia.com
5. Centralamericadata.com
6. Apparelnews.net
7. Euromonitor.com
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