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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

 

Central America apparel exports up on activewear and NAFTA

Thursday, November 30, 2017 > 10:02:00
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Just Style

Central American apparel exports are on the up thanks to rising US demand for high-performance synthetic activewear and ongoing uncertainty NAFTA uncertainty over Mexico's position in the North American Free Trade Agreement (NAFTA).

Guatemala's apparel exports are set to rise 7.5% to just over $1.6bn this year on the back of surging demand for synthetic or man-made fibre apparel, according to Alejandro Ceballos, director at Guatemalan apparel industry trade association Vestex.

The hike is helping boost the Central American nation's average garment prices to $3.75 per square metre equivalent (SME) from around $3.40 in 2015, he told just-style, adding that other Central American exports are strengthening amid similar dynamics.

"The US economy is strengthening and there has been a change in consumption toward more synthetics"

"We are doing very well in Guatemala," Ceballos says, adding that last year exports gained just 4% amid slower US demand. "The US economy is strengthening and there has been a change in consumption toward more synthetics."

On the back of this trend, Guatemala's export basket is now made up of 60% synthetic and 40% cotton apparel.

The polo-shirt segment is benefiting strongly, Ceballos says, adding that Guatemalan makers are rushing to expand in the sector."Polos are doing very well, not just T-shirts or basic sports" garments, he adds.

Ceballos flagged US fibre producer Unifi (which sells yarn to Guatemalan makers) and sportswear brands such as Nike, which source high-performance sportswear in Central America at much lower prices than in Asia (whose goods must pay a 28% tariff) as the biggest winners of the synthetics frenzy.

Rising investment

Guatemala is party to the seven-nation Dominican Republic-Central American Free Trade Deal (DR-CAFTA) in which textile and apparel goods are traded duty-free with the US.

As the world's biggest market seeks more value-added activewear products south of the border; shunning Mexico until the North American Free Trade Agreement (NAFTA) undergoes a high-stakes renegotiation; textile investments in the impoverished region are rising.

Ceballos says the influx is also helping lift exports for other Central American countries, which he forecasts are set to surpass last year's gains. In 2016, DR-CAFTA exports eased to $8.2bn from $8.4bn in 2015, according to Vestex research.

"We are seeing a lot of Asian investment, especially for yarn spinning capacity," Ceballos explains, adding that Sae-A recently invested in Costa Rica while several players are eyeing similar expenditures in Guatemala.

Honduras is also drawing great interest, while El Salvador's rising wages and lack of future growth strategy are prompting an exodus with Hanes, Fruit of the Loom and local player Intradeco recently moving factories to Honduras.

"A lot [of Asian] synthetic players see big business in Central America because they know the US taxes will stay for a while and they want to compete with the US suppliers by using DR-CAFTA's trade advantages," Ceballos explains.


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