Risks for the Apparel Maquila in Central America

A regional industry at risk: You can now add the reduction of US imports to the elimination of the Multi-fiber Agreement of a few years ago.

Monday, April 20, 2009

The apparel maquila is confronting a new challenge. The US recession has caused a contraction in clothing sales and hence a reduction in imports. Asian, Latin American, African and other regional producers are already embroiled in a fierce competition for the US market. It is a new challenge because it is adding to what the region faced some years ago following the abolition of the MFA, which enabled China to become the world’s gigantic "sewing machine."

The impact on employment and poverty in Central America could be considerable. Maquila is an intensive, low-skilled labor. Therefore, due to the drop in sales, worker dismissals are immediate and massive.

The present work of the Chief Economist of the Central American Bank for Economic Integration, Dr. Pablo Rodas Martini, consists of three sections. First, he presents figures on apparel imports by the US and he discusses the performance of apparel exports from Central America to that market in recent years. Secondly, he shows recent statistics s on US imports and apparel sales. Thirdly, he reflects on the implications of this new challenge for the maquila sector in Central America.

More on this topic

Inspection Rather than Deposits for Maquilas

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Guatemala is preparing a plan to inspect factories in order to avoid a possible arbitration, forced by the US, for non-compliance of labor standards under CAFTA.

The Labour Ministry is preparing a program to inspect working conditions in the textile factories which could take six months to complete.

Nicaraguan Textiles Lead in Central America

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Between January and May sales grew by 25% compared to the same period in 2010.

The rise in sales to the U.S. was higher than to countries like El Salvador, Honduras and Guatemala, which increased by 19%, 17% and 13% respectively in the same period.

With the 25% increase, Nicaraguan exports went up from $381.1 million to $476.7 million.

Guatemala, 5 Years after CAFTA-RD

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Exports have grown a mild 3.4%, with agricultural goods leading the way; Guatemala’s trade balance with the U.S. remains negative.

It is possible that the U.S economic crisis prevented the treaty from producing better results for Central American nations, but it is also probable that it helped soften the negative economic effects of said crisis.

FTA between Costa Rica and the US comes into effect

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