Following the spread of the virus globally and the suspension of some production in China, several garment companies in the region have reported increases in their orders.
The spread of the epidemic has stopped much of the economic activity of the Asian giant, which is the largest exporter of textiles in the world. This situation has forced buyers to look for alternatives.
With the recent signing of the U.S.-Canadian-Mexican trade agreement, a precedent was set for future negotiations, as this agreement sets binding labor conditions, such as making exports subject to the payment of a minimum wage.
For example, one of the conditions of the Treaty between Mexico, United States and Canada (T-MEC), which was signed on December 10, 2019, is that vehicles exported from one state of Mexico to the other two countries "must come from plants that pay wages not less than $16 an hour.
Guatemalan exporters report that President Trump's warning about export tariffs and taxes on remittances and transfers is raising doubts among U.S. buyers.
Uncertainty prevails among most Guatemalan businessmen after President Trump reacted to the provisional protection established by the Guatemalan Constitutional Court, which limits the functions of the Executive Branch to negotiate or sign any foreign policy agreement.
Guatemala's business sector responded with concern to President Trump's warning about imposing export tariffs and levies on remittances and transfers.
The announcement made by the president of the United States comes after the Guatemalan Constitutional Court issued a ruling in which it limits its foreign policy functions to the Executive, by granting a provisional injunction that prevents the negotiation or signing of any agreement.
In recent years, the sector in Guatemala has lost nearly 30,000 jobs, because the high costs resulting from having one of the highest minimum wages in the region, makes it more profitable only to export raw materials, rather than making them in the country.
Vestex figures show that in recent years several jobs have been lost in the sector, given that between 2006 and 2018 the industry lost a considerable number of jobs, going from 82,109 to 53,636 places, equivalent to a 35% decrease.
Because there is still no regulation for part-time employment in Guatemala, textile businessmen estimate that the country loses between 40 and 70 thousand jobs.
For representatives of the Costume and Textile Commission (Vestex), the high operating and labor costs in Guatemala cause businessmen to send cut pieces to Honduras, El Salvador and Nicaragua to be assembled.
Until May 20, the validity of the regional contingency plan was extended to customs, which was activated because of the difficulties generated by the use of the Central American Single Declaration.
Since May 7, when the Single Central American Declaration (DUCA) was implemented at the regional level, the situation in customs has been complicated, because of multiple difficulties reported in the import and export processes arising from the implementation of the new system.
From May 14 to 16 in Guatemala, textile exporters from the region will meet with international buyers at Apparel Sourcing Show, to explore business opportunities.
The objective of the event is to allow all members of the Central American industry value chain to expose their capabilities to buyers and promote the integration of the supply chain.
Reduced times to move goods through customs posts and an increase in bilateral trade are some of the results of the first year of the Customs Union between Guatemala and Honduras.
Twelve months after the entry into force of the treaty between the two countries, trade figures have favored the two Central American countries. In 2017, exports from Honduras to Guatemala totaled $384 million, 16% more than in 2016, and sales made from Guatemala to Honduras amounted to $967 million, which is equivalent to a 6% increase.
The trade union of Salvadoran exporters has already started the process to participate in the negotiation rounds to join the Customs Union between Guatemala and Honduras.
The private sector will be part of the negotiation process that has just begun to incorporate El Salvador and Nicaragua into the Customs Union which is already in force between Guatemala and Honduras.
The amendment relates to technical details regarding the rules of origin related to spandex or lycra fabrics, thread, and pajama pants.
A package containing technical changes to the rules of origin for textiles was ratified by the House of Representatives of the United States.
According to an article in Prensalibre.com Alejandro Ceballos, a member of the board of the Committee on Textiles and Clothing (Vestex) of Guatemala, said: "Spandex used in garments used to have to be native to the region, but this has now been relaxed and it can be obtained from other countries so as to make the article of clothing here."
Aggressive measures must be taken in marketing and attracting investment in order to exploit the possibilities opened by the DR-CAFTA and changes in the global market.
From Diario de Centro América:
The CAFTA-DR region has opportunities for growth
The clothing and textile sector of the country is ready to compete globally.
Opportunities in the region provided by the Free Trade Agreement between Central America, Dominican Republic and the U.S.
The rising costs in China have caused companies like this north American firm to look once again towards the isthmus to buy their clothing.
Carlos Arias, president of the Committee on Textiles and Clothing (Vestex) of Guatemala, said during a forum at the latest Apparel Sourcing Show 2012, that JC Penney have indicated that their purchases from the isthmus will rise by 30%.
The lower labor costs offered by China are no longer such, due to the 22% increase in the minimum wage for workers.
There are positive expectations for the maquila and textile sectors in Central America regarding the return of companies who had migrated to China because of the lower labor costs.
With the disappearance of this advantage, Central America is once again among the best options for multinationals, having as an advantage its proximity to the U.S., which reduces transportation costs and delivery times.
Guatemala's textile industry is changing from exporter of finished products to one that provides raw materials to manufacturers in other Central American countries.
The migration of maquila companies to Nicaragua, El Salvador and Honduras has generated an increased demand for industrial fabric and textile materials transforming the Guatemalan textile industry.