In order to reduce costs and take advantage of the country's geographical location, executives of the clothing manufacturing company confirmed that they will move two plants currently located in the US and Spain to Guatemala.
The announcement of the transfer of the factories' operations was made by Manuel Martos, representative of Nextil Group, in the context of the forum "Strengthening Regional Value Chains for Economic and Social Reactivation", organized by the Inter-American Development Bank (IDB) and the Government of Guatemala.
During the first weeks of 2021, interest in children's clothing measured by online searches and mentions in conversations in the digital environment, increased in Panama and Guatemala, and decreased in the case of the other markets in the region.
Through a system that monitors in real time changes in consumer interests and preferences in Central American countries, developed by CentralAmericaData, it is possible to project short and long term demand trends for the different products, services, sectors and markets operating in the region.
Against the backdrop of an imbalance in trade and restrictions decreed in several markets around the world, Central American companies in the garment business are operating and generating export earnings at levels that merely allow them to subsist.
Data from the Office of Textiles and Apparel, of the U.S. International Trade Administration, say that between the first half of 2019 and the same period in 2020, Central American textile exports to the U.S. decreased by 34%, from $ 17,593 million to $ 11,553 million.
Before the process of reopening the economy, the garment and textile export sector operated with 15 thousand workers, but with the elimination of some restrictions, the activity of the companies increased and now employs 45 thousand people.
For the next few months, it is estimated that in the Guatemalan market, sales of men's pants will decrease by about 5% from the levels reported prior to the change in the business scenario.
The impact that the crisis will have on companies related to the textile, leather and clothing sector in Central America is estimated to be explained, to a greater extent, by the expected drop in sales of carpets and curtains.
The "Information System for the Impact Analysis of Covid-19 on Business", developed by the Trade Intelligence Unit of CentralAmericaData, measures the degree of impact that the crisis will have on companies according to their sector or economic activity, during the coming months.
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.
Between 2010 and 2019 exports of textile companies in Guatemala reported an average annual growth of 2%, a rise that is attributed to demand from companies in the United States.
According to figures from the Bank of Guatemala (Banguat), the manufacture of clothing items was the sector that generated more foreign exchange during the past year, as revenues amounted to $ 1,397 million.
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.
During the first two months of the year, exports of the Guatemalan textile sector registered a 4% year-on-year increase, which is explained by demand from U.S. companies.
According to the most recent figures from the Bank of Guatemala, between the first two months of 2018 and the same period in 2019, overall exports fell from $1.808 million to $1.751 million.
Businessmen consider that 2018 will be a year with record sales for the country, as they projected exports of $1.724 million, a figure that would exceed 12% of what was reported in 2017.
Representatives of the Apparel and Textile Industry Association (Vestex) reported that they have recently reviewed the figures, and they estimate that this year the sector will have double-digit growth compared to 2017.
Imports of garments and clothing accessories reached $332 million during the first three months of the year, 3% more than what was reported in the same period in 2017.
Figures from the information system of the Central American Clothing and Clothing Accessories Market, from the Trade Intelligence Area of CentralAmericaData: [GRAFICA caption="Click to interact with the graph"]
In 2016 exports from the free zone regime fell by 4% compared to 2015, and those from companies covered under the maquila incentive law, fell by 6%.
The negative results in foreign sales of companies operating under one of the two incentive schemes is due in part to the departure of several companies from the free zone regime, having been affected by the Emergent Employment Act.
The new rule of law to promote export and maquila activity includes requirements that companies must meet in order to qualify as Producers for the Clothing and Textiles industry.
On January 10 Government Agreement No. 3-2017 concerning amendments to Government Agreement No. 533-89 "Regulations of the Law on the Promotion and Development of Export and Maquila Activities" was published in the official newspaper.
If the United States withdraws from the Transpacific Agreement, there will be less risk of competition from Asian countries for the Central American textile industry.
If the US does eventually abandon the Trans-Pacific Partnership Agreement (TPP), as promised by President-elect Donald Trump, the Central American textile industry could benefit from the elimination of the possibility that the US, its main market, will buy textiles from Vietnam at lower prices.Since the start of negotiations for the TPP, the Central American textile industry has tried to negotiate bilaterally with the US in order to minimize the negative effects that the TPP could have on the industry in the region.