Salvadoran textile companies state that the costs of labor, security and delivery times have made the sector's operations more expensive.
The recentincrease in the minimum wageis one of the factors that has had a direct impact on the cost structure of Salvadoran textile companies. Added to this are logistical difficulties in customs offices, which have caused companies from neighboring countries to obtain contracts that were originally planned for El Salvador.
Developing e-commerce strategies and raising the final value of the products are some of the goals that the trade union of medium-term textile companies aims to achieve.
The Vision 2030 plan by the Chamber of Textile, Clothing and Free Trade Zones of El Salvador (Camtex), has ten goals that the industry aims to achieve in order to raise competitiveness and the development of the activity in the future.
The Salvadoran union has stated that excessive bureaucracy and high production costs are the main factors that could be encouraging some textile mills to reduce operations in the country.
José Antonio Escobar, president of the Chamber of the Textile Industry, Clothing and Free Zones of El Salvador (Camtex) told Elsalvador.com that one of the companies that has shut down part of its operations, to transfer them to another country, is Fruit of the Loom.Escobar said"...'In the plant owned by Fruit of the Loom in the industrial park American Park, where a thousand people work, the company will make a reduction of about 850 positions'."
During the first six months of 2013 the textile industry sold $1,140 million, $104 million more compared to the same period in 2012.
"The industry has performed well, and that means more jobs in El Salvador," said Doris de Rivera, an economist in charge of the study by the Chamber of Textile, Clothing and Free Zones Companies(CAMTEX).
According to the Chamber of the Textile, Clothing and Free Zone Companies of El Salvador (CAMTEX), the cost of energy is one of the obstacles that is preventing this sector from increasing its productivity.
Textile businessmen say the new free zones law has caught the interest of investors and will strengthen the productive chain.
Elsalvador.com reported that "despite a series of reforms promoted under the table by the Finance Minister Carlos Cáceres, which put companies operating under the Free Zone scheme on alert, the approval of the regulations as they had been agreed between the public and private sector a year ago, "is a tremendous tool (...), a tremendous engine which will make this sector take off," said the president of the Chamber of the Textile, Clothing Companies and Free Zones in El Salvador (Camtex), Jose Antonio Escobar ".
The Chamber of Textile, Clothing Companies and Free Zones states that if the new law on Free Zone included the tax, it would drive away millions of dollars in investments.
Elmundo.com.sv reports that "The Chamber of Textile, Clothing Companies and Free Zones of El Salvador (Camtex) on Wednesday opposed changes made by the Finance Minister Carlos Cáceres to the proposed amendments to the Law on Free Zones, agreed with the sector since October 2011."
From January to September this year the Salvadoran textile and clothing sector exported $792.4 million, 6.7% less than in the same period in 2011.
Elsalvador.com reports that "The production of textiles and clothing lost momentum in growth between January and September compared to the same period last year due to a slowdown in the U.S. economy and the fiscal crisis in Europe .
Within the framework of the Trans-Pacific Partnership Agreement, the Asian country requires preferential rules of origin to use raw materials from China.
Central American textile businesses are worried that Vietnam receives more flexible terms than those of the FTA with the isthmus, a situation which they said could cause the loss of 200,000 jobs.
Organizations and unions of Salvadoran maquila workers have proposed the creation of an insurance policy guaranteeing payment of 100% of salaries in the event of closure of business operations.
The bill envisaged by organizations and unions also proposes sanctions such as loss of tax benefits for a period of three months for those companies who commit very serious offenses.
ANEP of El Salvador calculates the trade embargo with Honduras produced $36 million in losses each day for Central America, as calculated globally.
For the Salvadorian textile industry in particular, the border closing meant estimated losses of $1 million in exports and 4,000 workers sat idle, according to calculations from the Salvadorian Chamber of Textile, Confection, and Free Trade Zones Industries (CAMTEX, acronym in Spanish) published in Elsalvador.com. At the same time, the organization estimates that Honduran factories lost $700,000 in exports to El Salvador.
Faced with limited access to credit, the textile industry is looking to find financing abroad.
Jose Escobar, leader of the Salvadoran Chamber of the Textile Industry (CAMTEX), noted that the problem continues to be the risk analysis that is being used to evaluate them.
Lourdes Quintanilla reported the leader's statements in her article in Laprensagrafica.com: "This topic is the most difficult one for us because our industry has been misinterpreted regarding its value. The textile and clothing industry continues in the category labeled maquila, i.e. only assembling parts. This industry has made progress in the verticalization of the industry, and in offering complete packages (making garments from the first thread to packaging for sales)."
The survey conducted by the Textile Chamber (CAMTEX) among its members reflects the need for $25 million for the sector.
José Antonio Escobar, CAMTEX president, noted that the textile industry will seek a meeting with President-elect Mauricio Funes to inform him about the situation.
The Fruit of the Loom textile company halted operations at one of its 7 plants, temporarily suspending 25% of its personnel.
The chairman of the Salvadoran Chamber of Textiles and Apparel reported to La Prensa Grafica that the decline in operations is due to "Fruit of the Loom clients being overstocked with product and adjusting inventories.”
The sector exported $103 million in January of this year, $31 million less than in January, 2008.
An article in laprensagrafica.com reported that Jose Escobar, president of the Salvadoran Chamber of Textiles and Apparel, said, "There is a drop in exports because some US companies had to stop production since late last year due to adjustments of accumulated inventories which caused demand in the country to come to a standstill."
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