New Holland, a company engaged in the manufacture of clothing and which has been operating in the country for 15 years under the free trade zone regime, announced that it will close operations in the last days of May.
The company's decision to leave Nicaragua is due to the fact that the country does not have the adequate technological machinery to compete with the garments it manufactures for the Under Amour, Nike and Adidas brands.
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.
After the impact caused by the covid-19 outbreak, Nicaraguan businessmen in the sector estimate that in the first seven months of the year the maquila industry have stopped exporting close to $300 million and have had to lay off some 6 thousand employees.
The drop in demand in the United States, which is one of the main destination markets for exports of clothing made in Nicaragua, explains part of the drop in income for companies operating in the country.
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.
Considerable investments in the digitalization of operations, the closure of small stores and the expansion of the commercial area of the best located sales points, is part of the strategy that companies are beginning to implement in the new context of business transformation.
Managers of large corporations agree that several companies were already making progress in digitizing sales and operations, but the pandemic ended up persuading decision makers of the need to focus on online sales, and simultaneously accompany it with a plan to transform physical stores.
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.
According to businessmen in the country's textile sector, as a result of the covid-19 pandemic, a reduction in work orders is expected during the second half of the year.
Representatives of the Nicaraguan Association of the Textile and Clothing Industry (Anitec), predict that with the closure of the stores of several of their clients, sales will be reduced considerably and inventory levels will increase.
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.
The American Aalfs Uno, which operated in the municipality of Sébaco, in Matagalpa, closed its operations in the country due to a reduction in the number of contracts.
The closure of the company was made official by directors of the Nicaraguan Association of Textiles and Apparel Industry (Anitec), who say it is the first company in the U.S. capital sector to close in the country.
Despite global threats, such as the possibility of a global economic slowdown, businessmen in the sector are confident that their sales will continue to rise.
Companies operating under the free zone regime in the country, estimate that their sales abroad during 2019 amounted to about $ 1.7 billion, an amount that exceeds by 5% what was recorded in 2018.
In the first half of the year in Nicaragua, textile companies reported a slight increase in the volume exported, mainly because of an improvement in prices paid internationally.
According to data from the U.S. Office of Textiles and Clothing (Otexa), between the first half of 2018 and the same period in 2019 the volume of textile and apparel exports from Nicaragua to the U.S. grew slightly by 1.2%, from 270 million to 273 million square meters.
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.
In the first nine months of the year, imports of yarns and textile inputs in Central America totaled $349 million, registering a 14% drop over the same period in 2017.
Figures from the Trade Intelligence Unit at CentralAmericaData: [GRAFICA caption="Click to interact with graphics]
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.
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.