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WWD Magic Preview: Brazil Boosts Exports on Favorable Exchange Rate

Brands battle low-cost imports, despite currency advantage.

RIO DE JANEIRO — Brazil’s textile and mass-market apparel industry is not expected to grow in 2011, in part because of an increasing flood of low-cost Asian imports.

But some high-end designers are boosting U.S. exports in 2011, despite a sharp depreciation of the dollar against the Brazilian real, industry officials said.

The Brazilian Textile & Apparel Association, representing mass-market apparel manufacturers, expects that the industry’s 2011 earnings will be $62 billion, against $60 billion rung up in 2010, an increase caused only by a favorable exchange rate, not improved sales. About 65 percent of those sales comes from textiles and 35 percent from mass-market apparel and household products, like sheets and towels, made from textiles.

ABIT director Fernando Pimentel said first-half 2011 textile earnings were down 10 percent over the year-ago period, and mass-market apparel earnings were stable, even though the economy this year is expected to grow 5 percent.

“In the first half of 2011, mass-market apparel imports grew by 57 percent and textile imports grew by 20 percent, compared to the same period in 2010,” Pimentel said.

With the Brazilian textile and apparel industries struggling to compete with low-cost imports, ABIT is discussing with the government ways of protecting those industries, including a crackdown on dumping.

To help Brazilian textile and mass-market apparel and household-product makers boost exports, estimated to reach $1.5 billion in 2011, up from $1.44 billion in 2010, ABIT is counting on Texbrasil, an export program it set up in 2000.

“By image strengthening and trade promotion, Texbrasil has helped Brazilian textile and mass-market apparel makers during the past 10 years expand into Asian and African markets,” Pimentel said.

ABEST, the Brazilian designers association, which represents 56 of Brazil’s best-known stylists, expects members’ export revenues to increase 15 percent on average in 2011, despite a depreciated dollar which makes dollar-based Brazilian fashion less competitive abroad. From the 12 months through June 30, the dollar depreciated 14 percent against the Brazilian real.

ABEST estimates that its members will export $20 million worth of fashion in 2011, up from $17.4 million in 2010 and $15.4 million in 2009. Some 25 percent of those export revenues come from the U.S., ABEST members’ biggest foreign market.

“Even though the Brazilian fashion export prices have increased in the past year, some, but not all, Brazilian stylists are exporting more because, in this high-end industry where price is less important that product, foreign buyers are moving more of their original, high-quality products,” said Evilasio Miranda, ABEST’s executive secretary. “Stylists are also making faster deliveries, improving post-sales service and more closely analyzing foreign buyers’ sell-through reports to reproduce their ‘hits’ from the previous season.”

ABEST member Cecilia Prado, an upscale designer of novelty handmade knitwear, with 80 percent of her export fashion going to high-end U.S department stores and boutique chains like Anthropologie, said in the first half export revenues increased by 68 percent compared with the first half of 2010, while her domestic revenues increased just 15 percent.

“We have maintained our dollar-based export prices, despite the dollar’s depreciation, and are living with lower margins to keep our foreign clients,” said Prado. “We aren’t doing as well with domestic sales because Brazilians, armed with local currency with a lot of purchasing power abroad, especially the USA, buy innovative, quality fashion on trips abroad more cheaply than they can buy similar Brazilian fashion here.”

But ABEST member Cia. Maritima, a top high-end Brazilian beachwear designer, which exports 15 percent of the 1 million pieces it yearly produces, is doing better in the domestic market.

“A growing economy has boosted our domestic beachwear sales in 2011 and is helping sustain our foreign market, where we have maintained prices and cut margins because a depreciating dollar has made our dollar-based beachwear exports less competitive,” said Cia. Maritima’s executive director Benny Rosset. “If the dollar continues to depreciate against Brazil’s currency this year, we will have to increase export prices, even if it means becoming less competitive abroad.”