WASHINGTON — A government-sponsored apparel trade mission last fall to three Latin American countries has been paying off for participants, an indication that the opportunities of a North American Free Trade Agreement could expand into South America.
Back when NAFTA was far from a certainty, this contingent of 11 U.S. companies found eager buyers on their trip to Mexico, Chile and Argentina. It took place Oct. 13-22.
Now that NAFTA is in effect with its free trade benefits for Mexico, the Commerce Department is planning another apparel trade trip there in April, but it may also include Venezuela and Colombia, said Maura Kim, who heads the department’s women’s wear export promotion program.
“A lot of U.S. companies have an image of Latin America as a sourcing place rather than as a selling place,” said Kim. But outward-looking businesses now are discovering the area’s “very strong, viable markets,” she said.
Because Mexico’s economy was liberalized just five years ago, and those of Chile and Argentina were opened in 1990, many local companies are inefficient and unable to satisfy growing consumer demand, Kim said.
“Those countries are still an untapped market,” she said, although German, Chinese and Japanese apparel companies are starting to move in.
Ted DiPonzio, international sales manager for Ursula of Switzerland, Waterford, N.Y., said his company’s evening and social occasion apparel soon will be sold in Liverpool, Mexico’s largest department store chain, and El Palacio de Hierro, an upscale department store chain.
Eventually, at least 150 specialty stores around the country also will carry Ursula products, with sales expected to reach $10 million annually, DiPonzio said.
“It’s very exciting. There are only so many specialty stores [in the U.S.] to handle our product, and where better to go than someplace with 80 million people?”
Although the vast majority of those people do not have much money, DiPonzio said he was surprised at the spending power he saw in Mexico.
“The American perception is a vast wasteland of poverty-stricken people….[But] I visited five or seven malls, huge malls, and they were loaded, crowded with people spending money,” he said.
Business has moved even more briskly in Argentina, where the company’s eveningwear already is being sold in the 30 stores of designer Roberto Piazza, DiPonzio said. Ursula of Switzerland expects to sell $500,000 worth of goods in Argentina in its first year and $4 million annually after three to four years, he said.
Argentine retailers DiPonzio met with during the trade trip were “astounded” at the quality of his company’s machine-made gowns, he said.
“They don’t have the capital equipment to do the clean manufacturing we can do en masse. Everything is done by hand, so it’s extremely expensive.”
With the costs of transportation and tariffs, the prices of Ursula of Switzerland products are “about 30 percent higher than in the U.S., but below the [Argentine] couture lines,” DiPonzio said.
Like all of the companies on the October trip, Ursula of Switzerland’s products are manufactured in the U.S. The company probably will enlarge its facilities, all of which are in New York State, if other Latin American countries sign on to NAFTA, DiPonzio said.
Ken Rice, vice president and chief executive officer of Clothes Unlimited, Houston, said his company “made very good contacts” on the trade trip and may start looking for distributors this year in all three countries.
The six-year-old maker of women’s and girls’ contemporary separates, which posted 1993 sales of about $6 million, markets in the U.S. exclusively through home parties, but in Latin America will sell through retailers, Rice said.
Another trade trip attendee, Amir Moghadam, president and chief executive officer of AFR Apparel International, Van Nuys, Calif., said his company has agreed to sell its Parisa lingerie in Mexico’s Liverpool stores and has been interviewing potential distributors.
Moghadam anticipates annual sales in Mexico of up to $2 million by 1995, and distribution eventually in 500 to 700 stores.
“We have a European style, which is very appealing to Mexicans, and our products will be even more affordable relative to Europe because of NAFTA,” Moghadam said.
AFR also intends to hire a distributor in Argentina. It anticipates annual sales of $750,000 in the early stages and yearly growth of at least 20 percent in the first five years, Moghadam said.
Trade mission participants agreed that Chile is the easiest country of the three in which to do business, although it has a smaller population and therefore less export potential, than Mexico and Argentina.
“The Chileans are pretty savvy in business, and they just seem very ready and willing to make it very easy for us,” said Rice.
Chile does not place restrictions on foreign ownership of land or businesses, as Mexico does, and it offers tax incentives to foreign companies, trade mission participants said.
Ursula of Switzerland plans to open a sales office in Chile and eventually post about $1 million in yearly sales, DiPonzio said. AFR wants to open a sales office there, while Clothes Unlimited is likely to move into Chile before either of the other countries, the officials said.
Mission participants gave the Commerce Department rave reviews for the trip. In each of the three countries visited, U.S. officials set up interviews with dozens of local retailers and distributors, held briefings on local customs and business practices, provided display booths, hosted receptions and, in Chile, put on a fashion show using that country’s top models.
“I think the Department of Commerce really has it together,” DiPonzio said. “And believe me, I’m an ultra-conservative, so for me to laud the government is very unusual.”
Men’s wear giant Phillips-Van Heusen — showing the goods of three of its divisions and also its sock licensee, Platinum Hosiery Sales — was also one of the participants, although it headed home after the Mexican leg of the trip. Kenneth L. Wyse, P-VH’s vice president, licensing, said his firm already has licensing arrangements throughout Latin America, but many of the countries, particularly Mexico, offer strong markets for U.S.-made goods as well.
P-VH began selling American-made apparel in Mexico about 18 months ago, when the market for finished apparel first opened.
“But I think there’s a real good potential to sell a lot more,” Wyse said. “I expect our sales to increase every year, especially with the falling of trade barriers.”
Other companies on the mission were Avirex USA, Jockey International, Knitwaves, Lewis & Co., Me & You Inc. and Watch L.A. Jeans & Sportswear.