Argentina's textile industry has lost jobs.

Argentina’s textiles and apparel industry is hoping the debt-laden country’s return to a socialist Peronist government will help recover 800,000 jobs lost in the past decade when the sector shrank roughly 50 percent. Simultaneously, luxury brands — which were beginning to spread their wings before a primary election upset spoiled the industry’s “revival” — are watching developments closely.

“Before the last government of [President Mauricio] Macri, people and industries were working but in the past four years, there has been no support,” claimed Monica Basterrechea, secretary general of Satadya, a trades union representing mom-and-pop sewing shops in the Mar del Plata. Beach resort. “The past four years have been ‘manage however you can’ and financing has not been easily available.”

Basterrechea spoke as Argentina recently voted in Alberto Fernandez and Cristina Fernandez de Kirchner, who previously ran two presidential terms, as president and vice president, respectively. They succeeded business-friendly billionaire Macri, whose austerity package to win International Monetary Fund support was widely viewed as failed, sinking the population into greater poverty and sharply lifting inflation. Macri had been president since 2015.

Latin America’s third-largest economy has now technically defaulted on more than $100 billion of foreign debt, reprising a similar scenario in 2001, and faces challenges to restructure those liabilities to regain access to foreign capital.

But “the Peronists have more capacity to resolve our debt problems and credit is going to come back,” Basterrechea said. When Fernandez de Kirchner, or CFK, was in power from 2007 to 2015, the textiles and apparel industry employed up to 1.5 million people, compared to 700,000 currently, she added. Revenues are now $10 billion, roughly 50 percent below a decade ago.

Claudio Drescher, president of top apparel industry lobby Camara Industrial Argentina de la Indumentaria, said the new administration, which takes over just before Christmas, has already outlined a plan to help shore up the sector, which the business community is viewing favorably.

The initial plan has three prongs including credits or loans to boost flagging production, efforts to stabilize the peso to rally exports and tax cuts for small businesses.

“People are very happy with the new administration and the credits will help boost the industry’s competitiveness,” said Drescher, who declined to speculate on whether the financial assistance will help the industry raise the roughly $600 million needed to turn around its fortunes, as WWD previously reported.

“The peso is going to stay competitive enough to boost exports while not choking imports and taxes for small and midsize businesses will drop to 20 percent form 30 percent,” added the executive, who owns fashion brand Jazmin Chebar.

If all goes as planned, the industry should grow to make 157 million pieces in 2020, up 5 percent against this year, when output will decline 3 percent, Drescher claimed.

Some observers, however, noted 2019’s output will likely finish much lower than Drescher’s target.

Basterrechea said the plan’s call for greater financing access and lower taxes will help, though she doesn’t expect overnight success as the new populist team will need time to lift the country from its deep economic downturn.

A key way to bolster the sector’s fortunes will come from resurrecting past export stars such as high-end pullovers or hoodies, premium wool sweaters or leather jackets, which once sold strongly overseas.

“The textiles industry has to revive with a unique identity,” she said. “We have a lot of foreign product [referring to Asian garments] that devalue our product so we need to go back to our roots and bring back traditional products.”

Part of that effort should also include helping battered labels in the Mar del Plata province, a beaten textiles hub, regain their footing. Some of those brands include Casino, Montecarlo, Santista and others that once sold large numbers of fine sweaters.

Some names are getting ahead of the game, hoping to attract U.S. consumers.

These include, for example, Gaucho-Buenos Aires, a high-end leather goods and ready-to-wear label that just launched online in the U.S. after debuting at New York Fashion Week. The firm is using Argentina’s cowboy, or “gaucho,” culture to make leather products with a contemporary twist blending Buenos Aires’ uniqueness and glamour.

The company boasts on its web site that it wants to become the LVMH Moët Hennessy Louis Vuitton of Latin America, also by selling spirits under its Algodon (cotton) Wine banner. “Our goal is to reintroduce the world to the grandeurs of the city’s elegant past, intertwined with an altogether deeper cultural connection: the strength, honor and integrity of the Gaucho,” it says of Buenos Aires.

Argentina’s weakening peso currency (worth around 60 per dollar) may help Gaucho-Buenos Aires and other firms build export sales.

“We don’t have an export industry but now that the dollar has risen [as opposed to the collapsing peso] we may have a chance against China,” said Juan Chicote, who makes hoodies for local brands. China currently ships clothes to Argentina at an average price of $10 per item, including freight and taxes, roughly the same of what it costs to make a local variant before the mark-up, according to Chicote.

To take on the world’s largest apparel exporter, the sector must sharply boost capacity and know-how — but a big challenge requiring huge capital investments, he said.

A falling peso, while bad for importers and the country’s efforts to shore up its international debt, will help restrict some of the yarn and basic apparel imports that have killed local brands, added Chicote.

For now, the pain is being felt across the board.

Roughly 60 percent of Argentina’s small sewing shops are idle amid the fierce competition from Chinese and other Asian suppliers who found a niche with the country’s growing unemployed.

“Ten to 12 years ago we could not handle the amount of orders that came in,” Basterrechea continued. “We were maxed out. Now we have 500,000 shops in crisis and half with no orders. The ones that work are selling at very low prices, like 18 pesos [30 cents] for a shirt, not enough to buy a piece of bread.”

In 2008 to 2010, 18 pesos could buy a seamstress bread, milk and another basic food item, she added.

Meanwhile, the luxury sector, which was boosting its presence before August’s primary elections spelled the end for Macri, is waiting to see how the new Peronist administration — whose past protectionist trade and investment policies strangled the sector — runs the country of 44 million people.

“Some people say Cristina is not going to do things exactly the same as in the past because of all the big issues and bad publicity she had last time,” said Diego Stecchi, whose Luxury Retail Partners consultancy helps foreign upmarket brands expand in Latin America, referring to the former president’s past policies to block imports to Argentina and prevent brands from firing workers. “Some think it may not be so bad this time and think it’s even a good idea to come back to the advantage of low prices and low investment costs.”

While many expect CFK to wield strong power in Buenos Aires, Fernandez is expected to win strong support for his more moderate presidential agenda, which may or may not clash with hers.

Whatever happens, some luxury labels, including Louis Vuitton (which recently opened a pop-up store in the country before setting up a full stand-alone) and many others hoping to open stores in a newly planned luxury mall, are anxiously awaiting policy signals from Buenos Aires.

It’s unlikely that a barrage of high-end labels will hit Buenos Aires — where roughly 10 large international boutiques operate — anytime soon. Following the departures of Ralph Lauren, Ermenegildo Zegna, Fendi and many others during CFK’s last tenure, the market is still small at $300 million a year, much less than in Brazil or Chile.

“It’s a tenth of Brazil’s,” added Stecchi, “but is the only one where all the brands are not there yet.”

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