EXPOTELA COULD SHOW EFFECT OF DEVALUED PESO
Byline: Michael McNamara, with contributions from Margaret Mazzaraco
NEW YORK — Even as several key executives gave the nod Wednesday to Mexican President Ernesto Zedillo Ponce de Leon’s plan to stabilize his country’s economy, the first true test of how the devalued peso will impact the U.S. textile industry could come as early as next month, at the Expotela fabric show in Mexico City.
Some firms are anticipating a healthy showing at Expotela, but others that have already sent in their $3,350 per booth registration fees are concerned about what kind of business the show will generate.
They cited a possible dearth of attendees, reduced export opportunities and a worsening of credit problems — already a major stumbling block when dealing with Mexican firms — as potential elements that could hamper the show, all reflecting the higher prices of U.S. fabrics because of the devalued peso.
Expotela, which highlights textile offerings from U.S., Canadian and Mexican suppliers, is slated for Feb. 14-16 at Palacio Mundial de las Ferias. The event is sponsored by Bobbin Blenheim, Columbia, S.C., a division of Blenheim Trade Shows Inc.
This year’s show was moved from a temporary space in Mexico City’s World Trade Center, which housed the initial edition last March.
Alfred Greenblatt, president of the apparel, home fashions and industrial business units of Guilford Mills — which has a substantial interest in Mexico — said he agrees with Zedillo’s proposals. “We like the plan,” Greenblatt said. “Labor rates for labor-intensive jobs, such as garment manufacturing, should be going down, and that only continues to help in having this hemisphere gain share back from Asia.
“While it may be more difficult to export to Mexico, programs where American-made piece goods are being made into apparel and brought back to the U.S. is where the advantage is,” Greenblatt added. “We think it’s good for the apparel business.”
In September, Guilford Mills increased its stake to 75 percent from 20 percent in its Mexican partner, Grupo Ambar, which has two subsidiaries, American Textil, a warp knitter in Ecatepec de Morelos, and Servicios Corporativo’s Ambar, a fabric retailer in Mexico City.
Greenblatt said the company will continue to exhibit at Expotela — and has reserved four booths — citing “substantial interest generated at the show last March.”
“It’s a little too early to make a determination of how Zedillo’s plan will impact our industry, although I am optimistic,” said William Armfield 4th, vice chairman of Unifi and president of the American Textile Manufacturers Institute. The ATMI endorses Expotela. “If we have the fabrics that are desirable for particular garments, then Mexican manufacturers will continue to buy them and pass the price increases along,” said Armfield. “Still, you’ve got to think that prices may have a short-term negative impact. But on other hand, anything that is in the best interest of Mexico, to achieve a long-term trading partnership with them, is very important.
Armfield, though, said Unifi, which showed at last year’s Expotela, will not participate this year.
“It is not a reflection at all on the show,” said Armfield, who noted that he will attend the show. “Unifi goes to different shows during different years. It’s always been that way for us. We have a very strong presence through our Mexican agents.”
The event last March featured 120 companies in 147 booths and drew 5,319 buyers — including more than 3,000 from Mexico, according to Bobbin officials.
Betty Webb, Bobbin’s senior vice president and show manager, said she’s expecting about the same number of companies to participate. However she said that the devalued peso “could cut into buyer attendance somewhat. “However,” Webb continued, “the Mexicans have been through three devaluations since 1980. Their plants have to continue to produce, so they’ll need raw materials. This makes [the North American Free Trade Agreement] that much more attractive, and it makes exports from Mexico advantageous.”
Herb Stern, vice president of Stylecrest Fabrics Inc., here, said he is considering withdrawing from the show.
Stern said he spoke to Webb, and asked her what steps Bobbin was taking to protect the investment of American firms in the face of a potential sharp reduction in buyer attendance for the show due to the devaluation of the peso. According to Stern, the devaluation has resulted in a one-third to one-half increase in landed-Mexico cost of fabrics. “I indicated to Webb that without some adjustment, possibly in the [movement of the] date of the show, we would have to resign our participation,” Stern said.
One textile executive requesting anonymity said that because of the uncertain economic situation coupled with political problems, he is even concerned for the safety of his delegation attending the show “and will send them only if he receives assurances that there will be adequate security.”
As for security, Webb said, “We are still six weeks from the show. Certainly, as we move closer to the date, if we felt security would be a problem, we would mount more. But security has not come up as a major concern.”
Earl Kramer, president of Concord Fabrics, which exhibited at the March event, said despite the shaky economic climate in Mexico, Concord will once again exhibit fabrics there.
“Our decision on whether to participate, however, is not necessarily solely a function of the devalued peso, but rather because there is an opportunity for business there,” Kramer said. And he made it clear he feels there is this opportunity.
According to estimates from ATMI, orders of $8 million to $10 million were written on the floor by its members, who represented about half of the total number of exhibitors.
Bruce Roberts, executive director of the Textile Distributors Association, said despite the unsteady situation in Mexico, the organization will continue to endorse Expotela. The TDA is comprised primarily of about 165 New York-based mills and converters.
“We have had concerns all along about problems with credit in Mexico, and this most recent problem certainly isn’t going to enhance the situation any,” Roberts said. “But there is a great opportunity in Mexico, and we need to maximize that.’
Fred Baumgarten, president of corduroy producer Majestic Mills, said while his firm is expecting to take part in Expotela, he noted that Majestic is “reevaluating its approach to the Mexican market.” While the company does not plan to stop selling the market, it will weigh shows against other means of reaching the market.
Dan River is another company expected to show its goods at Expotela next month. Dan River, which has also established a sales office in Mexico, is keeping a close eye on the peso.