NEW YORK — Wilbur L. Ross said Thursday that, as part of his campaign to broaden the presence of International Textile Group outside the U.S., the company plans to open a denim plant in Guatemala City next year.
“We have been selling to Central America for quite a while, to Koramsa mainly [the Guatemalan pants producer], and also to other people down there,” he said in a phone interview. “A number of our ultimate clients, people like Gap and Limited, and firms like that, really want their vendors to be more global, and to therefore give them the capability of deciding what mixture of geographic sourcing suits their needs the best.”
Ross — who formed the $900 million Greensboro, N.C.-based ITG through the acquisition of Burlington Industries and Cone Mills, and serves as chairman of the new firm — said Cone has selected a site where it will open a mill with a capacity of about 30 million yards of denim a year. Cone already has a mill in Mexico and joint ventures in India and Turkey. Cone’s total Mexican denim capacity is about 60 million yards a year.
He said the move reflected a decision that “We need more of a Central American strategy — not instead of a U.S. strategy and certainly not instead of an Asian strategy.”
Central American manufacturing executives and U.S. buyers have said the region needs a sizable local textile industry to survive, particularly after the nations of the World Trade Organization drop their textile and apparel quotas on Jan 1. Today, apparel makers in the region are heavily dependent on fabric imported from the U.S., Asia or elsewhere in the world, with U.S. importers estimating that local textile makers supply only about 10 percent of the fabric used in the region.
ITG’s venture would be among the region’s largest textile producers. Textiles Amatitlán, another dominant Guatemalan producer, currently produces about 24 million yards of fabric a year.
“Central America needs at least 100 million yards of denim a year,” said Carlos Arias, executive vice president of Koramsa, in an interview last week in Guatemala City. Arias estimated producers in Guatemala and El Salvador currently produce about 36 million yards of denim a year.
Also last week, Marcio Cuevas, Guatemala’s minster of the economy, said, “We would like to see more investment coming in a way that will help to produce vertical integration of the sector.”
Most of Guatemala’s apparel and textile industry is foreign-owned, with South Korean investors a dominant factor.
Ross said the plant would serve as his production hub for the Central American region. He said the proposed Central American Free Trade Agreement with the U.S., Guatemala, El Salvador, Nicaragua and Costa Rica would boost the region’s growth prospects if it is passed.
Through the 12 months ended in March, the CAFTA nations supplied $7.11 billion worth of textiles and apparel to the U.S., giving them a combined 9.1 percent share of the import market, according to data from the U.S. Commerce Department.
“Guatemala is a very logical place from a CAFTA point of view,” Ross said. “The normal wage in this industry is a little under $200 a month. That is getting down toward the China level. [Also] Guatemala has pretty good infrastructure. Ports and roads, and highways and airports, and even the telecommunications systems, are good by Latin American standards.”
Mexico is Guatemala’s northern neighbor, Belize is to its east and Honduras and El Salvador are to its southeast. Guatemala has ports on both the Pacific Ocean and Caribbean Sea. Its location has prompted a number of industry suppliers, including label maker Shore to Shore, to choose it as a regional hub.
Since taking office in January, President Oscar Berger has worked to boost Guatemala’s trade presence, signing agreements with El Salvador, Honduras and Nicaragua to allow the free flow of people and merchandise over the nations’ borders.
The next step for ITG will be developing a greater manufacturing footprint in Asia, Ross said. In recent months, he has traveled in China looking at opportunities. In the next few weeks, he added, his deputies — Joe Gorga, chief executive officer of ITG, and John Bakane, ceo of Cone — would be traveling to Asia for further investigations.