MEDELLÍN, Colombia – Colombia’s textile and apparel industry is struggling to raise financing as it scrambles to boost U.S. exports to hedge against a strong dollar.

The gap is hindering efforts to obtain crucial working capital to bolster manufacturing efficiencies and technology, executives said at the 28th edition of the Colombiatex sourcing fair here.

Organizer Inexmoda expects potential sourcing contracts from the event to match or exceed last year’s increase of 15 percent to $306 million. It said the fair will feature 510 exhibitors from 24 countries and draw over 10,000 buyers to make “the fashion system vibrate.”

“We’ve gone to $25 million [in bank loans] a year from $100 million a year in 1999,” before many firms went bust amid a recession, said Lina Maria Posada, legal secretary at textiles giant Coltejer SA. She added that the sector owes some $500 million to banks as part of a bankruptcy rescue package introduced then that has made them wary to lend. “We are having a lot of trouble obtaining funds for everything including cotton supplies to finished fabrics.”

Loans from foreign institutions like the International Financing Corporation, Latin American Development Bank or European banks like Société Générale are also largely unavailable, further pressuring the sector, Posada said.

The industry is asking the Colombian government to strengthen development bank Bancoldex to issue more direct loans instead of guarantees. Posada said the government should expand Bancoldex’s reach and mission to mirror that of much more ambitious Brazilian peer BNDES, which helped bankroll Brazilian apparel firms during the boom times. Bancoldex apart, the government could also help issue new guarantees against companies’ real-estate, machinery, future sourcing contracts or other assets, she added.

Juliana Calad, executive director at National Business Chamber Andi’s textiles and apparel arm, said the funding shortage is triggering production and export delays.

“We want the government to know that the financing gap is creating bottlenecks,” Calad said. “For example, we have amazing high-end shirt producers but they can’t make the premium cotton needed to make their products. We have cotton textile mills but they don’t have the machines to make higher-end fabrics.”

Firms in the key denim sector are also struggling, finding it hard to procure funds to make more value-added products, stalling its growth.

Jorge Andres Lopez de Mesa, sales vice president of thread maker Enka, said the industry must clear its past debts to encourage banks to resume lending. However, he said a strong export outlook should prompt some institutions to issue new credit.

Lopez de Mesa forecast exports will rise 10 percent to over $1 billion as U.S. buyers step up orders to benefit from the strong dollar. Simultaneously, many garment-makers are set to substitute increasingly expensive imports with local products, benefiting local producers. Despite a weakening economy, Lopez de Mesa expects domestic sales will be strong enough to help the sector grow 10 percent to $11 billion in 2016, up from a 7 percent gain last year.

Lopez said garment-makers are feeling enthusiastic about the brightening outlook for exports, which could recover to the $2 billion-a-year level by 2020.

When the peso was stronger, cheaper Central American or Mexican rivals gained a leg on Colombia “but we have a great opportunity to recover that now,” Lopez de Mesa said. “Most large apparel firms are already at maxed capacity.”

During Colombiatex’s launch, executives said Bogota should also help slash sky-high energy prices (at $11 cents/kilowatt versus an $8 cent/kilowatt regional average), move to lift trade with the U.S. (by resolving a cumulation dispute depressing flows), sign free-trade deals with Canada, Brazil and Guatemala and curb the rising contraband trade.

Commerce, Industry and Tourism Minister Cecilia Alvarez-Correa said the government is considering creating a specific Bancoldex financing line for the sector and that it will meet with executives in coming days to explore new funding options. She added the government is working to resolve the U.S. rule of origin or cumulation dispute, though such a resolution could take some time. The U.S. has delayed Colombia’s requests that it expand rule-of-origin provisions in its free-trade agreement to allow it to source scarce raw materials from Peru or Central America, Calad said, adding that TPP negotiations and an investigation into irregular exports by Gildan in Colombia are causing the impasse.

Colombia hopes to complete negotiations to sign a free-trade deal with Canada this year, said Foreign Commerce Vice-Minister Mariana Serasti. She added a free-trade agreement with Guatemala (with a view to building a cumulation relationship) is also in the cards. Regarding Brazil, she said talks are making progress with new meetings scheduled in coming days to sign a free-trade deal, though she would not provide a timeline.

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