MEDELLÍN, Colombia — Colombia’s textiles and apparel industry will grow 7 percent to roughly $10 billion this year as rising domestic consumption offsets sluggish exports, mainly to Ecuador.
Carlos Botero, executive president of top trade group Inexmoda, said the neighboring nation’s introduction of a 21 percent duty against Colombian goods has put the industry on tenterhooks and could help fuel a 5 percent export decline to $746 million.
“If the situation is not resolved positively, we will be affected because this is our second export market,” Botero said on the sidelines of the Colombiatex sourcing fair that ended Jan. 29, where potential sourcing contracts rose 15 percent to $306 million.
Exports have been declining for years, however, due to plunging demand from troubled yet key buyers in Venezuela. As of November 2014, exports were down 13 percent to $786 million.
Botero is optimistic that negotiations with Ecuador, which is gradually replacing much of the lost Venezuelan trade, will conclude successfully. “The CAN [Andean Community trade bloc] is reviewing the issue and we hope the duty will fall” in the near term, he said.
As exports decline, local trade is set to climb 10 percent to $9.4 billion amid buoyant consumer spending in an economy set to see growth of more than 4 percent this year.
In sourcing, Colombia produces elaborate fashion jeans, lingerie and beachwear, as well as towels and polyester thread and fabrics, sources said.
“They are not just five-pocket jeans; they are embellished pieces of art,” boasted Inexmoda’s commercial director Clara Henríquez, adding that Colombian jeans (which can fetch $300 to $400 a pair) are more embroidered, riveted and washed than competitors’, ideally suited for “the Guesses of the world.”
Trucco Fashion leads the sector where manufacturing can be 15 percent cheaper than big rivals in Brazil’s denim sector, she said.
Colombia, which also has strong activewear and sportswear suppliers, is no longer a mass-market producer, Henríquez emphasized.
“About eight years ago, we were focused on long orders. Levi’s, J.C. Penney and Wal-Mart were all here,” she recalled. “Now we are in fashion denim, focused on short and differentiated series.”
Colombia lags in other markets, such as shirting, where “Peru is very good,” she conceded.
To stay competitive, full-package players looking to draw business from global brands exiting Asia must streamline their offer through technology upgrades and a better understanding of clients’ requirements, Botero said. He added that more state investment to improve road and port infrastructure is also crucial to hasten delivery speeds.
The South American country is looking to reverse an export decline that has been going on since 2009, when it totaled $2 billion, mainly because of a sharp drop in Venezuelan demand. “We are selling $67 million to Venezuela and that used to be $1 billion,” Botero noted.
Sales prospects in Ecuador — where Colombia places some $157 million worth of textiles — also look bleak because of the new tariffs.
To avoid further losses, brands are rushing to boost exports to the U.S., Europe and, more recently, South Korea to hedge a strengthening dollar and recover lost markets.
“We are increasing our presence outside New York and Florida to Illinois, California and the Carolinas,” said Ricardo Vallejo, promotion vice president at export lobby Procolombia (formerly Proexport), to help promote Colombian goods in the U.S., where a free-trade deal implemented in 2012 has failed to live up to expectations.
Procolombia is taking more companies to fairs such as Magic, Swim Collective and CurveNY to publicize top swimwear, shapewear, lingerie, jeanswear and kids’ trademarks, Vallejo noted.
But the U.S. market, where Colombia sells $223 million annually, is tough to crack.
“We are not where we should be,” said Camilo Herrera, president of trade consultancy Raddar, adding Colombian brands must move beyond New York and Miami to other cities with strong buying power, such as those in the central U.S.
On the bright side, goods now enter the American market more easily than 10 years ago when phytosanitary regulations and drug-related concerns meant many stayed at port.
However, “there is still some reticence,” Herrera noted, adding shoppers often confuse Colombia with sportswear firm Columbia.
A social media campaign dubbed ‘It’s Colombia, not Columbia,” launched two years ago, is helping change that, Herrera said.
The U.S. aside, the big game changer for Colombia may be the Pacific Alliance, a growing trade bloc among Colombia, Mexico, Peru and Chile expected to gain traction with the merger of the members’ stock exchanges late this year. Panama, Costa Rica and Canada have expressed interest in joining the initiative.
“This is going to open a lot of markets, introduce zero duties and unique trading windows among the four countries,” Vallejo said, adding that rules of origin will be flexible. Procolombia’s apparel exports director Catalina Hernández said global manufacturers and brands’ growing interest in sourcing in the Americas will also help fuel exports.
Apart from preferential terms in the CAN trading zone comprising Bolivia, Ecuador and Peru, Colombia is improving its garment delivery speed to draw more fast-fashion firms.
Compared with Central America, it can make more sophisticated products with relatively similar delivery deadlines.
“We can make garments with as many as 80 operations compared with around 10 in Central America but with more value added and higher standards,” Hernández said.
If the Pacific Alliance delivers and U.S. exports climb, Colombia could bounce back to the $2 billion export level by 2018–2020, she noted.
To raise their fortunes, Colombian clothiers would benefit from raising prices while the economy remains strong. In 15 years, price tags have increased a mere 15 percent as Asian and European rivals have clobbered the market. “There has been a huge price war, but we need to recover our local market,” said Herrera, adding that fast-fashion players such as Zara and Forever 21 have stolen 40 percent of trade in recent years.
Contraband also remains a huge challenge, accounting for 40 percent of sales.
A new bill to add contraband to existing money-laundering legislation should help tackle the problem more efficiently, Botero said.
“In Colombia and Latin America, contraband is not just a man who brings a container and wants to avoid taxes,” Botero said. “These are much more sophisticated networks tied to asset laundering. Drug dealers have found nests to launder assets and do so in a complex way.”