MEXICO CITY – Mexico’s textiles and apparel industry will grow 5 percent to $27.3 billion this year, as falling imports benefit local manufacturers and a “super-dollar” helps lift exports, executives said.
“It has to be a much better year,” than 2014, when the sector was reeling from a flood of sub-valued Asian imports though it chalked up growth of 4 percent,” said Alfonso Rocha, president of main apparel trade lobby Canaive’s Guanajuato State branch.
Following a government aid package last spring, “we now have reference prices that are countering imports and revitalizing internal consumption,” Rocha said.
He expects sales of Mexican-made apparel to rise 6 to 7 percent compared to 4 percent last year when cents-on-the-dollar clothing from China and Malaysia were denting producers’ fortunes.
Apart from reference prices, the rescue plan forced importers to register their operations, tightening state surveillance and stamping out organized crime rings in charge of funneling the illegal merchandise.
Exports are also forecast to gain 4 to 5 percent to $4.2 billion as the peso continues to trail the dollar, said Arturo Vivanco, president of Canaive’s Jalisco State division, home to second-biggest city Guadalajara.
The peso this week hit 17.50 per ‘super-dollar,’ as many Mexicans now refer to the U.S. currency, up sharply from a year ago.
But the high-flying greenback is causing problems elsewhere.
Vivanco said it has prompted spinners to boost textile sales north of the border, leaving many clothiers struggling to procure key fabrics to sow apparel for U.S. sale.
“There is no fabric to meet supply demands, especially for khaki and denim,” he said, adding that importing such products has become increasingly expensive and cumbersome. “The rising dollar has displaced 20 to 25 percent of textiles [manufacturing] capacity outside Mexico.”
Vivanco’s firm, Maquila Vivanco, which supplies C&A, is struggling to meet orders as local fabric makers are now fetching 20 percent more from goods shipped to the U.S., but also increasingly to South American markets like Colombia and Peru.
To fix the problem, Canaive is hammering a plan to help clothiers buy fabrics four months in advance at slightly higher prices, instead of weeks or one month in advance as they have traditionally done.
“We are going to start ordering much sooner and make sure orders are large and attractive enough for our manufacturers,” Vivanco said.
Rocha said the shortage is not so acute, at least not in Guanajuato.
“Most of the fabric we use is imported and we are not facing any shortages,” he said, adding that roughly 950 apparel firms in the state supply the likes of Perry Ellis, Guess Jeans, Bloomingdales and Nordstrom. “It really depends on whom you are talking to and where they are located.”
Meanwhile, textile producers say last year’s package has not worked that well for them.
Trade lobby Canaintex last month said low-priced fabric imports are rising, hurting yarn and fabric producers. They fell to 10 percent from 19 percent after the state introduced the aid, but later crept back as high as 16 percent, said president Alfonso Juan Ayub.
The sector has also recently faced last-minute order cancellations from apparel clients, further underscoring the view that illegal imports are climbing.
According to Ayub, temporary Chinese imports are arriving at Mexico’s Manzanillo port, “turning half-way” to go to the U.S. and then re-entering as originating from North America.
He said Mexico City must tighten raids and step up fines against illegal importers, among other things, to ensure they meet the law, though he expressed skepticism that this will effectively happen anytime soon.
While the textiles segment grew 2 percent last year, rebounding from a 3.1 percent contraction in 2014, this year’s growth could decline unless the government moves to ensure the package also works for textile suppliers.