MEXICO CITY — Mexico’s new textiles aid package is not causing sourcing delays to the U.S. or elsewhere, though it did face a bumpy start, according to Jose Manuel Martínez, general manager of the main trade lobby Canaive.

U.S. retailers and brands recently slammed the package for introducing import rules that were difficult to understand and were delaying their manufacturing operations.

Yet “the main commercial flow has not been interrupted” since the measure was launched last December, Martínez claimed. “We continue to get imports from all countries. These measures were not protectionist. They were meant to fight illegality,” he said.

A U.S. Commerce Department Webinar April 10 also successfully clarified the fledgling rules for U.S. firms, Martínez said.

A senior apparel executive in Puebla state disagreed, however, saying that some firms are struggling to meet the package’s key requirements — notably that all fiber and apparel importers join an official registry proving they are legally incorporated, tax-paying entities.

“A lot of small companies were caught in the middle of their production and shipment cycle so they have not been able to import the necessary raw materials,” the executive said. “They are having to team with larger firms to be able to import.

“In the past, everyone imported illegally, but that’s no longer possible.”

The registry triggered a plethora of applications that caused heavy delays, Martínez conceded.

“At the start, the number of companies that asked to be registered caused saturation,” he noted. “But legal companies importing at real prices can now get approved in a week.”

That said, some home textile and mass apparel (notably trousers or shorts) categories are still facing import delays as the government works to calculate reference prices, Martínez said, adding that this could take up to two months.

Only half of roughly 8,000 firms that applied to be registered were accepted because the others did not meet strict documentary requirements, Martínez said. However, he expects the country’s other 4,000 companies will successfully register in the next six to 12 months.

The package – aimed at stemming a flood of subvalued Asian imports hammering local producers – is expected to bear the bulk of its fruits after the summer, according to Martínez.

Canaive expects undervalued import prices will fall drastically as firms meet the measure’s price guarantees, forcing them to show the real value of apparel.

“We are starting to see the elimination of cent-on-dollar prices and hope this [value disparities] situation will continue to normalize,” Martínez said.

Meanwhile, some foreign retailers are considering increasing or shifting output to Mexico, mainly to hedge the peso’s decline but also to benefit from near-sourcing strategies and improved manufacturing capabilities, according to Martínez.

C&A is one such firm, having recently met with Canaive to find new suppliers to deepen already extensive manufacturing operations, Martínez said.

He added Canaive plans to hold “small commercial missions” or meetings with H&M, Inditex, Forever 21 and similar retailers that have expanded throughout Mexico but are not manufacturing there, an issue that has caused government and industry friction.

“We have firms here that make apparel for Wal-Mart in Mexico but not in the U.S.,” Martínez said. “We want to offer them all that we have in Mexico or have them tell us what they want.”

Mexico is working to meet global retailers’ certification processes. To do this, the country must sharply improve its productivity and efficiency ratios against Asian and other rivals, Martínez said, adding that roughly 40 percent of suppliers — mainly small and medium-size firms — are not up to standard.

Canaive is also looking to build an industry efficiency benchmark. It recently reviewed its delegations’ productivity levels and launched two programs to boost efficiencies in Yucatán and Guanajuato states.

Mexico has knowhow in making fashionable men’s suits, as well as men’s and children’s apparel that could attract fast-fashion brands, Martínez said. Innovation is also required to transform a largely basic T-shirt sector into a fashion-centric one.

A bigger synthetics and polyester-blends supply chain is also needed to meet the needs of international labels. To achieve this, Canaive is encouraging firms to borrow from development bank Bancomext, which Martínez said is willing to bankroll the transition in a similar vein to what peer BNDES has done in Brazil.

 

 

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