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R 282141Z JAN 10
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 2377
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBJ/AMEMBASSY BEIJING 0009
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA
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RUEHMU/AMEMBASSY MANAGUA
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RUEHQT/AMEMBASSY QUITO
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEHSG/AMEMBASSY SANTIAGO
RUEHSJ/AMEMBASSY SAN JOSE
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RUEHTG/AMEMBASSY TEGUCIGALPA 0765
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UNCLAS BOGOTA 000103
SENSITIVE
SIPDIS
STATE PASS USTR
E.O. 12958: N/A
TAGS: ETRD ECON PREL EIND KTEX CO
SUBJECT: COLOMBIAN TEXTILE INDUSTRY: DYING OR JUST DOWNSIZING?
REF: 09 BOGOTA 239
1. (U) SUMMARY. Long a cornerstone of Colombia's industrial base,
the textile/apparel industry has declined in recent years.
Industry experts point to four primary reasons for the sector's
dismal performance in 2009: 1) decreased exports, particularly to
Venezuela; 2) short-term U.S. trade preference extensions and the
absence of a free trade agreement with the U.S.; 3) the peso's
revaluation; and 4) increased competition from both contraband and
legal imports from China. The GOC and private sector pin hopes for
the industry's future on an orientation toward global niche
markets, requiring high degrees of innovation, technology, and
value added. END SUMMARY.
INDUSTRY DECLINE, BY THE NUMBERS
--------------------------------
2. (U) Following a difficult 2008 (reftel), Colombian Textile
Association President Ivan Amaya characterized 2009 as "brutal" for
the industry, and described Colombian textile and apparel producers
in 2010 as "survivors." Production in 2009 fell by 20 percent, and
the industry, which accounts for 21 percent of total manufacturing
sector employment, shed some 40,000 jobs. Antioquia department,
which accounts for 53 percent of Colombian textile/apparel
production and 62 percent of exports, was the hardest hit, with
several factories forced to close. Following are four principal
reasons for the industry's woes.
REASON ONE: DECLINE IN EXPORTS, PARTICULARLY TO VENEZUELA
--------------------------------------------- -------------
3. (SBU) Textile/apparel regularly ranks among the top five
Colombian exports, and number one when it comes to a significant
degree of value added. While overall Colombian exports saw a 14
percent decline in 2009, textile/apparel exports dropped by 45
percent. In 2008, Venezuela bought 65 percent of Colombia's
textile exports, and Ecuador 10 percent. Apparel exports to
Venezuela plummeted 67 percent in the first ten months of 2009 and
those to Ecuador fell 55 percent during the same period. GOC and
industry contacts do not expect to recover the Venezuelan market,
given the administrative barriers. However, they hold out hope for
Ecuador, once balance-of-payments and exchange rate safeguards are
lifted.
REASON TWO: NO FTA; SHORT-TERM ATPA EXTENSIONS
--------------------------------------------- ---
4. (SBU) Guillermo Valencia, a prominent economist and business
executive in the textile sector, described Colombia's frustration
over inaction on the U.S.-Colombia trade agreement with the
following allegory during public remarks: "We walked for a long
time on a bitterly cold night, until finally we reached the house
of a friend. And that friend refused to open the door for us."
Industry contacts argue that the lack of the bilateral deal
prevents significant long-term foreign investment in the sector.
Likewise, they consider that short-term (one-year) Andean Trade
Preference Act (ATPA) extensions, while better than nothing, do not
give the certainty necessary for the sector to thrive.
REASON THREE: REVALUATION
--------------------------
5. (SBU) The Colombian peso has appreciated by 51 percent in
nominal terms versus the dollar since 2003. This development has
taken a toll on all Colombian exporters, and the textile sector is
no exception. According to National Association of Exporters
(Analdex) President Javier Diaz, Colombian exporters have become
more savvy in the use of exchange rate hedging instruments to
manage volatility, but the overall upward trend in the peso's value
has put more inefficient exporters out of business and reduced
profits for the rest.
REASON FOUR: CONTRABAND / CHINESE IMPORTS HURTS DOMESTIC SALES
--------------------------------------------- ------------------
6. (U) A recent study ranked Colombia seventh out of nine Latin
American in per capita clothing consumption. Amaya attributed the
relatively low figure to the large amount of uncounted contraband.
Apparel producers have expressed concern that recently published
Decree 111 (enacted in response to a WTO case filed and won by
Panama against Colombia) will allow Chinese imports via the
Panamanian Colon Free Zone to enter Colombia through any port of
entry, leading to more contraband clothing. Likewise, domestic
producers acknowledge they cannot compete on price with legitimate
Chinese imports.
INDUSTRY FOCUSED ON GLOBAL NICHES, VALUE ADDED, FUNCTIONALITY
--------------------------------------------- ----------------
7. (U) Having ceded the high volume/low price market to China and
others, Colombia's textile/apparel producers are turning their
focus to global niche markets requiring higher degrees of
technology and value added. The theme of this year's textile trade
show "Colombiatex" was "Beyond Conventional, Closer to Functional."
It featured antibacterial clothing for medical professionals,
fabrics with "microcapsules" of skin-care products, antimicrobial
and "quick-dry" athletic wear, and "self-cleaning" fabrics, among
other efforts to incorporate the latest technology and
environmentally friendly practices in textile manufacturing.
8. (U) The Ministry of Commerce, as part of its "Productive
Transformation Program" has identified textile/apparel as one of
eight priority industries and, in collaboration with the private
sector, is establishing a work plan to develop it into a
world-class sector. The vision is to increase innovation and
creativity by taking a dispersed sector with a high degree of
informality and turning it into a technology-based "cluster." The
success of this initiative may well determine the long-term
viability of Colombia's textile/apparel sector.
BROWNFIELD