NEW YORK — By the late 1980s, Guatemala had endured a long and violent history of political and military unrest. It was also during this time that the country started to stabilize and its textile industry began supplying the U.S. market.
Today, Guatemala has established itself as a key supplier to the U.S. market and is looking to remain so by marketing the country as a one-stop shop for higher-end fashion goods.
“We have been in the business at least 20 years,” said Roberto Rosenberg, trade commissioner of the Guatemala Trade Office in New York. “At that time it was just cut-and-sew operations. The industry has become more sophisticated in recent years and we are moving with it. We already had a textile base, which is still one of the strongest in the region.”
The country has emerged as one of the most economically stable in the Central American region, reporting a gross domestic product of $35.2 billion in 2006 and a low level of debt. Costa Rica, in comparison, posted the second largest GDP at $21.8 billion.
During a conference to discuss the advantages of sourcing from Guatemala held here in early February, trade officials also pointed to the country’s growing global reputation. A World Bank report put Guatemala eighth in its ranking of the world’s most reformist countries in 2005 and 2006, behind France and Croatia. The country also ranked in the top 10 of the world’s least corrupt countries, according to a Gallup Poll, beating out Australia in 10th place.
Much of the growth in the textile sector has been homegrown, according to Rosenberg.
“What has happened in our industry, which also has happened in the U.S., is the consolidation of the industry,” said Rosenberg. “There have been important strategic alliances in Guatemala with local manufacturers teaming up to make vertical operations and become more attractive to U.S. clients.”
Natalie Hanson, vice president of trade consulting firm International Development Systems, said the manner in which investment has occurred in Guatemala has differed from other Central American countries.
“You had large U.S. companies making brick-and-mortar investments in places like Honduras to do their own underwear production,” said Hanson. “It’s not U.S. companies doing the production in Guatemala.”
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The improved situation is attracting a flood of foreign direct investment. In 2006, FDI to the apparel and textile sector totalled $75 million. Perhaps more telling for the country’s future is the $250 million of FDI that has been directed to modernizing ports and airports. Proximity to the U.S. market is a major selling point.
“Turnaround in Asia could be 16 weeks,” said Rosenberg. “For us it’s 10, sometimes seven to eight weeks, depending on the product.”
Cost, however, is one area that gives potential customers pause.
“Our labor is more expensive than many of the countries in Southeast Asia,” acknowledged Rosenberg.
Asia’s size and dominant position in the textiles industry also means it can offer a greater variety of fabrics.
“But because of CAFTA [Central American Free Trade Agreement], we are starting to get investment in the region, which is only going to give us more resources in the region to supply fabric,” he said.
Guatemala isn’t short on facilities that can provide everything from garment manufacturing to fabric and trim. The country has one of the largest populations of apparel and textile companies in central America at 506, far outpacing Honduras’ 201. Together with El Salvador, Nicaragua and Costa Rica, the region boasts 970 apparel, textile and accessories facilities.
Marketing the strengths and flexibility of the region as a package has been ongoing and is starting to take hold, aided by CAFTA.
“The previous program relied on the use of only U.S. yarns,” said Hanson. “It developed a hub-and-spoke relationship between the U.S. and each of the countries. Now with CAFTA…it encourages greater regional integration among the Central American countries themselves.”
Guatemala is now the 16th largest apparel supplier to the U.S. market, exporting $8.46 billion worth of goods to the U.S. for the year ended November 2006. Those sourcing there include Target, Kohl’s and Wal-Mart, but the country has its sights set on heading upstream. The country has also started working for Abercrombie & Fitch, Calvin Klein and American Eagle. The goal, said Rosenberg, is to evolve from producing moderate goods to better goods.
“The most important thing is that we have to continue doing this transition, to become a partner with U.S. clients where we can offer everything to them,” he said.