Five years ago, Chile’s textiles and apparel industry was reeling under a massive inflow of Chinese imports, with many fiber makers closing. But a successful restructuring campaign has helped shore up the industry, which is expected to grow 13 percent this year to about $6 billion, according to Arnaldo Flores, president of leading trade lobby Intech.
“Many textile companies have turned into importers while others have transformed into high-end apparel manufacturers and exporters,” Flores said, adding that 70 percent of companies that made mass-market fiber and clothing went bankrupt.
According to Flores, the industry’s pleas that the government help quash Chinese imports by raising duties went unanswered, forcing many undercapitalized companies to become importers of cheap apparel instead of competing against rock-bottom prices.
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Indeed, average Chilean duties for Chinese imports remained at 6 percent and are likely to fall to 2 to 3 percent in coming years.
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Due to the industry’s restructuring, roughly 30 percent of Chilean apparel firms now export, import and make apparel at home while 50 percent are pure importers and the remainder make upmarket or niche apparel. This means some 70 percent of clothing sold in Chile is imported and 30 percent made at home, compared to a 50/50 split in 2005.
Thanks to the booming Chilean economy, retail sales revenues will grow 16 percent this year, up from 14 percent in 2010, according to Flores.
“There will be more consumption than last year because of the economic growth but also because last year’s earthquake meant people had to buy a lot of new household products and had to limit apparel purchases,” he explained.
Regarding exports, Flores said they are likely to gain 3 percent this year to some $180 million as the U.S. dollar continues to slide against the peso and the U.S. and European Union economies recover at a slower pace than expected.
Last year, exports rose 5 percent as Chile continued to expand sales to new markets in Venezuela, Peru, Ecuador and Colombia. Meanwhile, imports are forecast to grow 30 percent on top of a similar hike last year.
Flores said Chile’s surviving apparel firms are now engaged in the manufacture of “very high-quality garments for the premium market and niche markets.” These include companies like Priviledged, men’s wear chain Trial, Flores underwear, Monetto and Bercovich. Leading apparel firm Bellavista, which went bankrupt a few years ago, is also back in business.
Ralph Lauren, Lacoste and Tommy Hilfiger are some of the best-selling foreign apparel brands in Chile while local label Umbralle also does very well, according to Flores. The luxury market is dominated by Versace, Giorgio Armani and Paco Rabanne.
“The luxury market is going to grow strongly in the future,” Flores noted, adding that Chile’s economic forecast remains rosy amid soaring prices of copper for which the Andean nation leads global production.
“There is more and more wealth and you see more BMWs, Audis and Porches out there.”
Aware of this trend, Louis Vuitton and Hermès are likely to increase their presences in Chile in the near to midterm, Flores added. So will other foreign premium brands such as Banana Republic, which is expected to arrive in Chile after Gap makes its arrival in November.
Meanwhile, a growing spate of Chilean fashion designers is likely to keep imports in check as Chileans are showing a rising appetite for national brands.
“My guess is imports will continue to rise but these designers’ collections will temper things a bit while exports will continue to grow at least 5 percent,” Flores concluded, adding that this will keep Chilean apparel manufacturers profitable in coming years.