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Argentina industry needs $600m to modernise manufacturing

By Ivan Castano Freeman | 12 October 2015 Font size Email Print

Argentina's textileand apparel industry is facing a flat 2015 amid falling consumption, exports and profits but the new boss ofindustry
body Camara Industrial Argentina De La Indumentaria (CIAI)remains confident this month's presidential elections will help change its
course.

"There are good growth expectations for the next few years," says Claudio Drescher, who was appointed CIAI president at the end of September, replacing
Jose de Mendiguren for a two-year term. "All candidates have strong plans to support and grow Argentina's industry and our proposals have been well
received."

The $8bn sector is asking the incoming government (which will be elected on 25October) to help facilitate up to $600m to modernise manufacturing,
which is at "30% of where we need to be," to produce more fashionable export apparel, Drescher told just-style.

Argentina's future president, which polls put as incumbent nominee Daniel Scioli, should also pursue policies to help develop over 20 cash-strapped yet
promising Argentine clothing labels.

Development funding Argentina's textile and apparel exports are expected to fall sharply this
year from $800m in 2014
"We are in a condition to develop brands that can successfully compete regionally and internationally," says Drescher, who owns export women's line
Jazmin Chebar. "We need a development bank to help brands that want to enter Mexico, Chile or Colombia lend funds to open stores."

Unlike Brazil or Mexico, Argentina doesn't have a development bank to collateralise private loans, Drescher adds, a crucial task for the fledgling administration.

"Our workers charge $1,200 a month, five times Asia's costs," he explains. "We need to have much higher [fashion] quality to compensate. We need better equipment, machinery and technology."

The new president should also scrapimport bureaucracy and further liberalise trade to enable manufacturers to more efficiently obtain crucial inputs and more quickly tap new export markets.

However, he believes some views that the government's protectionist agenda has shut imports are "totally exaggerated."

Complaint syndrome

"Argentines have the complaint syndrome," Drescher says. "When you talk to a businessman, the first thing they do is cry and complain. It's part of the culture."

Countering some views that "perverse protectionism" and head-banging red tape have limited Argentine apparel firms' expansion possibilities, Drescher says he has been able to expand Jazmin Chebar in the international arena.
"The system works, just not as quickly as it should."

For now, however, the industry's outlook remains bleak with growth forecast to be flat or marginally higher (depending on the crucial Christmas season) against a 3.5% gain to roughly $8bn last year.

Exports are seen falling sharply from $800m in 2014, due to main partner Brazil's economic woes. Operating margins are also down 2%, Drescher says.

Julieta Lastou, an economist at textiles lobby Fundacion Protejer, says the sector is asking for new rules to "regulate, not restrict" feedstock imports and new social anti-dumping measures to protect workers.

The textiles and apparel chain employs roughly 2m people with 500,000 directly, according to trade union officials.

$1,600 a month

"We want to block the entry of clothing made from countries where workers charge $200 a month compared to $1,600 a month here," Lastou says, adding that phytosanitary regulations should also be introduced.

Lastou agrees ongoing protectionism complaints are overblown, adding they have become a myth.

"All sectors have difficulties importing a raw material here or there but that doesn't mean the entire market is shut," she says. "We rank number 41 worldwide in terms of trade barriers with about 10 regulations, but the UShas
many more and no-one considers it protectionist."

Lastou says the textile export regime, which imposes a 5% duty, should be streamlined and measures to bolster formal employment introduced.

"We need more manufacturing parks instead of small shops that are inefficient and employ informal workers," Lastou adds.

These shops help feed Argentina's informal apparel industry which accounts for 20% of clothing sales and where many workers operate under sweatshop conditions.

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