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Argentinian clothing manufacturers face cost-related challenges


Argentinian clothing manufacturers face cost related challenges

For a country facing numerous economic challenges for long, the fact that its clothing sector has about 50 per cent import component is in itself a challenge.

As per The National Institute of Statistics and Censuses (INDEC), clothing is one of the highest performing sectors year-on-year. By June 2022, the manufactured quantity of clothing increased by 28.7 per cent compared to June 2021. In the first half of the year, production increased 24 per cent compared to the first half of previous year. The turnover of Argentine textile and clothing industry amounted to $2 billion in 2019. Around 90 per cent manufacturers are micro and small companies, large companies account for about 1per cent of manufacturers. All production of textiles and clothing in the country is for domestic consumption.

High cost of clothing imports affect prices

As per Galfion, a key member of INDEC, imports have to be financed 180 days after nationalization, resulting in a direct cost of around 35 per cent in dollar terms, which contributes directly to pricing of the final product. He feels, given the shortage of foreign exchange, Argentina should give priority to the supply of basic raw materials to produce domestically. This would save foreign exchange and limit prices of semi-finished products and further increase national output and Argentine labor.

He opines, the country is already in a dire situation with some factories reducing production due to lack of inputs, especially in the synthetic sector where raw materials are imported. These circumstances have resulted in a marked reduction in demand, great uncertainty, volatile prices and it is logical that the consumer waits and does not validate the adjustments. He expects the market to remain stable in coming months, which will establish predictability. This means, the producer knows at what price he will be able to get the supply of raw materials for production. This will contribute to stabilizing the prices of the final product.

Imports dominate market

As per latest Argentine Industrial Chamber of Clothing (CIAI) figures, in July 2022 (last reported), the dollar for clothing imports registered 71.1 per cent year-on-year growth, totaling $24.5 million. In terms weight in kg, it rose 80.1 per cent, totaling 1.1 million. For the period January-July 2022, the increase in imports in dollars terms was 50.3 per cent compared to the same period in 2021. In kg, there was an increase of 37.4 per cent in 2021 over the same period.

The average price per kg imported was 21.6, slightly higher than January-July 2021. The main import origin for January-July 2022 period was China, which accounted for 56 per cent of imports measured in dollars, followed by Vietnam 7.5 per cent and Bangladesh 5.9 per cent. Peru as at 5th place, Brazil 10th and Colombia 15th are the three South American country of origin that are prominent for this period. Peru and Colombia stand out as origins of outbound purchases with high $/kg ratios. From January to July 2022, due to change in weather, the largest imports were coats (31.5 per cent) category, followed by pants 15.9 per cent and sweaters 15.3 per cent.


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