Argentina textile market is in a trade quagmire
Recently, Argentina textile, hit by the crisis of the New Crown epidemic, has shown some signs of recovery across society after a huge effort. 2021 saw a rise in both investment and employment, and its industry recovered at an impressive pace, only after China. However, Argentina’s significant economic growth is a recovery rebound based on a lower base. At the same time, Argentina’s persistently high inflation rate, the weak supply capacity of Argentine textile production, and the strong dependence and vulnerability of its trade structure are factors that make its domestic economy extremely sensitive to international market fluctuations.
Recently, the Argentine Textile Industry Promotion Foundation (Fundacion ProTejer) surveyed more than 80 textile companies of different sizes and regions that are representative of the textile value chain, and the results show that the development of textile and apparel companies are also extremely vulnerable to inflationary distress.
Argentina apparel textile production chain to be technically supported
Compared to 2019, in 2021, 4/5 textile companies increased their investment and sales levels, including investments of more than USD 200 million; 3/5 textile companies made traditional investments, such as installing new machines and improving production facilities.
In addition to traditional investments, almost all textile companies are involved in investing in new technologies related to Industry 4.0 and are also making significant efforts to develop cutting-edge products such as technical textiles, smart textiles and entering the circular economy.
In terms of employment, more than half of the companies created more jobs in 2021 than in 2019. The increase in job opportunities is crucial to Argentina’s economic recovery. Among them, the textile and apparel sector plays a central role, creating more than 500,000 jobs in textiles and having the potential to double this number within five years.
Argentina textile and apparel chain covers a wide range of industries. Whether it is raw materials such as cotton, wool and camel hides, synthetic fibers from oil, or garments and end products made through spinning and weaving, the Argentine textile industry has the potential and ability to continuously increase the added value of the chain. Among them, the spinning and weaving sectors have shown the greatest dynamism, while apparel production, the most vulnerable link in the value chain, still lags behind. This reveals the structural problems that have always existed in Argentine garment production: lack of workshops, less formalized operational processes, shortage of skilled workers and low productivity are becoming huge bottlenecks in the current increase of Argentine garment production.
Nevertheless, the textile industry has made a significant contribution to Argentina in terms of foreign exchange. Argentine textile exports and imports have a non-negligible success. 27% of the textile companies surveyed have export operations in 2021, and this percentage is expected to grow further in 2022.
China is Argentina’s top textile importer
Argentina’s apparel import amount are high from China
Argentina’s apparel imports in USD terms fell by 12.2% year-on-year in January-December 2021. Due to the low base of import values in 2020 and 2021 and the foreign exchange shortage, the value of Argentina’s imports in 2022 is expected to be similar to the levels of the past two years, and may even be lower.
China is Argentina’s number one source of textile imports, and, as the share of the Argentine textile market for clothing produced in China continues to expand, Argentina’s apparel imports are also maintaining high growth rates. In USD terms, China accounts for 50.9% of Argentina’s textile imports in 2021, followed by Vietnam with 8.7%. In 2021, the Asian region accounts for more than 80% of its total worldwide imports.
Argentina textile exports remain stable in value
In terms of exports, Argentina’s apparel exports in U.S. dollars increased by 54.5% to $26.3 million in January-December 2021 compared to the same period in 2020. Despite the increase in global freight costs and changes in the real exchange rate, which add uncertainty to the textile industry in each country, Argentina’s exports in 2022 are expected to remain similar in value to 2021, with Mercosur (Southern Common Market) remaining the main destination for its apparel exports.
One Belt, One Road drives the Argentine textile market
In addition, in early February this year, China and Argentina signed a memorandum of understanding to build a “Belt and Road” to create new opportunities for deepening cooperation between the two countries. Through the “Belt and Road” cooperation, China and Argentina will give full play to their complementary advantages and deepen cooperation in various fields such as infrastructure, energy and minerals, manufacturing, agriculture and high technology. China will help Argentina achieve high-quality development.
Argentina’s textile industry has a bright future
Affected by the spillover effect of the Russia-Ukraine conflict and the new crown epidemic and other factors, nearly 80% of Argentina’s foreign trade enterprises are in business difficulties due to increased costs, and textile enterprises are the first to bear the brunt, facing the main problem is a significant increase in freight costs, as well as the shortage of containers due to poor global logistics. In addition, the impact of the epidemic, Argentina and Chile and other countries cross-border land route clearance is slow, coupled with the continued dry weather in South America caused by the low water level of the channel, thus seriously restricting waterway freight.
Even so, in the 2022 business outlook for Argentina, 80 percent of textile companies believe they can increase sales and overall performance, more than half plan to continue hiring new employees, and 70 percent are planning new productive investments to improve their productivity.
According to a study by McKinsey and Company, 71 percent of apparel brands in the U.S. and Europe plan to increase their sources of textile supply in nearby countries by 2025. With its unique geographical advantage, Argentina’s textile industry can become a textile hub in Latin America by expanding its enterprises, establishing new textile factories and building international brands.
