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January 2008
Around the World: Guatemala

                Q & A with Carla Caballeros

Did you know that many of the brand-name blue jeans sold by U.S. retailers are produced in Guatemala? And that's not all. From a fancy wool coat that sells in a high-end store in New York City to football uniforms, Guatemala is steadily emerging as a source of skilled labor for garment manufacturing.

Carla Caballeros is the manager of VESTEX,
Guatemala's Apparel & Textile Industry Commission. It is is part of the Guatemalan Exporters’ Association, (AGEXPORT), which promotes the competitive growth of exports to sustain the economic and social development of the country.

View the latest VESTEX videos.Here, Caballeros offers her insights on Guatemala's expanding role in the global market and opportunities for enhanced U.S. partnerships.

Q.How is the apparel industry in Guatemala, and region-wide, evolving since joining the Central American Free Trade Agreement (CAFTA)? What actual designing is going on in Guatemala and/or other CAFTA countries?

A. To understand the Guatemalan apparel and textile industry, it is important to provide you with a brief description. There are about eight local mills producing yarns, woven fabrics, and knits. On the needle side, there are about 169 apparel factories, most of them Korean-owned. The two main categories right now are cotton and synthetic knit tops and cotton woven and knit cotton trousers, pants, and shorts. Ninety percent of what we produce is exported to the United States.

Guatemala's apparel and textile industry is still facing the impact from the move of many specially woven orders to Asian countries, which has represented a challenge for our companies to reduce and readapt product lines. Companies are focusing on better serving more fashion goods that would find our close proximity to the market as a competitive advantage. CAFTA has helped the industry to face this challenge, by giving the opportunity to use yarn and fabrics made in the region, which has enabled the mills to expand their actual capabilities and capacities.

Q. What is distinctive about apparel production in Guatemala?

A. Guatemalan apparel is not yet in the brand business; mostly our production is focused to deliver the market with their own brands. Over the past 10 years, we have moved from many diverse styles and product categories, providing the quality and needle know-how to produce women's career apparel, to woven shirts a few years ago, to athletic performance apparel and knit goods.

Q. Will we soon see Guatemalan brands present
in the U.S. market?

A. To move from full package to ready-to-wear or even to brand is quite a challenge. At this moment and in the short term, we still see our industry as a better partner in a currently successful supply chain where many U.S. brands are participating together. The value of the strategic alliances between full-package garment makers in Guatemala and U.S. retailers gives the industry the opportunity for everyone to focus on what we are best at. Then we get a win-win business where the brands invest in the needed marketing to bring customers to the shops, and we produce quality apparel in a compliance environment, supplying goods in just two hours (by plane, two water days by boat) to the final stores. There are a few companies who already have started to test the market, looking forward to the future and the next steps in their individual strategies.

Q. What effects has the end of the international textile quota system had on the apparel industry in Guatemala?

A.It has produced a shift, moving away from the products that we were making with fabrics from Asia, which were limited from Asian countries by quotas. This change has forced the industry to readapt and focus on working with the raw materials available in the region.

Q. How do Guatemalan companies move up the value chain and stay "ahead of the curve"?

A.To compete in the market, the companies have focused on developing more value added for their products by giving the garment fashion-finishes such as high-end screen-printing techniques and washes. Apparel makers also are focusing toward creating strategic alliances with local mills in order to develop more fashion fabrics and yarns.

Q. How do Guatemalan companies finance their operations?

A.Most of the industry is Korean-owned, and they work with local banking but mostly with international U.S.-Korean financing. Finance, however, is still a challenge in the region.

Q. How does the Guatemalan government help or hinder the apparel industry there?

A.The government works together with the association by promoting investment and working toward better enhancing the business climate. Over the last year, there have been important steps that have contributed to improving the country's capacity for quick response such as the remodeling of the international airport and ports. The CSI certification and scanner implementation, effective December 2007, will allow Guatemalan shipments to do the U.S. customs clearing process from our ports, speeding up the overall logistics.

Q. Where does VESTEX see U.S.-Guatemalan partnerships forming within the apparel industry?

A.There is a big opportunity for U.S.-Central America partnerships in fibers, yarns, and fabrics. By creating this partnership, we will together make our industry more efficient, and we will generate the need for raw material capacity locally. We need to work together not only to succeed with quick response, but also to compete with other regions.

Q. What do Guatemalans want in the clothing they buy? What can U.S. brands do to be more visible in the Guatemalan market?

A.I don't have this kind of information, as we deal with the export industry. But from what I have seen, in general, Zara, DKNY, Levi's, Gap, Calvin Klein — those are brands you can find in the malls.

Q. How are Guatemalan workers trained? What corporate social responsibility (CSR) practices are most common in Guatemalan apparel companies?

A. Labor compliance has always been on Guatemala's agenda, as well as the Guatemalan apparel and textile industry’s agenda, as one of its competitive advantages — from the voluntary VESTEX Code of Conduct, originally created in 1996, to the Safety & Security at Work program that has been implemented at more than 120 factories over the last five years. Click here to download information on VESTEX's Labor Development Program (doc file format).

INTECAP, KOICA, Universidad del Istmo, and VESTEX are working together on different training programs focusing on skills in design, product development, and textile production. Since 1991, the industry has been organizing the apparel sourcing show in order to promote the region’s supply chain integration. In these 16 years, it has become the region’s trade show with more than 21 countries participating, making it an ideal place to network.

Q. How can American apparel small and medium-sized enterprises (SMEs) start doing business with Guatemala, for example, sourcing unique garments for retail stores in the Mid-Atlantic region?

A. The Guatemala industry’s vision towards 2010 is to consolidate through higher value-added and differentiated products by focusing on mid-high and more specialized market niches. The country’s specialties range from a fancy wool coat that sells in a New York brand store, fashion “destroyed” jeans, a football uniform, to a polo shirt. Strategic alliances and virtual vertical integrations are spreading from Guatemala to the rest of the nations throughout the region. Thanks to CAFTA’s freedom to use regional fabrics, local mills have invested more than $50 million these past two years to expand and increase yarn-spinning capabilities, as well as dyeing and finishing. Also, weaving and knitting capacities have been widely enhanced. Guatemala’s apparel and textile industry consists of a total of 476 companies providing jobs for more than 100,000 Guatemalans, generating over $500 million in foreign and local capital investments.