If you’ve felt more of an urge to splurge recently despite rising inflation, it may be due to the fact that textile imports into Argentina have increased by 33 percent in the first quarter of this year. And while this is great for consumers looking to buy more inexpensive clothes, it is bad news for small and medium-sized businesses (known as PYMEs here), who have seen their sales fall by an average of 30 percent, and in some cases by up to 80 percent.
According to a report by the PRO-TEJER Foundation (the name is a play on words between protejer, meaning “protect,” and pro-tejer, meaning “pro-sowing” or “pro-textile”), which was published in Pagina/12 today, in the first quarter of 2016, textile and clothing imports in Argentina increased to 57,000 tons; the equivalent to US $329 million. Compared to the same three-month period last year, this is a 6.6 percent rise in relation to weight and a 5 percent increase in terms of dollars. Going into more detail, Spain-based clothing giant Zara for example, has been importing 95 percent more kilograms worth of its clothes this year; a 51 percent increase regarding its monetary intake.
And while this has been bad news for PYMEs, according to PRO-TEJER, it has also had a negative effect on Argentina’s textile industry as a whole, which has seen its level of production fall by 25 percent. Last week, PRO-TEJER President Jorge Sorabilla, described the significant drop in the country’s fabric manufacturing as “the perfect storm.” Since textile production is labor intensive, there is concern that jobs will be put at risk, given that the local industry will be forced into direct competition with Asian producers. China now represents 43 percent of Argentina’s import market for textiles.
According to Pagina/12, there a couple of reasons for the rapid increase in relation to the importation of textiles and clothing. The first is due to rising inflation within Argentina (which reached 6.5 percent last month) that has forced consumers to look elsewhere for cheaper alternatives to their local high street stores.
Secondly, over the last few months, the Ministry of Commerce headed by Miguel Braun, has approved some 35,000 import applications that had built up at the end of the previous administration. Under former President Cristina Fernández de Kirchner, imports were restricted to almost zero in order to prop up the value of the Argentine peso and keep reserves in the Central Bank (BCRA). Every time Argentina imported anything, the BCRA had to give up dollars to pay for it, which then weakened the peso and lowered the bank’s reserves. Subsequently, brands were reluctant to set up shop because they were faced with huge import taxes.
However, since President Mauricio Macri lifted currency controls in December (known as the cepo), numerous international brands such as H&M, TopShop, Ralph Lauren and Gap have begun to express interest in opening flagship stores here in Argentina.
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