Mexico Textile & Apparel Industry – A Strategic Choice

25 Jul 2016

Mexico Textile & Apparel Industry – A Strategic Choice

July 25, 2016Market Watch

Mexico textile and apparel industry is diversifying and growing stronger and at the same time has experienced insightful structural changes over the past few years. It has not only become the major revenue and employment source but at the same time plays a significant role in the export sector.

It has a $1.26 trillion economy and hence 15th largest economy in the world and 11th largest power purchasing parity. Textile production is the fourth largest manufacturing activity in the country which includes the making of thread, cloth and decoration, in both natural and synthetic fibers.

In 2013, Textile & Apparel industry accounted for 3.7% of Mexico’s GDP i.e.1.3% for textiles and 2.4% for apparel. Around 415,000 workers directly employed in the sector out of which 74% worked for the apparel sector and remaining 26% worked for the textiles sector.

The production is located mainly in the central and northeastern part of the country. 80% of the textile and garment production are focused include.

  • Distrito Federal (DF)
  • Estado De México
  • Hidalgo
  • Jalisco
  • Puebla
  • San Luis Potosí, and
  • Tlaxcala

Other emerging states are Guanajuato, Michoacán, Morelos, Tamaulipas, and Yucatán.

AN INTERNATIONAL TRADING HUB:

Mexico’s geographic location makes it a strategically important export market. It is the seventh largest export market in the world. At the same time, the most important export market in Latin America.

  1. NAFTA: Textile and apparel sector growth has been spurred on by NAFTA. It is by far the most important export market for Mexico sector. Mexico has been the key US supplier, ahead of China, Hong Kong and Taiwan.
  2. MEXICO-EU FTA: FTA enables closer economic co-operation between Mexico and the EU. This will provide EU Companies preferential access to the major markets in North and South America through Mexico’s via extended FTA network.
  3. MAQUILA PROGRAM: Mexico initiated its maquila program to encourage the development of export manufacturing industries by waiving import duties on capital goods and material inputs used in the manufacture of products for export.
  4. TRANS PACIFIC STRATEGIC ECONOMIC PARTNESRSHIP AGREEMENT: TPP is a free trade agreement with the aim of integrating the economies of the Asia – Pacific region. Currently, it includes 12 member countries: Vietnam, the United States, Canada, Mexico, Peru, Chile, Brunei, Singapore, Malaysia, Australia, New Zealand and Japan. GDP scale of TPP is estimated at US$26,000bn, accounting for approximate 40% of global GDP.

CURRENCY MOVEMENT:

Image 1

 

Top Exporters to Mexico in FY 2015-16:

For Cotton Yarn:

USA 82.69 Mn US$
India 77.42 Mn US$
China 0.49 Mn US$
Spain 0.24 Mn US$
Honduras 0.18 Mn US$

For Polyester Filament Yarn:

USA 134.01 Mn US$
China 101.42 Mn US$
India 30.44 Mn US$
Taiwan 26.10 Mn US$
Korea 25.07 Mn US$

NEW IMPORT RULES RAISES CONCERN

An announced set of new measures expected at combating “unfair” trade practices in imports and improving the competitiveness of domestic sector. The proposed measures will mainly target those imports considered to be “undervalued” by the Mexican government. At the same time, one of the measures is to establish a minimum reference price for imported T&A products. Any shipments below that price would be subject to an imposition of additional duties and taxes.
Mexico will required a mandatory registry for T&A imports. Importers will be required to provide advance notice of shipments to the Mexican Economy Secretariat in the future. Mexico will break down the current eight-digit tariff lines for textile and apparel products into 10 digits, which would allow tariff rates to be more specific. Mexico will implement a new financing mechanism with total available credit of 450 million pesos (around $30 million USD) over the next 12 months to help the domestic T&A industry (especially small- and medium sized enterprises) upgrade their machinery and equipment, pursue innovative strategies and develop new products.

PRESENT SCENARIO

Despite the country’s close integration with the United States and Canada, the textile and apparel sector in Mexico has been facing an increasingly strong competitive challenge from China and other Asian producers.
Textile firms in Mexico realized they needed to increase their competitiveness by investing in expanding production centers and manufacturing high-quality textile products, in order to compete in international markets.
One of these areas are Technical Textiles. Mexico is the largest market for U.S. technical textiles, and plays a special role in trade with the United States textile market. Mexico, therefore, is an ideal starting point for new exporters.
The Mexican Government has acknowledged the need to promote these technical industries, which have the ability of taking on other international manufacturers in terms of price and quality.

Conclusion

The Mexican Government is keen to support and encourage the continued growth of the textile and clothing sector. It has introduced a sector-specific program aimed at strengthening the competitiveness of firms and providing a stable and dynamic environment for investment. Specific objectives include ongoing modernization through the introduction of high-tech solutions and the development of technical skills, the promotion of innovation and encouragement of foreign and domestic investment.

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