According to a forecast by EY Rapid-Growth Markets, by 2022 Mexico will be home to 10 million RGM (rapid growth markets) households with an annual income of more than US$ 35,000. This indicates that Mexico will be self-sufficient to concentrate on its domestic market to drive demand. Also, this will make the country a huge investment hub. The textile and apparel sector of Mexico is one of the largest manufacturing sectors of the country's economy.
In the recent past, fast fashion brands like H&M, American Eagle, Forever 21, etc., have shown interest in expanding business in Mexico. The country has also urged these brands to source apparel from Mexico instead of Asian countries. The textile and apparel sector of Mexico has earned an esteemed reputation for adapting to changes in demands and trends, which definitely augurs well for the industry.
Mexico's potential:
The textile and apparel industry contributes 4.7 percent to the Mexican Gross Domestic Product in terms of manufacturing. Textile pitches in with 1.3 percent, whereas apparel accounts for 2.5 percent of the overall figure. These sectors also generate approximately 20 percent employment in the country. The country also takes pride in being the first Latin American supplier of textile products to the United States.
Currently, Mexico exports synthetic fiber mixed with artificial fiber like rayon. Mexico's fabrics with textured polyester dyes are also in demand globally, and the county is also manufacturing and exporting upholstery fabrics and industrial fabrics for the automotive industry to neighboring countries. Textile machinery and equipment are another growing sector as Mexican textile and apparel manufacturers focus on the latest technology to survive competition from other developing nations.
Nevertheless, statistics suggest that things have changed for textile and clothing in Mexico, but not for the good. With the implementation of the North American Free Trade Agreement (Nafta), exports reported a high growth rate, but by the end of 2013, exports were 43 percent lower than the figure achieved in 2000.
Moreover, textile imports outnumbered exports by US$ 2.24 billion in 2013, which shows Mexico's heavy dependence on imported raw material. With growing competition from Asian countries, especially China, Mexico's trade equation with the United States of America has also changed. Several textile and apparel companies there are increasingly making export deals with China, tempted by lower costs. Chinese textile products are also finding buyers in Mexico's domestic market. According to a report by Textile Intelligence, Mexican clothing imports from China grew by 559 percent between 2008 and 2013. In 2013 alone, imports mounted by 42 percent.
On the brighter side, Mexico's textile and apparel industry is predicted to become the largest economy in Central and South America within a decade. The country is now looking at expanding business in the United States of America and also eyeing improving trade relations with other countries. The textile and apparel sales in the domestic market are also likely to improve as per capita income of Mexico's 120 million plus population is growing at a high rate.
Moreover, there is scope for higher sales in the domestic market, given that Mexico has a population of 120.3 million, which is becoming increasingly prosperous.
Strengths and challenges
Mexico's textile and apparel sector is adjusting to changes that the global textile has witnessed in terms of quality, competition, production deadlines, technology and other factors. The country's textile and apparel sector has some advantages over its international rivals. Mexico enjoys a well-established supplier chain, a highly skilled work force and good communication infrastructure. Though China too has these advantages, Mexico's proximity to the United States of America has led to endless opportunities for Mexican textile. The country has signed numerous free trade agreements that give it an edge over competitors.
Apart from well-structured domestic organisations, Mexican manufacturers have complete access to international fairs, where the Mexican textile products enjoy a high degree of repute. Furthermore, with saturation in Brazil's fashion market, Mexico has emerged as a smaller giant, which is attracting investment in textile and apparel. Government institutions are providing a global platform to Mexican textile, which is capable of competing with international manufacturers in terms of cost and quality.
Yet, rising imports and falling exports are some of the major concerns for Mexican textile and apparel. Mexico's reliance on other countries for its raw material is a major hurdle in its path to success. Mexico needs to make its domestic market stronger, as its burgeoning middle class can benefit from the textile and apparel sector.
Competition from Asia
Another area of concern is competition from Asian countries. Though China remains a giant as far as textile and apparel outsourcing is concerned, Mexico is considered a safe haven for workers. Mexican textile plants have superior safety and labour relation records. "They are taking the right approach because there is a correlation between safe workplaces that honour promises to pay workers fairly, and long-term financial success," says Drusilla Brown, who represents the International Labour Organisation in its efforts to set labour standards at manufacturing plants around the world.
China, India and Bangladesh have the advantage of cheap labour, but international brands are concerned about workplace safety measures in these countries. The twin accidents in different textile industries of Bangladesh attracted worldwide attention and since then, brands are more focused on ethical production.
Mexico's safety standards are extremely high and there is a long list of requirements for manufacturing plants that include emergency exits and stairs, safe places for workers, mandatory evacuation routes, fire detection and fire extinguishing safety equipment.
New import rules
At the beginning of 2015, Mexico announced a set of new measures to combat 'unfair' trade practices in textile and apparel imports. According to Inside US Trade and Sourcing Journal Online, a minimum reference price for imported textile and apparel products would be established. Thus, if shipments are reported to enter at below the fixed price, these would be investigated by the government and further imposition of duties and taxes will be levied.
Mexico will also implement a new financing mechanism with total available credit of around US$ 30 million in 2015 to help the domestic textile and apparel industry upgrade machinery and equipment, follow innovative strategies and launch new products. The Mexican Service Agency for the Commercialisation and Development of Agricultural Markets is working on the purchase support standpoint between domestic cotton producers and textile manufacturers.
This new policy is designed to strengthen the Mexican textile sector and increase its competitiveness at global level.
Mexico is one of the most promising emerging market economies of today. Its textile and apparel sector has received positive reviews from its trading partners including the United States of America, Canada, China and Peru. The healthy income indicates smooth growth of textile in domestic terms. According to Euromonitor, the ready-to-wear designer slice of the market will grow by 50 per cent, from US$ 1.9 billion in 2015 to US$ 3.0 billion in 2018.
Mexico's textile and apparel is a budding sector and will definitely attract huge investments in the near future.
References:
1. Knittingindustry.com
2. Tradingeconomics.com
3. Ey.com
4. Tradegood.com
5. Info.mfiintl.com
6. Businessoffashion.com
7. Wordpress.com
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