The following research report contains market research, analysis, statistics and business intelligence relating to research on Apparel Industry In Mexico.

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ABSTRACT
Many misperceptions still exist on the topic of the
North American Free Trade agreement. One of them seems to be
that trade in apparel and textiles is a one way street from
Mexico to the United States, just as it is from Asia. The facts
show this is not the case. Exports to Mexico from the United
States of textile/apparel products and textile mill products are
booming. Many maquila cutting and sewing plants in Mexico are
now fed with fabric produced in the United States supporting
U.S. jobs. Instead of sinking the U.S. textile industry, NAFTA
has provided a lifeline to survive in the face of Asian imports,
which usually contain no U.S. inputs. End Summary.

2. Even though the economic fundamentals of producing garments
in Mexico are very attractive, most U.S. firms have supplied
their Mexican plants since NAFTA with U.S. made fabric. While
most finished textile goods imported from Asia contain no U.S.
inputs, most textile products from Mexico entering the United
States contain significant amounts, if not 100 percent U.S. made
material. Also, many of the investment dollars spent on new
plants and equipment in Mexico by textile firms came back to the
United States in the form of capital goods purchases. Purchases
by Mexico of U.S. textile-manufacturing equipment including
cutting, sewing and weaving machines buoyed this industry, whose
woes in the early nineties could also be traced to low cost
apparel imports from the Far East. The same could not be said
of U.S. plant investments in Asia.

3. Textile and apparel trade with Mexico has grown along
product category lines. Goods, such as commercial carpets
which are heavy and difficult to ship, are usually made closer
to the end user. These goods do not figure prominently in
U.S./Mexico trade statistics. Interior consumer products, such
as draperies require more sewing and are therefore, produced
abroad in greater volumes. Synthetic garments have a higher
labor component still, and so trade in this area is more fluid.
However, spinning synthetic yarn and weaving fabric from it is
highly automated and can be competitively produced in the
States. It is in this category of garments that the NAFTA
partnership with Mexico has taken trade away from Asia, while
keeping mills humming in the States. Spun apparel products from
cotton or wool require additional labor in making the fabric,
which boosts the cost. Yet, even in this category of apparel,
trade flows have favored Mexico over the Far East. It should be
pointed out that this kind of trade still has a beneficial
effect on the U.S. economy when compared with sourcing from
Asia. The reason is that these Mexican plants pull in a host of
goods and services from the United States including textile
machinery, mill supplies, fashion design, management services,
etc. Comparable goods purchased from Asia contain far less
collateral benefit for U.S. firms.

4. In 1995, Mexico overtook China as the number one source of
garment imports to the United States. Today, Mexico is still
widening its lead position with about 15.4 percent of the U.S.
apparel market. This sourcing shift back to North America has
been good news for U.S. textile companies. More than 80 percent
of finished Mexican textile products are assembled with fabric
made in the United States. Since 1995, U.S. apparel exports to
Mexico, largely in the form of cut pieces for assembly, more
than doubled. U.S. exports of apparel products to Mexico in
1995 were 1.2 billion dollars. By 1999, these exports had
reached 2.9 billion dollars.

5. Leaders of the U.S. textile companies now point to NAFTA as
promoting a renaissance in this industry. In the six years
after NAFTA, states with big apparel and textile producing
industries, such as South Carolina, Tennessee, Georgia, and
North Carolina substantially increased exports to Mexico.

1993-1999 Apparel/Textile export growth to Mexico:

South Carolina 4713 percent
Tennessee 1807 percent
Georgia 1058 percent
North Carolina 220 percent

1993-1999 Textile Mill Products export growth to Mexico:

Tennessee 1526 percent
South Carolina 738 percent
North Carolina 418 percent
Georgia 215 percent

Even States that did not have a traditional base in textiles
benefited. A good example is Pennsylvania. Textile/Apparel
products and Textile Mill products exports from the state to
Mexico, in the same six-year period grew 101 and 122 percent
respectively. Colorado, to point to another example,
experienced 184 percent growth in their Textile/Apparel exports
to Mexico and a robust 331 percent growth in Textile Mill
products to Mexico over this period. Compare these figures with
total Colorado State export growth to Mexico of 112 percent.

Recently, Commercial Officers from the U.S. Embassy in Mexico
City visited a post-NAFTA maquila industrial park devoted to
apparel production and export. The park, located an hour south
of Mexico City in the State of Morelos, is known locally as
Apparel City (in Spanish, Ciudad de la Confeccion). It was a
collaboration of seven U.S., Canadian and Mexican firms. Each
plant tends to focus on just one or two types of products such
as lingerie, swimwear, or men's dress slacks. The park
currently employs about 3000 people and the average plant size
is approximately 8000 square meters. The park was designed with
land for future expansion. Park management expects growth,
either through additional investments by the current companies
or through new companies locating there.

7. The plant in the park that we toured was new and well
equipped. It was clean, well lighted, air-conditioned, and a
public address system pumped out popular music. A computerized
cutting machine neatly sliced 32 layers of U.S.-made wool/poly
worsted fabric at a time. Some 42 separate sewing operations
later, men's dress slacks--complete with sales tags--were ready
to hang on the rack in a U.S. department store. Company
officials said that the average base wage is about 10 dollars
per day (95 pesos) which, they pointed out, is approximately
two-and-a-half times greater than the official minimum wage of
about four dollars (37.90 pesos) per day. Many workers
apparently take home considerably more when incentive pay is
taken into account. Since the companies have a significant
demand for workers with the necessary skills, the park has its
own training center. They were also in the process of opening a
day care facility for the children of employees to accommodate
over 300 children.

8. It is impossible to say if Apparel City is representative of
textile maquila facilities in Mexico, but we do know that there
are many such plants. In the first five years after NAFTA the
number of maquila plants producing textiles and apparel jumped
from 520 to almost 1,200. They are located throughout central
Mexico, and the coastal and border regions.

9. The increase in trade has not come without risks. Companies
that ship goods to and from locations in Mexico must take
various measures to avoid falling victim to highway piracy. In
fact, several of the U.S. companies we interviewed with
operations in Mexico have been touched by crime in the recent
past. One company has 30 to 40 trucks per week running back and
forth from a location in central Mexico to the U.S. border. The
trucks are typically full in both directions. With so many
trucks moving without incident over a period of time, company
representatives now feel that they had become complacent and
were lax on security measures. Their company policy was to not
drive their trucks at night but this rule was not always
followed. One night in January hijackers posing as police
officers stopped a convoy of three of their trucks. The
company's unarmed security chase car was detained away from the
trucks, and the trucks laden with over half a million dollars in
finished, name-brand jeans, were driven off into the night.
Eventually, over 90 percent of the cargo was recovered, but
other companies are not so lucky. Counter-crime measures
increase the cost of doing business and there may come a point
where U.S. companies will feel it is not worth the risk.

10. The final chapter has not been written on U.S./Mexico
textile trade. Global competition has redefined the nature of
the business. It is clear that NAFTA has breathed new life into
the North American textile sector, but there is continual
pressure to innovate, reduce costs and streamline. For example,
U.S. companies are exploring the complete vertical integration
of operations in Mexico from polyester chips to finished
garment. This would cut into some of the U.S. textile export
gains to Mexico achieved thusfar through NAFTA. Also, highway
piracy may frustrate further business in Mexico in this sector.
Nevertheless, NAFTA has given the U.S. textile industry new legs
to compete with Asian, particularly Chinese, firms that should
carry this sector for a long time to come.

11. The Commercial Service of the U.S. Embassy is available to
assist U.S. companies interested exporting their textiles, mill
products or related services to Mexico, by providing background
information, counseling, market research and introductions to
prospective Mexican buyers.

Embassy Contact: Gregory Taevs, Commercial Attache
Fax:(525) 535-1139, Phone (525) 140-2645
e-mail: gregory.taevs@mail.doc.gov

DISCLAIMER
Information in this report relies on sources including Government Publications, Opinions of industry experts and other public sources. Infomat can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. All prices subject to change without notice.

$3500 USD
For the 2008 Edition

Published: 2006 August
Market: Mens Womens Childrens
Region: Mexico
Industry: Apparel
Pages: 45
Delivery: 7-12 Business Days
SKU: infre0000232