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

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ABSTRACT
This Market Overview Report focuses on the center of the textile market pyramid which consists of Argentine clothing manufacturers and the import apparel sector, specifically covering the Harmonized System Codes 6100 (knitted clothing) and 6200 (all other garments other than knitted) and all their sub-codes. The report also includes recent trends in the retail sector - the peak of the pyramid, and a very brief discussion of the base, raw material, thread and fabric production.
These three sectors comprise an $8 billion per annum textile industry. Adding to this unofficial estimates of informal and black market activities, the total textile market amounts to between $9 and $12 billion. Industry and the government are together focusing efforts in order to combat this problem and the domestic textile industry, in particular, is taking as many measures as can be allowed by national and international standards to protect their sector. In recent years, Argentina has been in disputes with the World Trade Organization (WTO), with respect to the 35 percent maximum tariff limits on textile and apparel imports set by the international organization.

Source: The above statistics are unofficial estimates, based on Argentine Customs data.

Registered apparel imports for 1998 accounted for $251 million, a 20 percent increase over 1997. The top ten importing countries for 1998 were (in order): China, Brazil, Uruguay, Italy, Spain, Chile, France, U.S., India and Paraguay. The clothing industry, although experiencing a slowdown in demand due to the current recession, is expected to steadily grow in the coming years. This is due, in part, to the industry and government's focus on Argentine haute-couture and its export, and the dynamic local retail sector into which have entered many significant local and foreign players, such as private equity funds and foreign clothing companies.

The Argentine market is promising for U.S. suppliers who cater to the mid-range segment of the apparel market. U.S. suppliers should be price competitive with Asian manufacturers and their product line adapted to local tastes. Argentine clothing preferences have traditionally leaned toward European-based design; however, American clothing is generally accepted for its good price/quality ratio and in the casual and sports apparel sector, U.S. suppliers should do well. Adolescents have taken a strong liking to comfortable, loose fitting casual wear whereas adults are more inclined to elegant casual attire. Brand names are important, especially for adolescents, who are heavilly influenced by U.S. lifestyles and trends.

Some possible entry strategies for U.S. suppliers could be: direct sales to manufacturers, importers, clothing chains and/or department stores (U.S. brand name or private label for Argentine firm); or buying into or establishing a local plant, retail chain or department store.

MARKET OVERVIEW
The textile industry moves approximately $8 billion per year in Argentina. Current apparel production and apparel imports account for nearly $4 billion and the distribution channel for another $4 billion. Nearly a decade ago almost 100 percent of sales took place in traditional clothing stores and boutiques; however, recently this has changed (and is continuing to evolve rapidly). Now, the traditional retail sector accounts for 50 percent of the market; factory outlets and factory owned stores for 33 percent; shopping centers for 11 percent; and supermarkets for six percent of all retail clothing sales. This textile industry figure of $8 billion is expected to increase significantly once demand, which has been stagnate in recent years due to the recession, begins to increase again.

á Primary Industry - raw materials, threads and fabrics, á Apparel Production - small workshops up to the large manufacturers, importers, licensees and brand name owners, and á Retail Channels - independent stores, factory outlets, shopping malls, etc. Three different productive and commercial sectors comprise the textile industry: The Argentine apparel industry, a qualified labor-intensive sector, transforms and adds value to almost 70 percent of the fabric produced in the country. This manufacturing sector is extremely fragmented. More than 65 percent of local production is in the hands of predominately family-run, small to medium-sized firms (under 50 employees). Many such firms produce through an independent job subcontractor system. Most manufacturers or retailers handle their own distribution, thus independent agents or distributors are virtually non-existent.

A great number of the smaller manufacturing firms or local subcontractors, particularly those without brand names and distribution channels, have disappeared or are in the process of closing down. In 1994 there were 7,000 manufacturers, while in 1999 the number had fallen to approximately 5,500. The Argentine Apparel Industry Chamber believes that the market shakedown is nearly finished; the manufacturers that have survived such abrupt market changes, have since adapted and modernized their operations and will continue to do well.

Black market apparel production and import is still a significant problem in Argentina. It is estimated that between 20 and 50 percent of the total market is affected by tax evasion, brand falsifications, contraband and under-invoicing in Customs. This is an area of concern shared by the national government, domestic producers and importers alike, and is one to which much attention is being devoted.

With decades of protectionist policies and a basically closed economy, and with the recent difficulties in a quick competitive turn-about (through specialization, increasing scales of production, automation, modern administration activities and similar improvements), the sector has found itself at a disadvantage in competing with low-cost imports from Southeast Asia and Brazil, and with European out-of-season clearance sales. This new open market environment has led local clothing prices to drop substantially. Besides an avalanche of imports, allowed by the free-market trade policies of the Argentine national government, other economic difficulties faced by local garment producers concern the high cost of credit, and the recent recession and consequent stagnation in demand.
While total apparel imports for 1998 were $251 million. Optimistic projections estimate 1999 to end with a rise of about two percent, reaching $255 million. However, demand is expected to pick up by late 2000 and grow approximately five percent for the next two years. Steadily increasing apparel exports from Argentina in 1998 are estimated to be near $70 million.

The textile industry is in the midst of a dramatic change and it is said that opportunities abound for U.S. clothing suppliers, U.S. retail chains and U.S. department stores. This was once not the case, as Argentina, unlike other Latin American countries, looked principally to Europe for design ideas and suppliers. Although still looking to Europe, the market today is receptive to good quality, competitively priced U.S. apparel.
The following is a list of the top brand names in the Argentine market (source "Mercado"magazine). Leading the list is Conindar, with an estimated $60 million in annual gross sales. The 25 that follow are listed in order according to annual sales (in millions):

Etam ($55 M) Caro Cuore ($24 M) Cacharel ($18 M)
Hering ($50 M) Nasa ($22 M) Conigio ($17.5 M)
Fem Fem ($40 M) Yagmour ($22 M) Arredo Verssion ($15 M)
Angelo Paolo ($40 M) Lacoste ($20 M) EF
($15 M)
Legacy ($39 M) New Man ($20 M) Sail ($12 M)
Yves Saint Laurent ($30 M) Drugstore ($20 M) Giesso ($11 M)
Motor Oil ($30 M) Vitamina ($20 M) Pierre Cardin ($10 M)
Christian Dior ($25 M) Kosiuko ($20 M)
This Week ($25 M) Eyelit ($18 M)
MARKET TRENDS
The barriers which once protected the clothing sector from foreign competition, including strong consumer preference, are being eliminated by large price differences and by the flexibility being shown by foreign manufacturers (i.e. Brazilian manufacturers now make garments especially designed for the Argentine market). In fact, some Argentine companies who control both brands and distribution channels have lately been placing their orders in Southeast Asia using their own designs and patterns, thus replacing smaller local subcontractors. This is one of numerous strategies that U.S. suppliers can use in order to enter the Argentine market.
á Argentina's emphasis on and support for export activities.
á Industry and government focus on Argentine haute-couture. á Rapidly evolving retail channels.
á Many new foreign clothing company market entries.
á Private equity fund involvement in the sector.
Demand in the apparel market is correlated with GDP and currently Argentina is experiencing a recession, thus general demand is down. However, unofficial appraisals for future growth prospects show that exports could continue to increase and that imports could moderately rise during 2000 and gradually regain the previous year's import levels. These projections are based upon: Argentina has always had talented and creative clothing designers who look to Europe for ideas, and then create a unique Argentine product. Recently this fact is being reconstructed as a competitive advantage and a new influence for the region. Manufacturers are in the process of modernizing and fine-tuning their production, in order to compete internationally not only in style and good taste, but also in volume, pricing and quality. They are planning to increase exports each year in the medium to high-end category.

The national apparel industry is positioning itself as a leader in South American haute couture with Buenos Aires as the fashion capital of Mercosur. The motivating forces behind this movement are the Argentine Apparel Industry Chamber and other associations along with the federal and Buenos Aires municipal governments. Within the last couple of years, an extraordinary number of fashion shows have taken place in Buenos Aires and these shows have been attracting international super models and consequently heavy media coverage.

Many parallels are being drawn between the successful textile industry in New York and Argentina's potential, despite relatively high production costs in both, near-by retail outlets prioritize quick and flexible delivery of the products they are selling. Buenos Aires, with the concentration of textile production in Argentina, is in the process of becoming the Mercosur version of New York.
Another combined government, industry and trade association movement is the encouragement of local manufacturers to take advantage of the extensive national resources available. Only around 16 percent of leather, 30 percent of cotton and 13 percent of wool production is currently consumed by the Argentine apparel sector, with a hefty remainder leaving the country as raw material.

From a business perspective, the garment industry has changed with the aim of conquering different domestic and regional segments. It is precisely the clothing market which fostered the shopping malls and factory outlets, and which is getting an increasingly larger share of hypermarket shelf space. Moreover, it has given rise to service activities such as modeling schools, tertiary and university fabric and fashion-related studies.

Globalization has brought many strong foreign investors into the apparel sector. These investors, along with some local private equity funds and certain forward-looking local manufacturers, are doing a great deal to change the concentration of the sector and the structure of traditional retail sales channels.
Some of the activities in which they are involved are:
á The buying and consolidating of factories, brand names and retail outlets
Non-existent in the country until the 1990s, private equity funds (exceeding $6 billion) are emerging as a key source of the capital Argentine companies need to grow. Until now the private equity playing field has been dominated by one player: the Exxel Group. With investments of around $1.5 billion, Exxel stands head and shoulders above the competition in terms of sheer size. However, there are at least twenty other funds now operating in the country. Some - BankBoston Capital, DLJ Merchant Banking Partners, and the Tower Fund, to name a few - are backed by heavyweight international financial institutions. Others - like BISA, one of the most active funds, with controlling shares on the top local lingerie manufacturer - are backed by a mix of local and international investors.
These private equity funds are searching for companies with high growth potential in order to inject capital; reengineer management, production and commercialization processes; and then, in industry parlance, "exit." Although there are a number of alternatives for exiting, most are a variation on a "trade sale"- the sale of the company to another company in the same sector - or on taking the company public via an initial public offering, or IPO. The problem in Argentina is that the potential for taking a company public is limited.
Recently the fashion industry has been a target for these private equity funds and this trend has had a significant influence on the Argentine apparel industry. No one company has much more than one percent of retail market share and the entrance of the private equity funds has hardly changed that figure; however, when the funds have their eye on an industry, all others start to act. This is, in part, why currently the apparel industry is dynamic and offers many opportunities.

The Exxel Group, the biggest investor in the apparel sector, has purchased Pentland (sportswear, Speedo), Eyelit (men's underwear, Disney, Pierre Cardin), Coniglio (children's casuals), Ralph Lauren (Polo), Vesubio (Lacoste) and Paula Cahen D'Anvers (women's wear). Exxel put these companies under one roof and is currently expanding operations into the Mercosur region, and planning to open department-type stores where the entire product line will be offered. They are hoping to "exit"in the near future and will be looking for a large local or foreign company in the textile business to buy their textile group.

Competing with Exxel is AVP (Argentine Venture Partners) with acquisitions of Argentine name brands Vitamina (women's wear), John L. Cook (casual wear) and Show Sport (sportswear), among others. The fund BISA recently acquired Caro Cuore, the leading name in womens' lingerie. In addition Etam, with 98 popular stores in Argentina, has recently been acquired by a private investment fund.

Although mergers and acquisitions in the apparel sector may be reaching their peak, there are numerous firms which are still interested in reaching some kind of association regarding investments or new product development.

á The expansion of shopping centers and hypermarkets It seems that the principal shopping malls in Buenos Aires, with rare exception, are in the hands of one owner -George Soros and his company IRSA. The main competitor to IRSA is the Chilean Horst Paulmann, with Cencosud (with Jumbo supermarkets and Easy Home Centers attached to its shopping centers).
This sector has only just begun to grow. A recent 1990s development, shopping malls currently account for about 8-9 percent of non-food retailing (estimated to be around $40-50 billion annually) vis-a-vis 50-60 percent in the U.S. Eleven percent of all clothing is sold through this channel.

There are approximately 30 shopping centers associated with the Argentine Association of Shopping Centers operating in the country, with an estimated 3,400 stores. These centers are visited by over 150 million people per year.
The search by shopping mall executives for international brand names continues, since they believe that would allow an increase in the market share of shopping malls within the retailing industry. Estimated annual sales for an apparel franchise located in a shopping center is $1.5 million.

á The opening of factory outlets Although a factory outlet mall has operated in the market for over 20 years (in Munro, a suburb north of Buenos Aires), this sales avenue only recently began to take off. Currently Argentina is experiencing a factory outlet boom with a second shopping area established in Parque Brown, and the most successful to date the factory outlet along Av. Cordoba near the Palermo neighborhood (in the middle of Buenos Aires). These outlets are strong competition to traditional-type shopping malls, already accounting for 11.5 percent of apparel sales.
á The beginning of the department store movement
Some large international department stores consider Argentina to be a very attractive market, with great potential for growth, and an ideal headquarters for the Mercosur region. Johnson's, a Chilean firm, started the movement five years ago before it could be called a movement. They currently plan to open 100 outlets and have already invested $60 million in remodelling 12 more. Last year C & A, Zara, and Falabella made tremendous headway in establishing themselves. When the Chilean Falabella opened its doors in the Unicenter Shopping Center in 1998, 500,000 people were registered entering the department store in only 15 days. Falabella plans to have its own credit card and in-store finance and payment plans, which is basically a new concept in Argentina. Dutch C & A plans to have 17 stores throughout Argentina in the year 2000; Brazil supplies 70 percent of its product line. Zara, from Spain, was a hit in 1998 and is expanding rapidly. Harrod's Argentina is looking to re-establish itself as a leading Argentine department store; it has a large well located site that for decades has only been fractionally used.

Argentina's first department stores were established in the early 1900s; Gath and Chaves experienced its peak in the 30s and Harrod's in the 50s. The notion that department stores had passed their prime has been disproven. Generally speaking, it can be said that 1998 was the start of this trend; it is believed that many more department stores, some from the U.S., will be entering Argentina soon.
á The establishment of local subsidiaries of foreign clothing firms
Beside the large number of Spanish firms that have been rapidly entering the Argentine market, there are countless foreign companies just now seeing that Argentina is a good place to invest. When the country gets out of its current recession, there will be a large middle class eager to go out on shopping sprees. Many foreign companies are establishing themselves now in Argentina and building market recognition for their brand names in hope of attracting this large future demand. Among U.S. retailers, besides Levi Strauss which entered in the mid 90s, VF Corporation established operations in Argentina to market its Wrangler, Lee, and Vanity Fair brands directly.
TRENDS IN APPAREL SUBSECTORS

While Argentine consumers in the high-end segment are basically unreceptive to American casual apparel, and in the low-end consumers buy primarily according to price, the middle and upper-middle class continues to seek good American casual apparel. This group accounts for around 36 percent of the overall population. In this segment the best prospects are found among teenagers, who consume mostly casual wear, are highly American oriented in their tastes and are inclined to spending liberally due to marketing and peer pressure.

Argentina has been no exception to the surge in growth that the sportswear sector has experienced worldwide during the last two decades, as consumer preferences have changed in favor of more informal sports apparel. This industry was practically nonexistent in Argentina as recently as 20 years ago. For instance, in 1970 there were only 10 sporting goods stores in the whole country, while today there are more than 2,500.
Regarding leather apparel, the number of finished leather goods - still relatively small compared to exported unfinished hides - is slowly growing with the introduction of modern finishing machinery. The dispersed leather industry moves $1 billion, with about 90 percent of total sales derived from exports.

IMPORT MARKET
The traditional market power of Argentine apparel companies has been greatly affected by the national government's free trade policies of the early 1990s, when in 1992 import tariffs were lowered to around 20 percent (down from 100 percent) and ensuing mass imports (particularly from Brazil and Southeast Asia), threatened companies throughout the industry.

The serious difficulties faced by many firms in the clothing sector caused the Argentine government to reverse itself somewhat in 1995 to provide some protection for the industry. This was one of the very few exceptions made to the government's free trade policy; they raised import tariffs around and in some cases above maximum levels (35 percent) negotiated in the World Trade Organization (WTO).

These import policies have negatively affected foreign importers; however, not by much as had been predicted. The entrance of foreign clothing chains and department stores plus the cost-effective mix (of imported and locally produced items) now employed by the more flexible Argentine manufacturers offset the negative effects of the tariff increase.

Total apparel imports for 1998 were $251 million. This figure is expected to rise slightly to $255 in 1999 and up to 20 percent for the next two-year period.

Following are the leading subsectors in the Argentine import market.

HS Code 6100 (knits) consisted of clothing imports worth $94.4 million in 1998 and HS Code 6200 had $152.3 million in 1998 imports. (The U.S. is stronger in the first category -6100.) Another product category in this report, "plastic"apparel found in HS Code 3926, represents imports of $4.3 million.

Imports from the U.S.
Apparel imports from the U.S. in 1998 were 1.4 percent lower than in 1997. In real terms, according to U.S. FOB prices, Customs registered $8.8 million in imports from the U.S. for 1997 and $7.4 million for 1998. While imports from the U.S. were projected to decrease to $5.2 in 1999, this trend may be reversed in 2000 and later, considering that several U.S. apparel firms and department stores are looking into the market for investments. The following graphs show a ranking of the top ten Harmonized System categories in which U.S. suppliers are showing some headway and the U.S. imports market share.

Importers
As can be seen in the following graph, there are many importing companies involved in the apparel sector, approximately 1,600 altogether (although half import $9,000 or less). Of these, 74 firms are strong importers, importing over $500,000 worth of merchandise.

NUMBER OF IMPORTERS BY VALUE OF IMPORTATION
Quantity FOB$13-2 million$1.9-1 million$999-500 thousand$499-100 thousand$99-50 thousand$49K and under Number of Importers
22
22
30
146
129
1239

The top apparel importers generally import for a sole client. Many found in the top ten list are mentioned in this report; Zara, Johnson's, C & A, Etam and Hering are retail outlets; Carrefour, a French hypermarket; and Avon, the U.S. direct sales cosmetic company, represented here mainly in the hosiery category. All importers listed below, except Zara Argentina SA (which entered the market in 1998), are also in the top ten list for 1997 and 1998. Nimes Amerique du Sud SA was formerly called La Nouvelle Mode SA (strong in European imports).

It is important to note that many domestic manufacturers are also importing a part of their products lines. Having a cost-efficient mix of import and locally-made apparel is deemed necessary in order to remain competitive in the Argentine market. Moreover, a portion of the more expensive designer brands are imported directly for sale to the upper middle class end-users in specialized "boutiques".

COMPETITION
Local production
The Argentine textile and garment industries operate with a large degree of self-sufficiency, but do rely heavily on imports of technology, machinery, non-cotton fibers, raw materials for synthetic fibers and fabrics, and novelty items (buttons, decorations, accessories). Today, the production process is more sophisticated and complex; nevertheless, it still retains some of its handicraft features which give each product a special touch. Argentina seems to have found a niche market for its production output. Focusing on talented and creative local designers and trendy retail stores located in the capital, Buenos Aires is launching itself as the fashion capital of the Mercosur region and South America in general.

Several factors are said to have influenced productivity increases in local clothing manufacturing: the purchase of automated machinery; computer-assisted pattern design and cutting; and a radical change in the organizational chart, where investment has been made in "soft"technologies, i.e. those related to human resources training and management.
Although there have been some technological advances in improving productivity by substituting human labor with high efficiency equipment, Argentina still does not have sufficient state-of-the-art machinery. In order to become more competitive, the textile and garment industries will continue to require modern equipment to meet export growth in the coming years. Moreover, many of the ubiquitous family-run firms are finding it difficult to adapt to the new administration practices being implemented.

The barriers which had once protected the sector from foreign competition, including strong consumer preference, are being eliminated. This proves difficult, especially for the smaller firms which once prevailed in the industry. Many small Argentine manufacturers have had problems reaching the scale and quality standards necessary for the international market place. The current tendency towards conversion, with a greater degree of market concentration, could be the basis for establishing the necessary economies of scale. If so, these companies could avail themselves of the cost advantages which Argentina enjoys to make significant entries into export markets.

The manufacturers in the apparel sector are closely intertwined with clothing retailers. Some manufacturers produce their own brandnames and supply their own retail and factory outlet stores; while others produce exclusively, under a licensee arrangement, for one brand name.
Third country imports
The top ten third country imports are from (in order according to percentage of market share): China (26%), Brazil (20%), Uruguay (13%), Italy (9%), Spain (4%), Chile (4%), France (3%), U.S. (3%), India (2%) and Paraguay (2%).

China, Brazil, India and Paraguay are known for their low-priced garments; Uruguay for its wool; Italy, Spain and France for upper-end fashion products; and Chile for its retail and department store market entries. The U.S. is known for durable, reasonably priced, high quality attire. (See graphs on page eleven under Import Market).

Products from China, Brazil, Uruguay and Italy have been at the top of the import list for years with very little change. Colombia, which figured seventh in 1997, was not present on the top ten list for 1998 - in its place came Spain, mainly due to the entrance of the Zara retail chain in 1998.
Spanish companies seem to be putting much energy into planning their Argentine strategies, thus one should expect much stronger Spanish importation in the near future. Some Spanish manufacturers/retailers who are already establishing themselves in the market or plan to do so in the near future are: Adolfo Domiguez (1998 in exclusive shopping center, Patio Bullrich and the Unicenter Complex), Punto Fa, Mango, Daniel Hechter, El Corte Ingles, Purificacion Garcia, Viriato, Caramelo, Roberto Verino, Dex (holding of 4 Spanish firms) and a few others. These enterprises are supported by the Galicia Textile Association in Spain.

Competition from the numerous Argentine brands, Spanish producers and retailers, the Dutch C & A, Chilean Falabella and Normandie, German Etam and the private equity funds textile groups is enough to invite and challenge many American companies to enter the Argentine market.
Locally-based U.S. competitors
The following is a list of some U.S. and other foreign name brands already present in the Argentine market (many of these under a license agreement): Adidas, Benetton, Calvin Klein, Christian Dior, Gloria Vanderbilt, Guess, Lacoste, L.A. Gear, Le Coq Sportif, Lee, Levi Strauss, Maidenform, New Balance, Pierre Cardin, Polo Ralph Lauren, Speedo, Stefanel, Walmart, Walt Disney, Warner Brothers, Wrangler and Yves Saint Laurent.
END USERS

Argentine domestic demand for apparel corresponds to around 36.2 million persons and of this total, 68 percent (25 million) can be considered urban residents (in 54 cities with over 50,000 inhabitants). One half of the total population is found in the seven cities and corresponding suburbs of Buenos Aires, Cordoba, Rosario, Mendoza, La Plata, San Miguel de Tucuman and Mar del Plata. One-third of Argentines live in Buenos Aires and its suburbs.

A survey carried out in 1997 by INDEC (National Census Board), with data available for the Metropolitan area of Buenos Aires, reveals that families devote 5.7 percent of their income to purchasing garments and shoes.

It is said that the cost of living is relatively high in Argentina compared to salaries. Around 17.3 million people earn some type of income. Of this group, 48.5 percent earn less than $400 a month, 37 percent earn between $400 and $900 and the rest, i.e. 14.5 percent, earn more than $900, with an average wage of $1,700 per month.

In the past 10 years, there has been strong job growth in management and technical positions. These consumers mainly purchase elegant casual or formal wear. However, working clothes or uniforms are very common for many jobs, and in addition, school children generally wear uniforms.
Buenos Aires, the "Paris of the South"is every bit as dressy and fashion conscious as Milan, Paris, New York or Hong Kong, although it tends to appreciate traditional formality rather than avant-garde experimentation. Initial business and social impressions for both men and women are based largely on dress, starting with shoes and moving up.
Men wear stylish medium weight wool suits during the winter months. In summer, men change to tropical weight woolens and cottons. For any season, dark conservative colors are the most popular. The U.S. casual dress code for Fridays in the office is becoming more common.
Simple elegance is the impression for which professional women strive in the workplace, with conservative colors and styles for their wool or silk suits and dresses. Trousers or pants suits have been becoming more popular lately. Professional working women of all ages look for elegant but practical clothing, not readily available in Argentina.

For the winter months (June to August), both genders need warm clothes and topcoats. Central heating is uncommon in older homes and office buildings. For weekend get-togethers, barbecues and outings, a good sense of style and conservative dress is key. Casual wear still is not so casual in Argentina. In urban areas, shorts are generally not worn except on the way to participate in a sport or go to the gym. Swimsuits are noticeably more conservative than those worn by either gender in Brazil (or Europe).

As in many countries, teenage apparel in Argentina sells very well. Adolescents are prone to shop every two weeks, looking for that new outfit. Brand name is very important to this sector as 60 percent of purchases go to acquiring favorite brands. Lately, baggy clothes, typical of U.S. teens, have become popular for the Argentine youth, and t-shirts, baseball caps and logos in English have been traditional favorites.

According to industry sources jeans sales account for 21 percent of the market and general feminine apparel takes 35 percent of the market share.
BEST SALES PROSPECTS
Following liberalization and the resulting outward-looking view toward fashion, a new group of market-oriented vendors has emerged (manufacturers/importers selling only to their exclusive retail chains). These companies are targeting the middle and upper-class markets and selling imported goods successfully. The best prospects for U.S. suppliers will be to focus on: direct sales to these Argentine marketers; direct sales to or establishment of department stores; investing in or establishing a wholly-owned local clothing retail chain; or investing in an already established manufacturing company.
Since each market has its competitive advantage concerning Argentine imports (China/Brazil/Uruguay/Italy/Spain - across the board consistent imports, Myanmar - men's shirts, Colombia - women's bras, Sri Lanka - gloves, India - women's blouses and scarves, etc.), it is interesting to note what the U.S. suppliers have been strong in. "Across the board imports"characterize U.S. imports; of 35 apparel HS Codes, the U.S. is present in only six top ten lists. (Please refer to the U.S. imports section)
Between fashion products and mass market budget products, there is a gap in which firms from the U.S. can find opportunities and their niche markets. Some hot items for the Argentine market are men's and women's elegant casual apparel; children's and adolescent's casual clothing; sportswear; and various knits.

There are many new clothing chains operating in this market. Franchisers of apparel, mainly casual and sportswear may study Argentina and the potential it has to offer. MARKET ACCESS
Because European exporters and clothing companies generally have a better knowledge of and a longer tradition within the Argentine market, U.S. suppliers will need to be imaginative and flexible to increase their market share.

The local textile industry is looking to better protect its domestic market and will continue to press for more rigid import regulations, especially concerning low priced Asian imports. Since imports originating in MERCOSUR-member countries enter Argentina free of duties, extra zone imports are at a disadvantage for competing on price. Therefore, U.S. firms should concentrate on other competitive advantages, or consider other entry strategies, such as joint-ventures with local firms.

Import Duties and Taxes
Apparel enters the Argentine market under the Mercosur Common External Tariff of 23 percent. Parallel to this tariff, an average 14.7$/Kg variable specific duty (DIEM) is levied for apparel (thus whichever is higher, the 23 percent or the DIEM is applied).
DIEM - Specific Duties: Following the opening of the Argentine economy in 1991, the first specific duties for apparel (DIEM) were established in 1993, thus slightly reducing the volume of imports. According to WTO regulations, all apparel imports from member countries are subject to a maximum limit of 35 percent ofthe value of the imported goods. The importer pays the higher of the two calculations: FOB value (Extra Zone - 23 percent) or weight (DIEM). DIEMs vary according to the product (ranging between $2 and $20 per kilo) however, one should expect to pay around 35 percent in import tariffs. An example of a maximum duty is $30/kilo for silk ties. The 35 percent maximum tariff rate is being followed in the textile industry, except for example concerning sports shoes where $7 is added per pair under certain quotas and outside these limits, the price is doubled. Footwear imports are heavily regulated and highly taxed in Argentina and still under debate at the WTO. Duties and commercialization mark-ups remain relatively high for apparel in Argentina, with end users paying even an extra 200-300 percent mark-up. (See Appendix A - Illustrative Study of Import Costs)
MCET EZ DIEM SF IZ
23% 23% 13.05% 0.5% 0%

MCET: MERCOSUR Common External Tariff; EZ: Extra Zone (applicable to U.S. products); DIEM: Specific Duty for apparel (variable per kilogram); SF: Statistics Fee (applicable to all imports, excepting capital goods); IZ: Intra Zone (applicable to MERCOSUR-member countries)

Import Restrictions
Argentina has restricted imports of used clothing and textiles, closeouts, irregulars, new and used rags, and scrap cordage of textile material wastes.

Pre-Shipment Inspection
Pre-shipment inspection requirements apply for imported goods over $800. Please refer to our Country Commercial Guide for further details.
Labeling Requirements for Textile Products
The Argentine law that establishes the labeling requirements for textile products (HS Codes 5700 to 6400) in Argentina is Resolution 26/96 of the Better Business Bureau (Direcci—n de Lealtad Comercial), under the Secretariat of Industry, Ministry of Economy. This body's mission is to assure the transparency of business transactions. It states and ensures that product labeling includes all the information that the customer needs and that information is true and valid. The main effect of this resolution was to prevent European end-of season clearance sale dumping into the market. Since Argentina is in the Southern hemisphere and favors European fashion, it was the ideal market in which to send all end-of-season products.
The current resolution states the general and basic labeling requirements for domestic or imported textile products, as follows:
All textile products sold in Argentina will bear the following information in Spanish on a printed label sewn into the top of the garment (information can be distributed in various labels if needed or so desired):
1. Components - Clearly list all fiber percentages in order of importance (not including accessories). The Spanish words "puro"or "todo"(pure or all) can be used if the product is 100 percent one fiber. The words "Otras fibras"(other fibers) can be applied to a group of fibers under 10 percent of the product total weight.
2. Country of Origin - This part can be in foreign language, if the meaning is obvious, i.e. Made in USA, Fabricazione Italiana, etc.
3. Name of Importer - List name, address and social security number (CUIT), (name of exporter is optional).
4. Number of Affidavit of Components (DJCP) - assigned by the Argentine Secretariat of Foreign Trade.
5. Care Instructions:
a) Cleaning - by hand, washing machine or dry cleaning (temperature)
b) Drying - by machine or natural
c) Ironing - temperature
d) These instructions can be represented by symbols, however (until otherwise mentioned) with a Spanish explanation legend.

The resolution allows the affidavit number to be replaced with an alphanumeric code set as follows: the letter "v"followed by five digits; the first three digits correspond to the code of the exporting country and the last two digits identify the exporters. There is no expiration date for this alphanumeric code.

In the case of a set, i.e., a suit or a pair of shoes, labels shouldbe sewn in each piece of the set. This resolution also indicates what documents require approval by the Secretariat before products can be removed from Customs.

The metric system is used in Argentina. Sizes are identified both as small, medium, large and extra-large, and by European size numbers. They should also be stated on the label(s).

Certificate of Origin
According to Resolution 39/96, imports of fabrics, items of clothing and footwear included in Chapters 51 to 64 of the Mercosur Harmonized System (NCM), must present a certificate of origin pursuant to the terms of Resolution 763/96 as of December 1, 1996. Besides facilitating accurate statistics gathering, this measure helps prevent excess triangulation of low-priced Asian products. Each shipment is required to include a certificate of origin issued by a Chamber of Commerce and then stamped by an Argentine Consulate. General practice is that the U.S. company obtains a certificate from a local Chamber of Commerce in a State (such as Florida) where there is an Argentine Consulate, to speed up the process. There is no pre-approval of future shipments and each certificate of origin is valid for six months.

Certificates of origin come in no predetermined special form; however, included, in Spanish or English, should be the following information:
6. Declaration of manufacturer, final producer or exporter, clearly indicating in what country was the product manufactured/obtained or the last country in which the product was substantially transformed (changing its essential character).
7. If the product has been transformed, the original country certificate of origin should also be attached.
8. Name, address, country, telephone and fax of the person or company who is filling out the declaration.
9. Product/merchandise denomination.
10. Port or place of transport loading.
11. Type of transport.
12. Quantity and unit of measure of merchandise.
13. Importer in Argentina
14. U.S. Certifying authority - name, address, country, telephone and fax
a) Public authority - name, address, country, telephone, and fax
b) Private authority - date of authorization to perform service and what public organization gave such authorization.

Samples
A certificate of origin is not required for samples of a value lower than $100. On average, textile samples amount to $20-30. There is no limitation in terms of volume if it is sent through regular airfreight; however, there would be a limitation if sent through Federal Express, for example. This limitation is stipulated by the dispatching company.
CONTACT INFORMATION

Liliana Paz
Apparel Sector Specialist
Commercial Service Buenos Aires
U.S. Embassy, Buenos Aires, Argentina
Phone: 54-11-4777-4533 ext. 2409
Fax: 54-11-4777-0673
E-Mail: liliana.paz@mail.doc.gov

APPENDIX A

Illustrative Study of Direct Import Costs
This example shows the case of the maximum import rate being applied to 10 kg (net weight) of apparel products.
DIRECT IMPORT COSTS (USING A TARIFF OF 23%)
FOB Base Price$1,000.00
Freight (8%) $80.00
C&F $180.00
Insurance (1.5%) of C&F (*) $16.20
Dutiable Base = CIF$1,096.20
Import Duty (23%) (*) @$252.13
Statistics Tax on CIF (0.5%) $5.48
DIEM (14.7 $/kg) @$147.00
Maximum applicable amount (35%) @$383.67
SUBTOTAL (Statistics tax+import duty)@$257.61
VAT Base$1,353.81
VAT (21%)$284.30
VAT (Additional) (10%) $135.38
Advanced Profits Tax (3%) $40.61
SUBTOTAL (After tax)$1,814.10
Port Costs (approximately 6% of CIF) (*)(**) $79.58
Customs Broker Fees (1.5% of CIF) (**) $19.90
Bank Charges (2.0% of FOB)(*)(**)(***) $20.00
LANDED COST$1,933.58
(*) Average. Actual costs depend on type of merchandise, mode of transportation (air or ocean), and the value/weight or volume ratio. Please consult a freight forwarder, an insurance company, a port terminal or a customs broker for exact costs.

(**) These amounts include 21% VAT (value added tax), charged on these services.

(***) Bank charges assume letter of credit.
@) The larger amount of Import duty of 23% vs. DIEM applies. DIEM values can be applied up to a maximum of 35%. In this case, the import duty is applied since it is larger than DIEM.

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: ARGENTINA
Industry: Apparel
Pages: 45
Delivery: 7-12 Business Days
SKU: infre0000299