The following research report contains market research, analysis, statistics and business intelligence relating to research on Textile Machinery & Fabrics In Honduras.

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ABSTRACT
With the passage of a 1998 law that designates the entire country a Free Trade Zone (FTZ) and private industry construction of industrial parks equipped with advanced technology and up-to-date infrastructure, Honduras offers textile manufacturers one of the more exciting investment packages in the hemisphere.
Honduras hosts some of America's most successful apparel manufacturers. They produce brand-name items in fashion wear, lingerie, sports wear and casual wear. The apparel industry has tremendous potential for expansion due to the combination of inexpensive and experienced labor, a solid managerial base, and quota access to the US. Some of these companies are Fruit of the Loom, Sara Lee Knit Products, Bestform, Oshkosh B'Gosh, Kellwood Industries, Maidenform, Dickies, Hanes, Gap, Outer Banks, Gildan Activewear, Wrangler, and other prestigious manufacturers.
The Trade and Development Act of 2000 (Caribbean Basin Trade Development Act) promises to double exports and employment generation in the Honduran apparel assembly industry over the next four years. According to the Honduran Apparel Manufacturing Association (HAMA), the CBI Act makes the country more attractive to maquiladora investment, construction and expansion of industrial parks, and importation of tax free textile machinery, equipment, and accessories. Although the Honduran textile manufacturing industry is still relatively small, local textile manufacturing companies will benefit from the new CBI legislation by supplying locally produced knit fabric to maquilas as well as from being able to import tax free U.S. made yarn, fabrics, and dyes to manufacture and process textile products used in the apparel assembly industry. The law took effect on October 1, 2000, and will remain valid through September 30, 2008, or until2007, the year slated for the launch of the Free Trade Area of the Americas (FTAA).

Today Honduras is the largest single textile exporter in the Caribbean Basin. The U.S., Taiwan, Korea and Hong Kong are among the countries investing in the Honduran apparel assembly industry. Honduras has recently increased efforts to enter the European Union market (EU). Europe demands better quality and environmental standards than the United States, and Honduras will have to make strides to meet these expectations. The industry expects to grow by an average of 20% annually for the next three years.

According to HAMA, Honduras exported $325.0 million in assembled garments to the United States in 1999. Honduras exported $1.1 billion in apparel alone. Textile manufacturers import yarn from the United States or buy Honduran-produced yarn, because Central America produces little. Nicaragua and Honduras are the two countries that grow the most cotton in the region, but Honduran cotton has a short fiber, which limits its uses. Several companies are manufacturing full package garments. Although some companies have to buy the fabric, they retain control of production and can offer a finished garment to the stores. Such companies are few compared to maquila factories - most of which produce under 807 - but the tendency to offer full package is growing. When labor conflicts have arisen due to cultural differences, the Government of Honduras (GOH) has offered management counseling.
MARKET TRENDS

The 1998 law declaring Honduras a Free Trade Zone (FTZ) - which allows investors to invest anywhere in the country rather than just in a designated area, as before - and the enhanced Caribbean Basin Initiative (CBI) law has helped to attract foreign textile investment. 1998's disastrous Hurricane Mitch had little impact on maquila operations. As the country's major employer, the apparel industry is playing a key role in the rebuilding process.

A company that locates in a FTZ, Industrial Park or Export-Processing Zone (EPZ) can be privately owned and is exempt from payment of import duties on goods and capital equipment, charges, surcharges, selective consumption taxes, and sales taxes. In addition, the production and sale of goods within these areas are exempt from Honduran federal and municipal taxes. Firms operating in these zones are exempt from income tax for 20 years and municipal taxes for 10 years, and there are no controls or restrictions on the use of foreign exchange or the repatriation of capital profits. The movement of imported components and exported products is handled with a minimum of paperwork and is normally done within hours. Shipping times to the United States are just two hours by air and 48 hours by sea.

Currently, there are more than 30 EPZ's in Honduras, with more than 5,000 employees working in each. Most EPZ's are conveniently located in San Pedro Sula, La Lima, Choloma, and Villanueva, near the Honduran deep-water port of Puerto Cortes, which is the closest major port to Miami in all of Central America. EPZ's provide maintenance of streets and green areas, security services, and waste management. They have made sure that manufacturers have uninterrupted and abundant water, electricity, and telecommunication services. They can also provide a range of other important services, like employee screening and training, cafeterias, medical facilities, day care centers, post office, banks, and on-site customs clearance. Firms operating in the EPZ must grant workers all benefits established by Honduran labor legislation.

According to industry representatives, some of the benefits resulting from the CBI enhancement are an expected doubling of direct industry employment, expansion of existing and construction of new factories, decentralization of the industry from the San Pedro Sula area to cities in other regions of the country, increased air shipments of maquila products, and expansion of the Honduran textile producing capacity. The Honduran market for textile machinery, fabric, and accessories shows a very promising future for U.S. exporters/manufacturers.

Honduras has no local production of textile machinery and parts. As a result, the local market will continue to depend largely on imports.
Statistical Data (U.S. Million Dollars) - Fabrics Estimated
1999 2000
2001
Import Market 49.1
58.9 70.6
Local Production - -
-
Exports 4.6 5.5
6.6 Total Market 44.5
53.4 64.0
Imports from the U.S. 28.9
34.6 41.5
Note: Total Market equals Imports plus Local Production minus Exports.

Fabrics Import Market Share:
United States 51%
El Salvador 11%
Panama 7%
Guatemala 4%
Mexico 4%
Korea 4%
China 4%
Hong Kong 2%
Taiwan 2%

Statistical Data (U.S. Million Dollars) - Machinery and accessories
Estimated
1999 2000
2001
Import Market 13.2
15.8 18.9
Local Production - -
-
Exports - - -
Total Market 13.2
15.8 18.9
Imports from the U.S. 5.2
6.2 7.5
Note: Total Market equals Imports plus Local Production minus Exports.

Machinery and Accessories Import Market Share:
United States 40%
Italy 39%
Switzerland 5%
China 3%

1999 2000
2001
Exchange Rates 13.54
14.56 Estimated Future Inflation 10%

Employment Generation 108,890 130,668 156,800

Source: Statistics 1999 obtained from Central Bank of Honduras and Ministry of Industry and Trade.
IMPORT MARKET

As a result of the economic structural reform program implemented by the GOH, import duties have been reduced to a maximum of 20 percent for all products. Another reduction of import duties is expected throughout the Central American region. A 12 percent value added tax and a 0.5-1.5 percent tariff is also applicable for some imported products. The Presidents of Central America recently signed a treaty to reduce and unify all regional import duties.

Textile machinery and parts used by local apparel producers are usually imported directly from the U.S., Italy, Germany, Switzerland, and Spain. Most raw materials used by the local industry, including colorants, and chemicals, are imported from manufacturers in the United States, Germany, and Switzerland.

Applicable duty rates for textiles (fabrics) are as follows:

Code Product HS Import Duty
59021000 Fabrics manufactured for pneumatic nylon 1% + 0.5% 55151100 Synthetic fibers mixed with rayon 20% + 0.5%
54075200 Other fabrics with textured polyester dyes 20% + 0.5%
59031000 Impregnated fabrics with polyurethane 15% + 0.5%
55132100 Other taffeta fabrics with discontinuous dyes made
of polyester fibers 20% + 0.5%
55161400 Fabrics with artificial fibers
20% + 0.5%
52094200 Cotton fabrics with 85% denim 20% + 0.5%
51121900 Other fine wool fabrics 20% + 0.5%
Note: A 12% sales tax is levied on all imports and many domestic goods.
Applicable duty rates for textile machinery and accessories are as follows:

Code Product HS Import Duty
8445130000 Drawing or roving machinery 1% (no sales tax applied)
8445200000 Textile spinning machines 1% (no sales tax applied)
8445300010 Textile twisting machines 1% (no sales tax applied)
8445400000 Textile winding or reeling machines 1% (no sales tax applied)
8446100090 Weaving machines 1% (no sales tax applied)
8447111000 Hosiery knit machines
1% (no sales tax applied)
8448399000 Parts & accessories of machines 1% (no sales tax applied)
8448515000 Sinker, needle & other articles 1% (no sales tax applied)
8448591000 Parts of knitting machines 1% (no sales tax applied)
8451900010 Parts, machines for wash, dry-clean, iron, and press
1% (no sales tax applied)
8451900020 Parts machines for bleach, dry, washing, or cleaning 1% (no sales tax applied)

Aside from the apparel assembly industry, there are several wholesalers and small size stores importing fabrics for local production of textile products. Fabrics made in the U.S. have a high level of recognition and acceptance among consumers. This tendency will continue because local manufacturers tend to create new designs slowly and to offer fabrics at comparable quality.
B. COMPETITION

The United States is the largest supplier (40% of imports) of textile machinery and accessories to Honduras. It controls 40 percent of imports. Other important competitors in this sector are Italy (39%), Switzerland (5%), and China (3%). The total market for textile machinery and accessories in Honduras for 1999 is US$13.2 million. A 20% annual growth rate in the next four years is anticipated.
The United States is also the largest supplier of fabrics in Honduras, controlling 51 percent of the import market. Other important competitors in this sector are El Salvador (11%), Panama (7%), and China, Korea, Guatemala, and Mexico (4% each). The total market for fabrics in Honduras for 1999 is US$ 44.5 million.
Apparel assembly investment in Honduras is distributed in the following way:

Origin No. of Companies Percentage
United States 82 41
Honduras 57 28
Korea 29 14
Hong Kong 10 5
* Others 23 12 _________________________________________
Total 201 100

* including joint ventures.

Local producers of fabrics do not compete directly against U.S. producers / exporters of similar products. However, a few local firms have developed a small-size industry that produces for the local and export markets, especially Central America. With CBI enhancement benefits, some of these companies may begin to import U.S. made yarns to produce fabrics for factories located in EPZs.
C. END-USERS

Considering all factors that will stimulate the fast growing textile industry in Honduras, end-users for textile machinery and fabrics are full-package factories located in EPZ, local textile mills, wholesale importers, and distributors.

Honduras has two main cities: Tegucigalpa, the capital city, and San Pedro Sula, the commercial and industrial capital. A large number of EPZ's are located in San Pedro Sula, La Lima, Choloma, and Villanueva, near the Honduran deep-water port of Puerto Cortes. CBI enhancement benefits will allow the decentralization of the apparel industry established in the Cortes area to cities in other regions of the country, like Tegucigalpa, Amarateca, Comayagua, and Choluteca.

Companies interested in entering the market should be aware that the most important factors that determine a successful sale in Honduras are the price and quality of the machinery, and after sale service. Honduran importers have traveled to the U.S. and/or have done business with U.S. companies. A reliable local partner / representative can be very valuable in providing U.S. companies with market information on a regular basis, as well as performing follow-up services.
SALES PROSPECTS

The best sales prospects for the next four years are:

Fabrics:
Harmonized Code Product
59021000 Fabrics manufactured for pneumatic nylon
55151100 Synthetic fibers mixed with rayon
54075200 Other fabrics with textured polyester dyes
59031000 Impregnated fabrics with polyurethane
55132100 Other taffeta fabrics with discontinuous dyes made
of polyester fibers
55161400 Fabrics with artificial fibers
52094200 Cotton fabrics with 85% denim
51121900 Other fine wool fabrics

Textile Machinery:
Harmonized Code Product
8445130000 Drawing or roving machinery
8445200000 Textile spinning machines
8445300010 Textile twisting machines
8445400000 Textile winding or reeling machines
8446100090 Weaving machines 8447111000 Hosiery knit machines
8448399000 Parts & accessories of machines
8448515000 Sinker, needle & other articles
8448591000 Parts of knitting machines
8451900010 Parts, machines for wash, dry-clean, iron, and press
8451900020 Parts of machines for bleach, dry, washing, or cleaning
D. MARKET ACCESS

The civil and commercial codes, Supreme Decree 549, Official Register (La Gaceta) No. 22366, of December 7, 1977, govern the principal-agent relationship in Honduras. This law, entitled "Law of Agents, Distributors and Representatives of National and Foreign Enterprises," it includes a penalty provision for wrongful termination that discourages exclusive distribution agreements. Principals may not terminate the contract without just cause, unless they fairly compensate the agent for damages suffered. Only Honduran nationals or Honduran legal entities registered with a local chamber of commerce and the Ministry of Industry & Trade may represent foreign firms. It is therefore that U.S. companies enter into non-exclusive distribution agreements.

Foreigners exporting to Honduras are not required by law to sell through an agent or distributor, except when selling to the government. Although a U.S. firm may export directly to Honduran companies, appointing a local agent, representative, or legal advisor is strongly recommended to help with import procedures, sales promotion and after-sales service. Independent intermediaries are especially important for smaller companies, as their knowledge of the market and of the relevant business customs and practices adds to the strength of the U.S. manufacturer/exporter. U.S. companies are advised to evaluate local prospects in terms of the services and benefits provided, considering factors such as location, financial strength, quality of the sales force, warehousing facilities, reputation in the market, outlay on advertising, product compatibility and overall experience.
A recession and severe damage suffered by businesses during Hurricane Mitch have resulted in a loss in purchasing power. However, the next three years should see a steadily improving economy. Payment options vary from open account to prepayment. Foreign suppliersoften grant credit for 30 to 90 days to preferred customers. It is a common practice to make prepayments when companies are beginning their trade relationship. Honduran importing companies maintain lines of credit to facilitate international trade transactions.

KEY CONTACTS

Honduran Textile Mills:

Textiles Rio Lindo, S.A. de C.V.
Adolfo FacussŽ, General Manager
Col. San JosŽ del Pedregal
P.O.Box: 211
Tegucigalpa, M.D.C.
Tel (504) 245-5411/10
Fax (504) 245-5433

Hilos y Mechas, S.A. de C.V.
Edward Handal, General Manager
20-24 cll., 1-4 ave., Bo. Guadalupe #110. Costado norte de la Cervecer’a Hondure–a.
P.O.Box: 118
San Pedro Sula, CortŽs
Tel (504) 557-3661 / 553-0978
Fax (504) 552-2441 / 552-6549

Hilos Centroamericanos, S.A. de C.V.
Edward Handal, General Manager
1-4 ave., 20-24 cll., Bo. Guadalupe #110. Costado norte de la Cervecer’a Hondure–a.
P.O.Box: 118
San Pedro Sula, CortŽs
Tel (504) 557-3661 / 553-0978
Fax (504) 552-2441 / 552-6549

Textiles Red Point de Honduras, S.A. de C.V.
Victor Adolfo Ham, General Manager
20 cll., 7 ave., Bo. La Guardia, atr‡s de la Pepsi-Cola.
P.O.Box: 643
San Pedro Sula, CortŽs
Tel (504) 556-8484 / 556-8476
Fax (504) 556-8873

Industria Textil Centroamericana, S. de R.L. de C.V.
Francisco Alfredo Campos, General Manager
Callejon El Obrero, atr‡s de la Fosforera, #1655. Segunda entrada Col. Country Club.
P.O.Box: 719
Tegucigalpa, M.D.C.
Tel (504) 227-3009/ 227-9230
Fax (504) 227-1133

Manfacturera Textil, S. de R.L. de C.V.
Antonio Kattan, General Manager
Crr. a La Lima Km.4, fte. 5ta etapa de la Col. SatŽlite, Edificio Lee Cooper.
P.O.Box: 2265
San Pedro Sula, CortŽs
Tel (504) 559-8301/ 559-8517/ 559-8519/ 559-1182
Fax (504) 559-8182

Textile Associations:
National Association of the Textile Industry (ANDITEX)
Adolfo FacussŽ, President
Col. San JosŽ del Pedregal
P.O.Box: 211
Tegucigalpa, M.D.C.
Tel (504) 245-5411/ 245-5410
Fax (504) 245-5433
E-mail: riolindo@netsys.hn

Honduran Apparel Manufacturers Association (HAMA)
Jesœs Canahuati, President
P.O. Box: 2658
San Pedro Sula, CortŽs
Tel: (504) 552-4140
Fax: (504) 552-4150
E-mail: ahm@netsys.hn Http://www.netsys.hn/~ahm
Asociaci—n de Zonas Francas de Honduras (AZAFRANCAH)
Fernando Alvarez, President
P.O. Box 3973
San Pedro Sula, CortŽs
Tel. (504) 554-2772 / 554-2776
Fax (504) 554-0466

Trade Associations:

Honduran American Chamber of Commerce (AMCHAM)
Jacqueline Foglia, President
Tania Lazarus, General Manager
P.O. Box # 1838
Tegucigalpa, M.D.C.
Tel: (504) 232-7043
Fax: (504) 232-2031

Chamber of Commerce and Industry of Tegucigalpa (CCIT)
Antonio Tavel Otero, President
P.O. Box # 3444
Tegucigalpa, M.D.C.
Tel: (504) 232-8110
Fax: (504) 232-0159

Chamber of Commerce and Industry of Cortes (CCIC)
Emil Hawit, President
P.O. Box # 14
San Pedro Sula, Cortes
Tel: (504) 553-0761, 557-1666
Fax: (504) 553-3777

International Chamber of Commerce (INTERCHAM)
Issa Antonio Jaar, President
P.O. Box # 4548
San Pedro Sula, Cortes
Tel: (504) 557-4994, 557-5656
Fax: (504) 557-4994

Federation of Chambers of Commerce and Industry of Honduras (FEDECAMARA)
Luis Ernesto T‡bora, President
c/o Tegucigalpa Chamber of Commerce
P.O. Box # 3393
Tegucigalpa, M.D.C.
Tel: (504) 232-1870, 232-6083
Fax: (504) 232-1870

Foundation for Investment and Development of Exports (FIDE)
Norman Garc’a, President
P.O. Box # 2029
Tegucigalpa, M.D.C.
Tel: (504) 232-9345, 232-9105, 232-9098, 232-9099
Fax: (504) 239-0766

Chamber of Commerce and Industry of Puerto CortŽs
Carlos Izaguirre, President
P.O.Box # 233
Puerto CortŽs, CortŽs
Tel (504) 665-1365, 665-2174
Fax (504) 665-1365

Chamber of Commerce and Industry of Choloma
Zenio Pagan Medina, President
Col. San Carlos, salida a Ticamaya instalaciones Guarder’a Infantil No. 1
Choloma, CortŽs
Tel (504) 669-3892
Fax (504) 669-1667

Chamber of Commerce and Industry of El Progreso
Jorge Gabrie Solim‡n, President
P.O. Box # 95
El Progreso, Yoro
Tel (504) 666-4403, 666-0392
Fax (504) 666-1313

Chamber of Commerce, Industry, and Tourism of Cop‡n
JosŽ Raœl Welchez, President
Parque Central Cop‡n Ruinas
Copan Ruinas, Cop‡n
Tel (504) 651-4070, 651-4071
Fax (504) 651-4477

Chamber of Commerce and Industry of La Ceiba
Patricia de Laffite, Executive Director
P.O. Box # 1129
La Ceiba, Atl‡ntida
Tel (504) 443-0069
Fax (504) 443-1324 / 443-0069

Chamber of Commerce and Industry of Tela
Rosendo Garay Garc’a, President
4 ave., 8-9 cll. NO Bo. El Centro Edificio 845
Tela, Atl‡ntida
Tel (504) 448-2754
Fax (504) 448-2754

Chamber of Commerce and Industry of Choluteca
Lourdes Guevara, Executive Director
P.O. Box # 125
Choluteca, Choluteca
Tel (504) 882-0660, 882-7705
Fax (504) 882-2858

List of U.S. Companies in the Apparel Industry:
807 Industries (CMT Blues)
ABBA Apparel
ADHESA
AKH
American Technologies International
American Apparel Corporation Honduras
Avent Inc.
Best From Foundation Inc.
Blue Bell
Blue Pilot
Buster Brown Apparel Inc.
Cambridge Textile
Cash
Co-Man Corporation
Confecciones Dos Caminos
Confecciones Monzini
Confecciones Perry de Honduras
Cross Creek
Delta Apparel
Dickies de Honduras
E.H. Manufacturing
El Porvenir Manufacturing
Fivaro
Garan de Honduras
G-Tees Apparel Group
Golden Eagle Trading
Guantes Sure–os
Hamlet Manufacturing
Hanes Choloma
Honduras Manufacturing
Hugger de Honduras
Industrias Cortes
Industrias del Valle
Industrias Lanier
J.E. Morgan de Honduras
Jasper Honduras
Jerzees de Honduras
Jockey de Honduras
Jogbra de Honduras
Karim's Fashion
Kelwood Co.
KWC de Honduras
Land Apparel
LAVATEX Finishing
Lexi Aren
M. Fine & Sons Manufacturing Co.
Mainta
Makress
Manufacturas Hondure–as
Manufacturas Villanueva
Manufacturera Ceibe–a
Manufacturera Cortez
Manufacturera ELCA
Mass Power Industry
Modas Buena Vista
Modas Hondure–as
N.Y. Knitwear
New Holland Lingerie
Olga de Villanueva
Osh Kosh B'Gosh
Paxar de Honduras
Petralex
Pindu Ltd.
Productos Industriales
Productos San Jose
Productos Textiles
QR Fashion
Red Kap Industries Honduras
Renfro Corporation
Sale City Manufacturing
Sara Lee Intimates
Silver Cortes
Silvera Honduras
Skip's de Honduras
Soigne International
Southern Textile Knitters de Honduras
Southern Apparel Contractors
Spencer's de Honduras
Tropic Wear
Unitog Co.
Warner's de Honduras
Winners Manufacturing
Wrangler
Wundies de Honduras
Zarina Industries

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: Honduras
Industry: Textiles
Pages: 45
Delivery: 7-12 Business Days
SKU: infre0000305