The Brazilian textile and apparel industry – among the top five in the world is reeling under the impact of two challenges – large scale imports and high labour and energy costs. These have created a cascading effect in the form of closures or factories relocating to low-cost near by countries.
As per figures from the Brazilian Textile and Apparel Industry Association (ABIT) the sector has around 30,000 in its fold and posted an annual turnover of around US $63 billion in 2011. It is also the second biggest employment creator in Brazil and represents 10.6 percent of all employees in the Brazilian manufacturing sector.
“The import surge of textile products and especially of apparel is definitely one of main factors that impacted the performance of Brazilian industry in the past few years. Naturally, this surge could only have happened, due to our overvalued currency and therefore we cannot consider it as a fair competition”, informs Mr Aguinaldo Diniz Filho, President of ABIT.
He adds, “At the same time we had an increase in production costs especially in items such as electricity and labor, factors not directly controlled by the manufacturers and therefore harder to absorb and remain competitive”.
In 2009, Brazil imported textiles and clothing worth $2.69 billion and $767.07 million respectively, in 2010 it rose to $3.89 billion and $1.07 billion, in 2011 it further increased to $4.45 billion and $1.72 billion respectively and in the first nine months of 2012 it has reached $3.30 billion and $1.64 billion, respectively.
About government support to tackle the crisis, he says, “The Brazilian Government is aware of the problems faced by the Brazilian industry and they are working hard on a domestic competitive agenda. The necessary measures are not easy to create and implement and many of them will demand time to become effective.
“The Govt agenda is focused on the reduction of costs such as electricity, taxes, basic interest rates, bureaucracy, education and qualification and others. We have a free floating currency and therefore we do not manipulate to be artificially competitive, which differentiates us from our competitors”, he reveals.
On efforts from ABIT to reduce impact of the twin challenges, he explains by saying, “We are working closely with our government. In the short term, we believe that the most important measurers are trade remedies actions to fight against unfair and illegal trade practices.
“In the mid to long term, we believe that the systemic competitive conditions in Brazil will be less disadvantaged allowing us to compete in a more balanced and fair manner with foreign manufacturers, he winds up by saying.
