VZCZCXYZ0029
RR RUEHWEB

DE RUEHBO #0103/01 0282141
ZNR UUUUU ZZH
R 282141Z JAN 10
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 2377
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBJ/AMEMBASSY BEIJING 0009
RUEHBO/AMEMBASSY BOGOTA
RUEHBR/AMEMBASSY BRASILIA
RUEHCV/AMEMBASSY CARACAS
RUEHGT/AMEMBASSY GUATEMALA
RUEHLP/AMEMBASSY LA PAZ
RUEHME/AMEMBASSY MEXICO
RUEHMU/AMEMBASSY MANAGUA
RUEHPE/AMEMBASSY LIMA
RUEHQT/AMEMBASSY QUITO
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEHSG/AMEMBASSY SANTIAGO
RUEHSJ/AMEMBASSY SAN JOSE
RUEHSN/AMEMBASSY SAN SALVADOR
RUEHTG/AMEMBASSY TEGUCIGALPA 0765
RUEHZP/AMEMBASSY PANAMA

UNCLAS BOGOTA 000103 
 
SENSITIVE 
SIPDIS 
STATE PASS USTR 
 
E.O. 12958: N/A 
TAGS: ETRD ECON PREL EIND KTEX CO
SUBJECT: COLOMBIAN TEXTILE INDUSTRY: DYING OR JUST DOWNSIZING? 
 
REF: 09 BOGOTA 239 
 
¶1. (U)  SUMMARY.  Long a cornerstone of Colombia's industrial base, 
the textile/apparel industry has declined in recent years. 
Industry experts point to four primary reasons for the sector's 
dismal performance in 2009: 1) decreased exports, particularly to 
Venezuela; 2) short-term U.S. trade preference extensions and the 
absence of a free trade agreement with the U.S.; 3) the peso's 
revaluation; and 4) increased competition from both contraband and 
legal imports from China.  The GOC and private sector pin hopes for 
the industry's future on an orientation toward global niche 
markets, requiring high degrees of innovation, technology, and 
value added.  END SUMMARY. 
 
 
 
INDUSTRY DECLINE, BY THE NUMBERS 
 
-------------------------------- 
 
 
 
¶2. (U)  Following a difficult 2008 (reftel), Colombian Textile 
Association President Ivan Amaya characterized 2009 as "brutal" for 
the industry, and described Colombian textile and apparel producers 
in 2010 as "survivors."  Production in 2009 fell by 20 percent, and 
the industry, which accounts for 21 percent of total manufacturing 
sector employment, shed some 40,000 jobs.  Antioquia department, 
which accounts for 53 percent of Colombian textile/apparel 
production and 62 percent of exports, was the hardest hit, with 
several factories forced to close.  Following are four principal 
reasons for the industry's woes. 
 
 
 
REASON ONE:  DECLINE IN EXPORTS, PARTICULARLY TO VENEZUELA 
 
--------------------------------------------- ------------- 
 
 
 
¶3. (SBU)  Textile/apparel regularly ranks among the top five 
Colombian exports, and number one when it comes to a significant 
degree of value added.  While overall Colombian exports saw a 14 
percent decline in 2009, textile/apparel exports dropped by 45 
percent.  In 2008, Venezuela bought 65 percent of Colombia's 
textile exports, and Ecuador 10 percent.  Apparel exports to 
Venezuela plummeted 67 percent in the first ten months of 2009 and 
those to Ecuador fell 55 percent during the same period.  GOC and 
industry contacts do not expect to recover the Venezuelan market, 
given the administrative barriers.  However, they hold out hope for 
Ecuador, once balance-of-payments and exchange rate safeguards are 
lifted. 
 
 
 
REASON TWO:  NO FTA; SHORT-TERM ATPA EXTENSIONS 
 
--------------------------------------------- --- 
 
 
 
¶4. (SBU)  Guillermo Valencia, a prominent economist and business 
executive in the textile sector, described Colombia's frustration 
over inaction on the U.S.-Colombia trade agreement with the 
following allegory during public remarks: "We walked for a long 
time on a bitterly cold night, until finally we reached the house 
of a friend.  And that friend refused to open the door for us." 
Industry contacts argue that the lack of the bilateral deal 
 
prevents significant long-term foreign investment in the sector. 
Likewise, they consider that short-term (one-year) Andean Trade 
Preference Act (ATPA) extensions, while better than nothing, do not 
give the certainty necessary for the sector to thrive. 
 
 
 
REASON THREE:  REVALUATION 
 
-------------------------- 
 
 
 
¶5. (SBU)  The Colombian peso has appreciated by 51 percent in 
nominal terms versus the dollar since 2003.  This development has 
taken a toll on all Colombian exporters, and the textile sector is 
no exception.  According to National Association of Exporters 
(Analdex) President Javier Diaz, Colombian exporters have become 
more savvy in the use of exchange rate hedging instruments to 
manage volatility, but the overall upward trend in the peso's value 
has put more inefficient exporters out of business and reduced 
profits for the rest. 
 
 
 
REASON FOUR:  CONTRABAND / CHINESE IMPORTS HURTS DOMESTIC SALES 
 
--------------------------------------------- ------------------ 
 
 
 
¶6. (U)  A recent study ranked Colombia seventh out of nine Latin 
American in per capita clothing consumption.  Amaya attributed the 
relatively low figure to the large amount of uncounted contraband. 
Apparel producers have expressed concern that recently published 
Decree 111 (enacted in response to a WTO case filed and won by 
Panama against Colombia) will allow Chinese imports via the 
Panamanian Colon Free Zone to enter Colombia through any port of 
entry, leading to more contraband clothing.  Likewise, domestic 
producers acknowledge they cannot compete on price with legitimate 
Chinese imports. 
 
 
 
INDUSTRY FOCUSED ON GLOBAL NICHES, VALUE ADDED, FUNCTIONALITY 
 
--------------------------------------------- ---------------- 
 
 
 
¶7. (U)  Having ceded the high volume/low price market to China and 
others, Colombia's textile/apparel producers are turning their 
focus to global niche markets requiring higher degrees of 
technology and value added.  The theme of this year's textile trade 
show "Colombiatex" was "Beyond Conventional, Closer to Functional." 
It featured antibacterial clothing for medical professionals, 
fabrics with "microcapsules" of skin-care products, antimicrobial 
and "quick-dry" athletic wear, and "self-cleaning" fabrics, among 
other efforts to incorporate the latest technology and 
environmentally friendly practices in textile manufacturing. 
 
 
 
¶8. (U) The Ministry of Commerce, as part of its "Productive 
Transformation Program" has identified textile/apparel as one of 
eight priority industries and, in collaboration with the private 
sector, is establishing a work plan to develop it into a 
world-class sector.  The vision is to increase innovation and 
creativity by taking a dispersed sector with a high degree of 
informality and turning it into a technology-based "cluster."  The 
success of this initiative may well determine the long-term 
 
viability of Colombia's textile/apparel sector. 
BROWNFIELD