VZCZCXYZ0030
PP RUEHWEB

DE RUEHSG #2103/01 2791811
ZNR UUUUU ZZH
P 061811Z OCT 06
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC PRIORITY 0118
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS SANTIAGO 002103 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/TPP/ABT - THOMAS LERSTEN 
COMMERCE FOR ITA/OTEXA - MARIA D'ANDREA 
STATE PLEASE PASS TO USTR FOR ABIOLA HEYLIGER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KTEX CI
SUBJECT: CHILE - UPDATED STATISTICS FOR TEXTILES AND APPAREL SECTOR 
 
REF: STATE 138090 
 
¶1.  Per reftel, Post provides the following data for textile and 
apparel production in Chile in 2005. 
 
TOTAL INDUSTRIAL PRODUCTION IN USD VALUE 
------------------ ---------------------- 
 
¶2.  Total industrial production for 2005 reached USD 19.4 billion, 
and USD 10 billion for the first semester of 2006.  According to 
SOFOFA, Chile's Chamber of Commerce and Industry, industrial 
production increased 1.5 percent in July 2006 over July 2005.  Total 
production for the first 7 months of 2006 grew 3.6 percent. 
Industrial production represented 17.7 percent of Chile's total GDP 
in 2005. 
 
TOTAL TEXTILES AND APPAREL PRODUCTION IN USD VALUE 
---------------------- ---------------------------- 
 
¶3.  Textiles and apparel production totaled USD 694 million in 2005 
and USD 262 million during the first half of 2006.  The textile and 
apparel production constituted 4 percent of Chile's total industrial 
production in 2005. 
 
TEXTILE AND APPAREL SHARE OF CHILE'S IMPORTS AND EXPORTS 
--------------------------- ---------------------------- 
 
¶4.  Chile's total exports for 2005 were USD 38.9 billion of which 
USD 14.4 billion were industrial exports.  Textile and apparel 
exports totaled only USD 193 million.  Industrial exports 
represented 37 percent of Chile's total exports for 2005.  Textiles 
and apparel represented only 1.3 percent of total industrial exports 
and 0.5 percent of Chile's total exports.  Chile's imports during 
2005 totaled USD 32 billion; of that, USD 23.9 billion were 
industrial imports.  Textile and apparel imports totaled USD 1.5 
billion in 2005 representing 6.2 percent of total industrial 
imports.  Industrial imports represented 75 percent of Chile's total 
imports of which 4.7 percent were textiles and apparel. 
 
¶5.  For the first half of 2006, total exports were USD 26 billion of 
which USD 8.1 billion were industrial exports.  Textile exports were 
only USD 93 million, equivalent to 0.4 percent of total exports. 
During the same period, Chile imported USD 16.7 billion worth of 
goods of which USD 13 billion were industrial imports.  Textiles and 
apparel accounted for USD 865 million representing 5.2 percent of 
total imports. 
 
EXPORTS IN TEXTILES AND APPAREL TO THE UNITED STATES 
------------------------ ---------------------------- 
 
¶6.  Total Chilean exports to the U.S. in 2005 were USD 6.5 billion 
of which USD 2.9 billion were industrial exports.  Total Chilean 
imports from the U.S. in 2005 reached USD 4.7 billion, of which USD 
4.6 billion were industrial products.  According to Chilean Customs 
Service data, Chile exported to the United States USD 2.7 million 
worth of textile and apparel while imports from the United States to 
Chile totaled USD 11.9 million in 2005. 
 
TOTAL MANUFACTURING EMPLOYMENT 
------------------------------ 
 
¶7.  The manufacturing/industrial sector provided employment for 
776,670 persons during 2005.  There is no disaggregated available 
data per sub-sector. 
 
OTHER QUESTIONS 
--------------- 
 
¶8.  E/POL Specialist met with Mario Garcia, President of Chile's 
Textile Institute, (INTECH) the association of the textiles, apparel 
and shoes industries, in order to get answers to the following 
questions: 
 
-- Are Chile's producers receiving lower prices due to heightened 
international competition? 
 
According to Garcia prices have dropped considerably in order to 
adjust to international competition.  About 60 percent of Chile's 
imports of textiles and apparels are coming from Asian countries, 
predominantly China, at low, typically undervalued prices. 
Therefore profitability for the industry has decreased in light of 
what Garcia calls "unfair competition."  At the same time, the 
energy crisis, mainly caused by the shortage of natural gas from 
Argentina, has increased the cost for the industry between 10-20 
percent. All this together with the strong appreciation of the peso 
has prompted a serious re-structuring of the industrial sector in 
general. 
 
-- Have U.S. and EU restrictions on certain exports of textiles and 
apparel from China affected Chilean export prospects for host 
country manufacturers? 
 
In general terms, the U.S.-Chile Free Trade Agreement (FTA) has 
created a preferential access to the U.S. textile and apparel 
market, providing great benefits for the sector.  According to 
Garcia, since the implementation of the FTA (January 2004), Chile's 
sales to the U.S. have increased about 50 percent, due to the 
immediate tariff elimination for most of the sector negotiated under 
the FTA.  However, U.S. and EU restrictions on China's textiles and 
apparel prompted China to look for alternative markets.  China's 
four to five percent increase in their share of the Chilean textile 
and apparel domestic market has hurt local producers. 
 
-- Has Chile implemented, or is it considering implementing 
safeguards or other measures to reduce growth of imports of Chinese 
textile and apparel products into the country? 
 
During the 1980's economic crisis in Chile, productive sectors were 
strongly affected by the sudden peso depreciation, the opening of 
the economy, and trade liberalization.  Most companies in the 
textiles and apparel industry went bankrupt.  To support the 
re-structuring of the textile and apparel industry the GOC, through 
the National Committee for Analysis of Economic Distortions, imposed 
a tariff surcharge between 10 to 15 percent for all sensitive 
products in the textile and apparel industry.  This affected mainly 
imports from Korea, Brazil, Argentina and Colombia.  This surcharge 
was applied from 1983 to 1993.  The sector was able to grow again. 
However since 1991, the sector has been facing what Garcia terms 
unfair competition from Asian countries that are exporting their 
undervalued products.  About two years ago, the Chilean National 
Customs Service, at the request of INTECH, formed a joint committee 
to analyze cases of undervalued products in order to penalize those 
imports.  INTECH has requested the GOC on several occasions to 
initiate an investigation for safeguards, but according to Garcia, 
there is no political will to do so. 
 
Garcia believes the Chile-China FTA signed in November 2005, and 
recently ratified by the Chilean Congress, will provide for the 
implementation and oversight of proper regulation to protect Chilean 
textile and apparel producers from unfair Chinese competition.  The 
chapter on dispute resolutions and the Regulatory Joint Commission 
provide mechanisms to channel the industry's claims and concerns. 
 
-- Has increased global competition affected local labor conditions 
by causing employers to reduce wages, seek flexibility from 
government required minimum wages, or adversely affected union 
organizing? 
 
Except for one company that reduced by 10 percent some of the 
benefits - not wages - offered to its workers, the industry has not 
decreased wages.  Nor have wages been increased.  Wages in the 
sector have remained the same for the last 5 years, with yearly 
adjustments for CPI. 
 
-- Will Chile remain competitive in textile and apparel given more 
competition? 
 
According to Garcia, competition itself is not the main problem.  It 
is unfair competition in which countries undervalue their product 
making fair competition impossible, the strong appreciation of the 
peso, and the  high cost of energy. 
KELLY