VZCZCXYZ0000
RR RUEHWEB

DE RUEHPE #3339/01 2761941
ZNR UUUUU ZZH
R 031941Z OCT 07
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 7052
INFO RUEHBO/AMEMBASSY BOGOTA 5147
RUEHQT/AMEMBASSY QUITO 1496
RUEHLP/AMEMBASSY LA PAZ OCT SANTIAGO 1525
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC

UNCLAS LIMA 003339 
 
SIPDIS 
 
SIPDIS 
 
STATE/EEB/TPP/ABT GARY A. CLEMENTS 
COMMERCE/ITA/OTEXA MARIA DANDREA 
USTR CAROYL MILLER 
DEPT FOR WHA/AND, EB/IEP 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
TREASURY FOR AJEWELL AND JLEVINE 
DEPT PASS TO OPIC FOR J BRACHE 
DEPT PASS TO EXIM FOR DON HULTMAN 
 
E.O. 12958: N/A 
TAGS: ECON EINV EFIN PGOV TBIO USTR PE
 
SUBJECT: PERU TEXTILES AND APPAREL EXPORTS GROW 
 
 
¶1.  Summary: Over the last ten years, Peru has made a name for 
itself with its exports of cotton apparel, based on its high-quality 
pima cotton.  In fact, textiles and apparel production is now one of 
Peru's more dynamic export industries.  Major buyers in the U.S., 
such as Gap and Lands End recognize the quality cotton for some of 
their high-margin apparel. Over the last decade and a half, Peru's 
export sector has benefited significantly from the one-way trade 
preferences that the Andean Trade Preferences Act (ATPA), and 
subsequently ATPDEA, have offered Peru since 1990. Locally, the 
industry is vibrant, producing both for local department store 
chains as well as for wholesale in the Gamarra textile area. On the 
export side, companies have specialized in high-end of the casual 
apparel segment and small to medium-sized exporting orders, gaining 
an advantage over volume-based Chinese exports. Local producers have 
nevertheless found tough competition from Chinese apparel imports. 
End Summary. 
 
U.S. TAKES 61 PERCENT OF EXPORTS 
 
¶2.  Textiles and apparel production is a very dynamic yet still 
small sector of the Peruvian economy. Total Peruvian exports in 2006 
were $23.5 billion out of which only 6 percent ($1.4 billion) came 
from the textiles and apparel segment. Nevertheless, total textile 
and apparel exports grew 9.8 percent from 2005 to 2006. Out of the 
total $1.4 billion exported in 2006, exports to the U.S. accounted 
for almost 61 percent of that amount ($853.8 million). The ATPDEA 
agreement has been a major boost for textile and apparel exports to 
the US doubling growth from $403.6 million in 2002 to $853.8 million 
in 2006, an increase of over 110 percent. Most of the growth came 
from the apparel subsector, which almost tripled in growth from 
$390.1 million to $831.8 million (2002-2006). 
 
--------------------------------------------- ------- 
      Peru Exports (in USD millions) 
--------------------------------------------- ------- 
Description          2007    2006  %Share 
         (Jan-Aug)    (2006) 
--------------------------------------------- ------- 
Total Exports     13,646.1 23,498.3 
Textile/Apparel       844.2  1,455.4     6.19 
--------------------------------------------- ------- 
Exports to the US     2,461.0  5,625.3 
Textile/Apparel to US  457.1    853.8   15.18 
--------------------------------------------- ------- 
Source: Adex, SUNAT 
 
¶3. Peru's textile and apparel imports are still relatively small. In 
2006, Peruvian imports amounted to $14.6 billion, out of which 
textiles and apparel made up only 3.38 percent of the total ($494.2 
million). When compared to 2005 import figures ($465 million), 
growth has been slow, at 6.2 percent, despite local industry 
complaints about Chinese competition. Imports from the U.S. totaled 
$2.4 billion in 2006 out of which textiles and apparel accounted for 
a dismal 1.35 percent of that amount (32.4 million). U.S. imports 
consist mainly of the textile sub sector ($30.9 million), which 
accounts for 95.3 percent of total imports from the U.S., most of 
which is wool and short-staple cotton yarns. (Note: Peru's high 
quality pima cotton, used mostly in high margin garments, is 
long-staple cotton). 
 
--------------------------------------------- ------- 
      Peru Imports (in USD millions) 
--------------------------------------------- ------- 
Description          2007  2006   %Share 
       (Jan-Apr)    (2006) 
--------------------------------------------- ------- 
Total Imports     5,308.8    14,619.2 
Textile/Apparel   185.6   494.2     3.38 
--------------------------------------------- ------- 
Imports from the US  888.7 2,400.8 
Textile/Apparel to US  10.8    32.4   1.35 
--------------------------------------------- ------- 
Source: Adex, SUNAT 
 
COMPETING AGAINST CHINA WITH NICHE MARKETS 
 
¶4. Competition on price and volume against China, India, and 
Pakistan has been difficult. Accordingly, many successful companies 
in the textile and apparel industry have developed a specialized 
high-end niche focused on quality and service. Fernando Garibaldi, 
CEO of Peru's fifth largest apparel exporting companies (Ralph 
Lauren, Lacoste), says Peru's industry concentrates largely on 
creating specialized products and marketing their use of high-end 
fabrics such as Peruvian pima cotton. In terms of service, exporters 
provide their customers the opportunity to produce smaller volume 
and unique apparel products, and great flexibility when designs 
change. Despite these efforts, a trend continues towards movement of 
basic apparel lines and even high-end apparel brands, to overseas 
manufacturers that provide better cost/volume manufacturing. 
 
¶5. Out of the total number of exporting companies, 92 percent 
(1,633) are small and medium sized companies. Nevertheless, it is 
the medium and large companies that generate the bulk of the value 
in exports at 65 percent. For the large companies, the US is the 
main export destination with over 95 percent of exports, followed by 
Venezuela with 3.1 percent and France with 1.9 percent. The main 
export destination for small and medium sized companies is Venezuela 
with 22.3 percent followed by the US with 15.6 percent, Chile with 
6.8 percent and Ecuador with 5.9 percent. Venezuela is an 
increasingly attractive market for low-end products. 
 
FAVORABLE TRENDS 
 
¶6.  Both quotas imposed by the European Union and the U.S.  against 
China and the benefits of the ATPDEA to Peru have combined to 
allowed the apparel segment a healthy level of growth. The Peru 
Trade Promotion Agreement, currently pending in the U.S. Congress, 
will likely continue this favorable trend that will encourage 
long-term capital investments in the industry.  As an indicator of 
the level of optimism in the industry, four major textile and 
apparel companies of the Chincha area (south of Lima) have recently 
announced investment plans of $12 million in new machinery and 
infrastructure. 
 
 
MCKINLEY