VZCZCXRO4436
RR RUEHAG RUEHAP RUEHDE RUEHDF RUEHGI RUEHHM RUEHLZ RUEHMA RUEHMR
RUEHPA RUEHPB RUEHRN
DE RUEHZP #1619/01 2751447
ZNR UUUUU ZZH
R 021447Z OCT 07
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 1249
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCNWTO/WORLD TRADE ORGANIZATION COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHGV/USMISSION GENEVA 0287

UNCLAS SECTION 01 OF 02 PANAMA 001619 
 
SIPDIS 
 
SIPDIS 
 
FOR STATE WHA-CEN - TELLO 
FOR STATE EEB/TPP/ABT - CLEMENTE 
FOR COMMERCE ITA/OTEXA - D'ANDREA 
FOR USTR - MILLER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KTEX
SUBJECT: PANAMA -TEXTILE AND APPAREL PRODUCTION INFORMATION 
 
REF: STATE 114799 
 
¶1. (U)  Total industrial production in USD value: 
$1,066,600,000 (2006; in 1996 USD); $277,400,000 (first 
quarter 2007; in 1996 USD). 
 
Total textile and apparel production in USD value: $6,555,343 
(2006); $3,144,986 (first quarter 2007). 
 
Textile/apparel share of host country imports and exports: 
0.7% (2006); 1.0% (first quarter 2007). 
 
Exports in textile and apparel to the U.S. in USD value: 
$1,587,386 (2006); $858,472 (first quarter 2007). 
 
Total manufacturing employment: 44,406 (2006); 45,378 (first 
quarter 2007). 
 
Total textiles and total apparel employment:  1,866 (2006); 
1,933 (first quarter 2007); 
 
All figures are from the GOP's Comptroller General's Office. 
Textile production and employment (manufacturing and 
textile/apparel) figures based on an estimate of firms having 
5 or more employees derived from a 2002 census; industry 
contact told Post he believes there are less than 1,000 
people employed in the textile industry) 
 
¶2. (U)  Q. Are host country producers receiving lower prices 
due to heightened international competition? 
 
¶A. While there are no official GOP statistics on this 
question, textile industry contacts have told EmbOff that 
Panamanian producers are not receiving lower prices due to 
heightened international competition. 
 
¶3. (U)  Q. Have manufacturers received more, less, or the 
same number of orders as in years past? 
 
¶A. Industry contacts have told EmbOff that they are receiving 
approximately the same number of orders as in past years. 
The industry contacts said that the number of orders has not 
significantly varied over the past few years due to specific 
quality and "designer type" clothing (such as the traditional 
shirt, the guayabera) manufactured in Panama.  However, 
according to data from 1997 through 2006 from the GOP's 
Controller General's Office, Panamanian textile exports 
reached a high of $3,316,732 during 2004.  Such exports have 
since fallen to $2,358,520 during 2005 and $1,618,409 during 
2006; the drop is almost exclusively related to declines in 
the dollar value of T-shirts and undershirt exports. 
 
¶4. (U)  Q. Have foreign investors, particularly, Asian 
investors, closed factories or otherwise pulled out of local 
production? 
 
¶A. No.  According to industry contacts, there are no Asian 
investors of any noticeable size in the Panamanian textile 
industry. 
 
¶5. (U)  Q. Have U.S. and EU restrictions on certain exports 
of textiles and apparel from China, effective through 
2007/2008, affected export prospects for host country 
manufacturers? 
 
¶A. According to industry contacts, such restrictions have 
adversely affected those Panamanian manufacturers who import 
very inexpensive apparel from Asia, then add value and 
re-export to other countries.  There are no reliable GOP 
statistics or industry contact estimates quantifying this 
adverse effect. 
 
¶6. (U)  Q. Has the host government implemented, or is it 
considering implementing, safeguards or other measures to 
reduce growth of imports of Chinese textile and apparel 
products into the host country? 
 
¶A. According to the GOP's Ministry of Industry and Commerce 
(MICI) and industry contacts, the GOP has not implemented, 
nor is it planning on implementing, any such measures. 
 
¶7. (U) Does the host have policies or programs in place to 
deal with any dislocated workers in the sector resulting from 
increased competition? 
 
PANAMA 00001619  002 OF 002 
 
 
 
¶A. According to the MICI and industry contacts, there are no 
policies or programs specifically designed to address the 
needs of such dislocated workers. 
 
¶8. (U) 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? 
 
¶A. According to industry contacts, textile manufacturers have 
been forced to lower wages as a result of Chinese 
competition.  Such contacts said that union organization has 
not been affected and the wage demands of such unions have 
resulted in closures of various textile companies. 
 
¶9. (U) Has the host government or private industry taken 
action to increase the country's competitiveness, such as 
improving infrastructure, reducing bureaucratic requirements, 
developing the textiles (fabric production) industry, moving 
to higher value-added goods, or identifying niche markets? 
Does post think that the host government or private 
industry's strategy will be successful? 
 
¶A. Neither the GOP nor private industry has undertaken any 
action to specifically improve the competitiveness of 
Panama's textile industry.  The GOP has engaged in various 
programs to improve the country's overall competitiveness, 
such as allocating $88 million to worker training programs, 
establishing a one-stop online process to register new 
businesses replacing the prior multi-step, multi-agency 
registration process (Panama Emprende), and establishing 
on-line government procurement processes to facilitate access 
to government contracts (Panama Compra).  Industry contacts 
have complained to Post that Panama's rigid labor code 
eliminates a free market in labor, making it impossible to 
hire and terminate workers to accommodate the seasonal demand 
shifts for apparel.  As a result, producers are 
disincentivized from expanding production or hiring 
additional workers. 
 
¶10. (U) If your host government is a partner in a free trade 
agreement or a beneficiary of a preference program such as 
AGOA, CBTPA, CAFTA or ATPDEA, what impact does the program 
have on local sector industry competitiveness? 
 
¶A. Panama is a beneficiary under CBTPA, which benefits are 
scheduled to expire in September 2008.  According to one 
industry source, the benefits CBTPA allow to the textile 
industry to flourish during the 1980s.  However, as the U.S. 
reduced or eliminated quotas and tariffs on textiles entering 
the U.S. from other countries, the value of the CBTPA 
benefits declined, as did exports to the U.S.  According to 
this source, NAFTA dealt a severe blow to the Panamanian 
textile exports to the U.S. because Mexico offered lower 
wage, energy and transportation costs, and Mexican exports 
paid no import tax unlike Panamanian textile exports.  Panama 
and the U.S. have signed a Trade Promotion Agreement (TPA) 
which is awaiting U.S. Congressional approval.  Panama's 
National Assembly ratified the TPA in July 2007.  Panama is 
not a party to CAFTA-DR. 
 
¶11. (U) Q. Overall, if not already addressed, does post think 
that host country can be competitive in textiles and apparel 
exports given heightened global competition? 
 
¶A. No.  Panama's economy 75% service-based.  The country has 
only 15 textile manufacturers, principally producing work and 
school uniforms, and certain designer type clothing, such as 
the guayabera.  Due to the small domestic market (only 3.2 
million residents), neither the GOP nor the private sector 
appear eager, willing or incentivized to make large scale 
investment to upgrade or expand textile production facilities. 
EATON