VZCZCXYZ0006
PP RUEHWEB

DE RUEHSG #1699/01 2921804
ZNR UUUUU ZZH
P 191804Z OCT 07
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC PRIORITY 2300
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS SANTIAGO 001699 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/TPP/ABT - GARY A. CLEMENTS 
COMMERCE FOR ITA/OTEXA - MARIA D'ANDREA 
STATE PLEASE PASS TO USTR FOR CAROYL MILLER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KTEX CI
SUBJECT: CHILE - 2006 UPDATED STATISTICS FOR TEXTILES AND APPAREL 
SECTOR 
 
REF: STATE 114799 
 
¶1. Per reftel, Post provides the following data for textile and 
apparel production in Chile in 2006.  Please note that some of the 
final figures for all of 2006 are not yet available. 
 
VALUE OF TOTAL INDUSTRIAL PRODUCTION IN USD 
------------------------------------------- 
 
¶2. Total industrial production in Chile for 2006 was USD 18.6 
billion.  According to SOFOFA, Chile's Chamber of Commerce and 
Industry, total industrial production increased 2.4 percent on a 
year-to-year basis from July 2006 to July 2007.  Total production 
for the first 7 months of 2007 grew 3.9 percent.  Industrial 
production represented 17.1 percent of Chile's total GDP in 2006. 
 
VALUE OF TOTAL TEXTILES AND APPAREL PRODUCTION IN USD 
--------------------------------------------- -------- 
 
¶3. Textiles and apparel production totaled USD 694 million in 2005 
and USD 262 million during the first half of 2006.  Data for the 
second half of 2006 and for the first half of 2007 is incomplete in 
part because many Chilean textile producers are going out of 
business.  The industry is losing market share and competitiveness 
due to cheaper imports.  Textile and apparel industrial production 
has experienced a drop of close to 20 percent during the last 12 
months.  Textile and apparel production constituted less than 4 
percent of Chile's total industrial production in 2006.  In 2005, 
textile and apparel production constituted 4.5 percent of total 
industrial production. 
 
TEXTILE AND APPAREL'S SHARE OF CHILE'S TRADE 
-------------------------------------------- 
 
¶4. Chile's total exports for 2006 were USD 58.1 billion, of which 
USD 16.5 billion were industrial exports.  Textile and apparel 
exports totaled only USD 179 million in 2006.  Overall industrial 
exports represented 37 percent of Chile's total exports for 2006. 
Textiles and apparel represented only 1.3 percent of total 
industrial exports and 0.5 percent of Chile's total exports. 
 
¶5. Chile's imports during 2006 totaled USD 35.9 billion.  Of that, 
USD 30.2 billion were industrial imports.  Textile and apparel 
imports totaled USD 1.54 billion in 2006 (up from USD 1.28 billion 
in 2005), representing 5 percent of total industrial imports. 
Industrial imports represented 84 percent of Chile's total imports 
of which 4.96 percent were textiles and apparel.  Just as a point of 
reference, Chile's importation of textiles and apparel is up nearly 
100 percent in the period 2003-2006. 
 
TEXTILE AND APPAREL EXPORTS TO THE UNITED STATES 
--------------------------------------------- --- 
 
¶6. Total Chilean exports to the U.S. in 2006 were USD 8.9 billion, 
of which USD 1.4 billion were industrial exports.  Total Chilean 
imports from the U.S. in 2006 reached USD 5.5 billion, an 18 percent 
growth over 2005.  Import growth was strongly influenced by 
petroleum oil imports (gas oil, diesel oil, and gasoline) which 
totaled USD 1.2 billion, equivalent to 21 percent of the total 
import value from the United Sates.  Even excluding these energy 
imports, U.S.-produced goods exported to Chile grew by 16 percent. 
According to Chilean Customs Service data, Chile exported to the 
United States USD 33.3 million worth of textile and apparel while 
similar imports from the United States to Chile totaled USD 72 
million in 2006. 
 
TOTAL MANUFACTURING EMPLOYMENT 
------------------------------ 
 
¶7. The manufacturing/industrial sector provided employment for 
836,000 workers in 2006.  During 2006, 25 thousand new jobs were 
created in the industrial sector.  Employment in the 
manufacturing/industrial sector represented 13.3 percent of total 
employment.  There is no disaggregated data available for 
sub-sector. 
 
OTHER QUESTIONS 
--------------- 
 
¶8. The Textile Institute (INTECH) -- Chile's national association of 
the textile, apparel and shoes industries -- provided 2006 updates 
to this year's questions: 
 
-- Are Chile's producers receiving lower prices due to heightened 
international competition?  Have manufacturers received more, less, 
or the same number of orders as in years past?  Have foreign 
investors, particularly Asian investors, closed factories or 
otherwise pulled out of local production? 
 
 
According to INTECH, prices in Chile continue to drop in response to 
international competition.  About 60 percent of Chile's imports of 
textiles and apparels come from Asia, predominantly China.  At the 
same time, the cost of energy in Chile has increased the cost for 
the industry by about 30 percent.  Together with the peso's 
appreciation this has prompted re-structuring of the industrial 
sector in general.  There is no discernable Asian investment in the 
textile and apparel industry in Chile.  Asian companies are focused 
on the import of textile and apparel production rather than setting 
up production in Chile. 
 
-- Have U.S. and EU restrictions on certain exports of textiles and 
apparel from China, effective through 2007/2008, affected Chilean 
export prospects for host country manufacturers? 
 
In general terms, the U.S.-Chile Free Trade Agreement (FTA) created 
preferential access to the U.S. textile and apparel market, 
providing trade benefits to the Chilean textile sector.  According 
to INTECH, since the implementation of the FTA in January 2004, 
Chile's sales to the U.S. have increased by about 50 percent, with 
the immediate tariff elimination under the FTA accounting for that. 
However, it is INTECH's view that U.S. and EU restrictions on 
Chinese textiles and apparel prompted China to look for alternative 
markets, such as Chile. 
 
China's increasing participation in the Chilean textile and apparel 
domestic market is clearly hurting local producers.  Chinese 
textiles and apparel imports represents about 57 percent of Chile's 
total imports of these items, with Chinese participation in this 
market growing by 29 percent from 2005 to 2006.  For comparison, the 
United States is the third most important supplier of textiles and 
apparel to Chile, with a market share of only about 4.7 percent. 
 
-- Has Chile implemented, or is it considering implementing 
safeguards or other measures to reduce the growth of imports of 
Chinese textile and apparel products into the country? 
 
During the 1980's economic crisis in Chile, most textile and apparel 
companies went bankrupt.  To support the re-structuring of the 
industry the GOC, through the National Committee for Analysis of 
Economic Distortions, imposed a tariff surcharge between 10 to 15 
percent on textile imports.  This mainly affected imports from South 
Korea, Brazil, Argentina and Colombia.  This surcharge was applied 
from 1983 to 1993.  The Chilean domestic sector was able to recover, 
but according to INTECH, since 1991 Chile has been facing unfair 
competition from Asian countries exporting undervalued products. 
About two years ago, the Chilean National Customs Service, at the 
request of INTECH, formed a joint committee to analyze cases of 
dumping of undervalued products.  INTECH has requested the GOC on 
several occasions to initiate an investigation for safeguard 
measures.  To date, no such measures have been applied. 
 
INTECH 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.  However other issues such as peso appreciation 
and the cost of energy could prompt some work force reductions in 
the industry. 
 
That being said, Chilean textile and apparel producers are clearly 
under pressure.  Though employment figures are not broken down to 
show a decrease in jobs in the sector, anecdotal evidence indicates 
the sector is rapidly losing jobs. 
 
-- Will Chile remain competitive in textile and apparel given more 
competition? 
 
INTECH blames unfair competition from Asia, primarily China, for the 
declining domestic Chilean textile and apparel industry.  Its claims 
of dumping have not been verified by the Chilean government.  While 
dumping is a possibility, it is more likely that small, inefficient 
Chilean producers are simply unable to compete with cheaper imports 
from Asia.  High energy costs, a strong peso and inflexible labor 
laws likely are further disadvantages for Chile's producers. 
 
URBAN