VZCZCXRO5435
PP RUEHRG
DE RUEHBR #2236/01 3401536
ZNR UUUUU ZZH
P 061536Z DEC 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 0590
INFO RUEHSO/AMCONSUL SAO PAULO 1278
RUEHRI/AMCONSUL RIO DE JANEIRO 5529
RUEHRG/AMCONSUL RECIFE 7458
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 BRASILIA 002236 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EEB/TPP/ABT GARY A. CLEMENTS 
DEPT PASS USTR FOR KATE DUCKWORTH, CAROLYN MILLER 
USDOC FOR ITA/OTEXA MARIA D'ANDREA 
 
E.O. 12958: N/A 
 
TAGS: ECON ETRD KTEX BR
SUBJECT: BRAZIL: INFORMATION ON TEXTILES AND APPAREL 
PRODUCTION 
 
Ref: State 114799 
 
¶1.  (U) Post sends this cable in response to information requested 
in reftel. 
 
¶2.  (U) Total 2006 industrial production in Brazil was approximately 
USD 284 billion.  Through June, 2007 (latest available figures), 
total industrial production increased 6.7% over the same period in 
¶2006. 
 
¶3.  (U) According to Brazilian Textile Industry Association (ABIT) 
figures, total Brazilian textile production in 2006 was USD 33 
billion. 
 
¶4.  (U) In 2006, textiles and apparel accounted for 1.5% of Brazil's 
total exports and 2.41% of Brazil's 2006 total imports.  As of 
October, 2007, textiles comprised 2.55% of Brazil's imports and 
1.44% of its exports. 
 
¶5.  (U) Brazil exported USD 459.5 million in textiles and apparel to 
the U.S. in 2006, a decrease of over 9.7% from the previous year. 
 
¶6.  (U) As of December, 2006, approximately 12.5 million Brazilian 
workers were employed in manufacturing.  ABIT figures show 1.65 
million Brazilians employed in the textile and apparel industry. 
 
¶7.  (SBU) Below are answers to the additional information requested 
reftel. 
 
-- Are host country 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 a representative of the Brazilian Textile Industry 
Association (ABIT), competition from lower priced imports, mainly 
Chinese, is depressing market prices and reducing Brazilian textile 
industry market share.  The ABIT official alleged to EconOff that 
Chinese competitors have used under invoicing and smuggling as one 
method to reduce or avoid Brazilian tariffs and taxes.  He said that 
ABIT began partnering with the Brazilian Customs authorities in May 
of this year to inspect textile and apparel shipments arriving at 
Brazilian ports for under invoicing and mislabeling.  According to 
him, the result has been an increase of the average FOB on Chinese 
imports from USD 8/kilo in April, 2007 to around USD 16/kilo at the 
present. 
 
Less overall orders from the U.S. have been partially offset by 
increased textile and apparel exports to Brazil's Mercosul trading 
partners (including a 34.3% increase in textile exports to Mercosul 
aspirant Venezuela from 2005 to 2006). There have not been any 
significant closings of factories by foreign investors. 
 
-- 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? 
 
This has not had a noticeable effect on the Brazilian textile 
industry. 
 
-- 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? 
 
Brazil implemented a safeguard against certain Chinese exports in 
January, 2006 (including polyester filaments, silk fabrics, corduroy 
and knit shirts) that is due to expire in December 2008.  Mercosul's 
average Common External Tariff (TEC) increased from 20% in 2006 to 
35% in 2007 from 20% to 35% on most garments (including towels and 
sheets) and from 18% to 26% on most fabrics from 2006 to 2007. 
 
-- Does the host government have policies or programs in place to 
deal with any dislocated workers in the sector resulting from 
increased competition? 
 
Post is not aware of any such program. 
 
-- 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? 
 
BRASILIA 00002236  002 OF 002 
 
 
 
Brazilian labor law is fairly inflexible and, as a result, unions 
and wages have not been noticeably affected in the formal industry, 
although the case for wage depression may be different in the 
informal industry. 
 
-- 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? 
 
Poor infrastructure, an oppressive tax regime and excessive 
bureaucracy have had a negative affect on the competitiveness of 
Brazilian industry as a whole.  The Brazilian textile industry has 
attempted to address lower priced imports by attempting to move to 
higher-value niche markets such as swimwear and intimate apparel. 
 
The ADIT official pointed out that the Brazilian textile industry 
continues to invest heavily in capital improvements.  He noted that 
domestic demand, which he termed "generally poor" in the past has 
started to pick-up in the fourth quarter of this year.  He 
attributed much of the improvement to social programs that provide 
cash payments to lower income families in Brazil and more disposable 
income among some in the middle class. 
 
-- 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? 
 
Brazil's partnership in the Mercosul customs union has helped 
increase its textile exports within the block, particularly to 
Argentina. 
 
-- Overall, if not already addressed, does post think that the host 
country can be competitive in textiles and apparel exports given 
heightened global competition? 
 
Realistically, the Brazilian textile industry may be hard-pressed to 
compete domestically or internationally with lower-cost imports over 
the long-run.  There may be some high-value niche markets in which 
Brazilian industry will remain competitive both at home and abroad. 
 
 
CHICOLA