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Oct 22, 2008
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US crisis threatens Centam, Mexico textile sector

By
Reuters
Published
Oct 22, 2008

By Gustavo Palencia

VALLE DE SULA, Honduras (Reuters) - The economic slowdown in the United States is the latest threat to the struggling clothing and textile industry in Mexico and Central America, already unraveling under stiff competition in Asia.

Retail sales in the United States slumped in September to their lowest in three years, a sign the global credit crunch is spreading fast into the real economy.

That is bad news for the tiny nation of Honduras, Central America's top clothing and textile exporter to the United States, and for the poor factory workers who sew clothing in the assembly plants around the Honduran town of Valle de Sula.

By the end of the year, Glenda Garcia who spends all day stitching pockets on sweatshirts at a sprawling factory owned by Hanesbrands Inc, will be out of work when the plant shuts down and moves operations to Asia to cut costs.

"I don't know how I'm going to live or support my two daughters. ... The bosses are telling us they are not selling enough because there is a crisis in the United States," said Garcia, 32, outside rows of assembly plants known as maquilas.

For years Central America and Mexico have watched factory after factory pack up and move to China in search of cheaper labor, despite signing free trade deals to secure preferential terms for their exports.

Now, the U.S. economic downturn could be a fatal blow to an already struggling industry with only a few factories able to adapt by specializing in niche products or just-in-time orders.

"Everyone is operating in low gear because they have not received any new orders, or the orders they have received are smaller," said a factory manager in Valle de Sula, where hundreds of women line up for work as the sun is rising.

Especially worrying is the sleepy pace of orders for the upcoming Christmas season, usually Valle de Sula's busiest time of year, said the manager.

FACTORIES SHUT

In 2002, a quarter of all U.S. textile imports came from Mexico and Central America, and 13 percent from China. Last year, China provided 31 percent of all U.S. clothing imports and only around 15 percent came from neighbors of the United States.

Layoffs in the region are now quickening in pace.

Hanesbrands, whose brands include Playtex, Just My Size, and Wonderbra, said last month it was closing four sewing plants in El Salvador, Honduras, Costa Rica and Mexico as part of a strategy to cut costs and streamline production.

Workers in Asia earn even less than Garcia, who takes home about $275 a month.

In August and September Honduras lost 3,465 manufacturing jobs and the industry sees another 2,000 vanishing before the end of the year due to the U.S. slowdown.

Mexican clothing producers say they could lose up to 18,000 jobs by the end of the year and maquila owners in other Central American countries fear their businesses will soon meet a similar fate.

Luisa Alfaro, 39, another Hanesbrands employee, is worried her 18 years doing repetitive factory work has permanently injured her left arm, making it harder to find a new job.

Once she is unemployed she will depend completely on the $100 or $200 her husband in the United States sends each month, but that meager income is also at risk as more immigrants have trouble finding jobs and send less money home.

(Additional reporting and writing by Mica Rosenberg in Mexico City; Editing by James Dalgleish)

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