ECONOMY-BRAZIL: Textiles Stage a Comeback

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Feb 10 2000 (IPS) - Brazil’s textile industry, hit hard by the phenomenon of globalisation over the past decade, is recovering, and exports could rise threefold over the next three years.

The sector’s exports are expected to climb from 1.2 to 1.4 billion dollars this year and to 4.0 billion by 2002, said the president of the Brazilian Association of the Textile Industry (ABIT), Paulo Skaf.

The industry’s strong performance last year indicates that such targets are feasibile, said Skaf, who pointed out that in December, exports stood at 110.7 million dollars, 26 percent higher than the December 1998 figure.

The aim is to recover market share. Back in 1980, Brazil accounted for one percent of the 100 billion dollar global trade in textiles. Today the local textile industry represents just 0.34 percent of the global market.

Textile production totalled 21 billion dollars in 1999 and grew five percent, by contrast to a drop of 1.5 percent posted by Brazilian industry as a whole.

ABIT hopes to repeat that performance this year and once again outstrip overall economic growth. With that goal in mind, it launched the ABIT 2000 Programme, which will entail 1.5 billion dollars in investment and close attention to the textile industry’s entire chain of production.

The industry’s growth enabled it to add 40,000 people to the total 1.4 million employed in 1999. Another 100,000 new jobs should be generated this year by the industry’s 20,000 companies, according to Skaf.

Last year’s performance put an end to a period of decline. The opening of the Brazilian market, which began in 1990, added to a local curency that was over-valued from late 1994 to January 1999, led to a flood of imports, the consequent bankruptcy of thousands of companies, and massive layoffs.

The heavy competition brought a 9.7 percent fall in clothing prices from July 1994 to November 1999, a period in which accumulated inflation totalled 66.9 percent, according to ABIT.

From 1993 to 1995, imports of textiles, thread and garments soared from 557 million to 2.2 billion dollars, stated a 1996 study by the governmental National Bank of Social and Economic Development.

The flood of cheap Asian products was especially seen in the apparel industry, where imports climbed 647 percent in the same three-year period, from 47 to 351 million dollars.

In order to cut costs, the textile industry was forced to upgrade the technology used, modernise administration and management, and downsize by dismissing hundreds of thousands of workers. Over the past six years, it invested six billion dollars in upgrading and human resources training.

But the industry successfully boosted productivity, quality and prices, and was able to reconquer domestic market share, Skaf pointed out.

The January 1999 depreciation of the local currency, the real, was a decisive factor in the industry’s recovery, even in exports, an area in which other branches of industry have not yet rallied as expected. Last year, Brazil continued to suffer a trade deficit, of 1.196 billion dollars.

But in textiles, the deficit was reduced from 700 million dollars in 1998 to half of that last year. And this year, the industry hopes to post a 200 million dollar surplus.

The local textile industry’s increased competitiveness was the cause of complaints in Argentina – Brazil’s partner in the Southern Common Market (Mercosur), along with Paraguay and Uruguay – and that country slapped quotas on cotton textiles from Brazil.

Although they have not been approved by the World Trade Organisation (WTO), the restrictions are still in place, but are the object of negotiations.

Another factor in the industry’s recuperation was the coordination, for the first time, among the various links in the chain of production, said Skaf.

The ABIT 2000 Programme, for example, has also stimulated cotton production in Brazil, which currently stands at around 500,000 tonnes a year and does not cover domestic demand. By 2002, production should have increased to between 800,000 and 900,000 tonnes, which would make the country once again self-sufficient.