Mexico’s flagship denim industry is expected to see a sharp decline in exports in 2021 as the Covid-19 pandemic continues to dent U.S. sales, industry observers said.
“Mexican apparel exports fell 60 percent last year to around $2.5 billion and denim accounts for around 40 percent of that,” said leading textiles consultant Raul Garcia. “We don’t estimate a strong recovery in the first half of this year because the pandemic is taking a long time to fight and things haven’t changed much, regardless of [new U.S. President] Biden coming in or the vaccines or the USMCA treaty modification.”
Garcia added, “We don’t expect a recovery until late 2021 or first half of 2022.”
That’s bad news for manufacturers, which have spent millions in recent years to streamline their collections and add more innovative finishes and environmentally friendly washes to win the hearts of U.S. brands.
After raking in sales of around $1 billion last year, many have idled production and reportedly cut 20,000 workers while they wait for the world’s biggest market to bounce back.
“Everyone’s suffering, from those that harvest raw cotton in Coahuila and Chihuahua States, to those that spin fabric in Torreon and Puebla [two major production poles],” Garcia, formerly president of top apparel trade lobby Canaive, said. Key manufacturers there, as well as in the output hub of La Laguna, have frozen spending until better times. Blue Denim, Compania Industrial de Parras and expansionist Siete Leguas are some of Mexico’s top jeans makers.
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Meanwhile, those in the capital of Mexico City have offered little assistance while the industry struggles, Garcia added. “The government has not supported the apparel nor any industrial sector,” he said, adding that growing Covid deaths are worrying producers who say operators may be unavailable when demand resumes, especially in poverty-ridden Mexico State or in Southeast Mexico. “We have the greatest number of Covid deaths after the U.S., Brazil, India and China,” Garcia said, adding that the state has been slow to roll out vaccines.
Industry consultant Arturo Rodriguez agrees that this year’s outlook appears gloomy, noting that excess inventory from last year’s unsold denim and other merchandise will also cripple shipments. The local industry is a far cry from its peak of 2006 when exports of apparel totaled nearly $10 billion.
“The government has given the industry crumbs,” Rodriguez said, noting that small enterprises, or pymes, received a maximum of 20,000 pesos ($990) as part of the country’s stimulus package to help combat the virus.
As Chinese and Central American competition intensifies, Mexico must work to become a high-end niche player, especially in the breadwinning denim circuit. “We need to focus on small volumes of highly differentiated products with a very fast response,” Garcia said.
Siete Leguas, which makes product for the likes of Levi’s and Guess, has accomplished that transformation, he noted. “They have worked really hard to make differentiated products with fashion-forward laundering techniques, dyes and deconstructed or stressed finishes.”
Yet Mexico is unlikely to recover lost ground.
“We aren’t going to return to 2006’s volumes,” Garcia said. “In 1992, Mexico was NAFTA’s biggest supplier. Now we are number 7. Even Honduras exports more units than we do.”