SAE-A Trading, a South Korean manufacturing firm, USAID, and Inter American Development Bank are bringing 20,000 jobs to Haiti’s textile sector over the next few months, starting in the Caracol industrial park in Haiti’s north. The industrial park, located in a region that was largely undamaged by the 2010 earthquake shielded from hurricanes, was heavily subsidized by USAID and the IDB. Its state of the art water and power facilities insure steady supplies of both essentials. A new deepwater port has been developed on the same sight, bypassing crumbling facilities in the capital, Port au Prince, as well as the nation’s dilapidated secondary road network.
Sae-A trading recently announced its hope that, following the expiration of trade preference status in Nicaragua in 2014, more of the company’s manufacturing operations can be moved to Haiti.
Rapid growth in the Haitian garment and apparel sector is creating cascading linkages, and Sae-A is a big part of that equation. The establishment of fixed shipping schedules and the development of procurement lines for essential inputs will facilitate the growth of smaller operators and also make it easier for other large manufacturers to set up operations.
Haiti suffers from the least skilled workforce in Latin America, along with infrastructure that is the least reliable in the region. For Sae-A and others, however, these downsides are largely offset by the low cost of Haitian workers and subsidies from international aid organizations. More critically, Haiti enjoys duty free access to the United States market, without a third party fiber provision. This makes it possible for Sae-A to source the lowest cost fabric it can find, cut and stitch in Haiti, and still sell goods in the United States without tariffs.
These advantages have led to almost $1 billion in investment in Haiti’s garment sector in the last year. Most of the resulting production will consist of commodity t-shirts. As the skill of the workforce increases and more infrastructure comes online, it is expected that the local industry will expand into other higher value-add products.
Many of the firms involved cite humanitarian motives for venturing into a nation as notoriously difficult as Haiti, but industry insiders point out that the numbers are also very favorable. Hope II, the free trade agreement that promotes Haitian garment exports, does not expire until 2018. It will likely be replaced by a regional agreement similar to CAFTA-DR, which governs other exporting countries in the region. This gives ample time for a robust ramp up of manufacturing and improvements in Haiti’s global competitiveness. In the meantime, firms like Sae-A can get in on the ground floor and bring home healthy profits through their proximity to the US market.
Sourcing Journal takes a closer look at Haiti and other Latin American countries in its new whitepaper collaboration with TradeCard, Sourcing in the Americas: Strategies, Opportunities, and Obstacles.