A weakening peso and demand hike from main trading bloc partners Brazil, Uruguay, Paraguay and Bolivia, propelled the gains. Simultaneously, local manufacturers breathed a sigh of relief as China’s yuan appreciated against the peso, undermining sub-valued garment imports that have strangled local purveyors for years.
Unfortunately, however, the January gain was a one-off event. Foreign sales dropped 4 percent in February and were expected to come in flat in March, according to Francisco Roca, chief economist at key apparel trade lobby CIAI.
As global markets recover from Covid-19 and the peso remains depreciated, Roca expects exports will stage a modest recovery this year, to the tune of 1 to 2 percent, but far from the gains seen before the pandemic hit Latin America’s No. 3 economy.
Increased state financing is one avenue that could help exports inch higher, Roca said. Buenos Aires recently announced it will inject $26 million into the industry’s small or midsize firms or pymes, hoping to enable them to boost exports, notably to China, which has been identified as a promising market for its high-end fashion brands.
“The government’s financing component is very important with many different lines of credit,” added Roca, noting that the state also scrapped some export taxes last year, including a so-called right-to-export duty with an ad valorem of 7 to 8 percent.
“We need to diversify our exports,” he said. “We can sell our luxury to China. There is a high middle class that has the acquisitive power and looks for the variety and design innovation that our brands can offer.”
Trademarks such as Gaucho-Buenos Aires, Juana de Arco or Jazmin Chebar, which already export to Japan, are primed to benefit from increased China exposure, according to Roca.
Not all firms are eyeing China, however, with Buenos Aires-based Derwill looking to the U.S. and Europe. The family-owned firm recently spent $5 million to double production and increase shipments to the likes of Nike and Adidas, said founder and owner Marcelo Lopez.
He noted, however, that the bulk of the funding to build a new mill to double sport socks output to 13 million pairs annually came mostly from its own cash and not government coffers.
“This year, we will export $12 million, up from $5 million to $6 million last year when the factory was much smaller,” the executive revealed, adding that the new site near Buenos Aires also saw the addition of 200 machines, mainly from Italy’s Lonati.
Derwill, which also counts Under Armour and New Balance as clients, expects demand for its unisex and children’s socks to rise this year, mainly from Argentina’s Mercosur partners but also from Chile.
While welcoming the aid from Argentina’s debt-laden administration, Lopez said firms must make a bigger effort to tailor their products to foreign buyers, not just rely on government help.
“The government aid may not be enough, depending on the market you are in and your product prices, but if we can get everyone more focused on exporting, there is business to be won and we have the creative workforce to win new markets,” he added.
Revving up exports will also help Argentina obtain much-needed funds to make investments that can help bolster jobs which, at least in the textiles circuit, declined around 50 percent in 2020.
While Economy Minister Martin Guzman said last month that GDP will recover faster than expected to at least 7 percent growth (from a 10 percent plunge in 2020), trades union officials were not as sanguine about the sector’s outlook.
“We are still mired in Covid with a very small percentage of vaccines coming in,” said Monica Basterrechea, who heads Satadya, a trade union representing mom-and-pop sewers in the Mar del Plata beach town. “Workers are struggling and employment has not recovered much.”
Local fashion consumption remains anemic as reportedly eight million Argentines remain in poverty, struggling under high inflation and a rapidly depreciating currency, she added.
“It’s true that the government is being more diligent about [increasing] exports but I think we are looking to do more than we can,” Basterrechea continued. “Our borders are closed with Brazil and we don’t know how the new virus strains will affect us.”