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Argentina’s Textile Sector Faces Bleak Outlook

Argentina is not doing well.”

This is the way Juan Chicote, who makes sweaters in the city of Mar de Plata near Buenos Aires, summarized the state of the debt-laden South American country, whose three-year recession deepened with the coronavirus pandemic and where the economy is forecast to contract more than 10 percent this year.

Chicote, who owns the Pura Vida sweater and hoodies brand, said the textiles and apparel industry will likely see revenues plunge 60 percent this year from around $10 billion in 2019, extending a decade-long decline as exports have shrunk and local retailers fend off ultra-cheap competitors from China. Textile manufacturing headcount, which last year hovered around 700,000, has also more than halved, he added. “The [overall] unemployment rate in Mar de Plata is 20 percent. It’s really very sad,” added Chicote.

When the pandemic hit Argentina in the spring, Buenos Aires shuttered the economy for seven months, bringing huge losses for retailers and grinding apparel production to a near halt.

“This was a very difficult year as we were stopped for a very long time,” Chicote noted. “It certainly hasn’t been a year to make money.”

Worsening matters, raw materials have shot up in price amid higher fuel costs and inflation, squeezing mom-and-pop apparel makers or pymes, many of which have closed, despite government efforts to shore up the sector.

Matters are so bad that not even memorabilia linked to late soccer star Maradona’s death is seen being able to lift manufacturers’ near-term fortunes, observers said. “We are expecting a 60 percent to 70 percent plunge,” they added. “Many businesses have closed and exports have stalled because we are too competitive against other countries.”

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This comes despite the fact that Argentina’s peso hovers at an all-time low against the U.S. dollar and is poised to fall further in 2021 as the government delays a whopping $44 billion debt restructuring with foreign investors. The state’s woes have resurrected fears of a devaluation and shuttered credit for corporate entities.

While the government has said a deal with the International Monetary Fund is in the works by March or April, executives don’t expect a breakthrough in the country’s fiscal nor economic health anytime soon. As of press time, inflation topped 37 percent while four of nine Argentinians were said to remain in poverty.

Officials at top apparel trade lobby Camara Industrial Argentina de la Indumentaria (CIAI) conceded things are tough, noting the peso has fallen 50 percent from last year. However, they insisted things are looking up as the country battles the virus.

“We saw an improvement in fourth-quarter activity and today all retailers are open, something we didn’t have for seven months,” said CIAI president Claudio Drescher, adding that sales topped expectations during Mother’s Day  on Oct. 17 and that “we are seeing a consumption recovery before Christmas.”

Drescher forecast the industry will decline 30 percent this year in terms of manufactured units, which totaled shy of 150 million in 2019, adding that the new numbers are much better than a 70 percent decline forecast at the pandemic’s height in March.

To survive the crisis, the government recently announced $350 million in financing aid for the sector, also to help manufacturers invest in innovation and Industry 4.0. processes, which Dreschler said are pivotal to boost competitiveness.

Drescher declined to provide revenue figures for 2020, adding that the peso’s growing devaluation and high volatility have complicated accounting.