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Central America Sourcing on the Comeback Trail, Insiders Say

Sourcing of apparel in Central American countries–notably Guatemala, Honduras and El Salvador–has whiplashed from full pandemic shutdown to the great PPE pivot to nearly full operations today, but experts contend its full potential has yet to be seen.

Apparel imports from the region, most of which are shipped to the U.S. duty free, rose 46.44 percent to 1.08 billion square meter equivalents in the first five months of 2021 compared to the same period last year, Sharon Perez, business development manager for activewear and footwear at Lenzing Fibers said last week while moderating a Texworld Lenzing seminar on “Central America Sourcing Strategy.”

Taken together, the countries of the Central American Free Trade Agreement (CAFTA), which also includes Nicaragua, the Dominican Republic and Costa Rica, is the third largest supplier of apparel to the United States behind China and Vietnam, Perez said.

“From Guatemala, we are two days shipping by boat to Miami or Los Angles,” Davide Piazza, commercial director of Liztex, said. “So that’s a big opportunity we do have. I do believe we need more investments in the textile industry in the region, for instance in the types of yarn we can produce.”

Sourcing of apparel in Central American countries has gone from full shutdown to the great pivot making PPE to booming business today.
A Liztex factory. Courtesy

Piazza said the pandemic highlighted the region’s opportunity to serve the U.S. market in terms of the types of materials it can supply.

Central America has significant potential to grow as a supplier to U.S. retailers and brands, according to Diego Cuenca, senior sales manager for Mercados Internacionales, based in El Salvador.

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“There’s a lot of opportunity being so close to the largest end market in the world and it’s slowly been getting better but we have to make it go faster if we work more together,” Cuenca said. “Also important to note is that Central America has been producing garments for 30 to 40 years now, so the labor force is very experienced.”

Liztex has been expanding into full-package production of bottoms and uniforms due not just to strong demand but also to an imperative to expand beyond yarns and knits. The company has also focused on adding fabric finishes such as temperature control, wicking, wrinkle free and soil release.

Companies in Central America dealt with the pandemic in different ways and continue to be impacted by the ongoing global health emergency.

From the outset, Liztex, like many of its global peers, saw business slow down and order cancellations pile up, Piazza said. But after a couple of months, PPE orders began coming in, prompting Liztex to start producing masks and medical scrubs.

“After that we began making a lot of knits because people were working from home and buying T-shirts, knit shirts and soft pants,” he said. “So Liztex started producing 100 percent yarns for knits. Then when industry got going again, we started over again with woven uniforms. So we really didn’t feel a big lack of orders during the pandemic and now we’re able to grow the business again.”

El Salvador completely locked down on March 18 last year, and Mercados also shut down accordingly, Cuenca said. But by the next month, textile manufacturers were included among “essential industries” allowed to open and produce PPE.

“I do think the relationships among mills and textiles companies got even stronger during the pandemic and a lot of orders meant to be produced in El Salvador were shifted to Honduras and Guatemala,” he said. “That was good for us because we do business throughout the region.”

Then in June 2020, the country reopened and business starting coming back to El Salvador “at 120 percent.”

“Right now, it’s been crazily growing,” Cuenca said. “Almost all spinning mills are booked and most of the manufacturing is also fully booked. We got out of the pandemic into this huge demand and we’re trying to make it and hopefully it continues.”

SanMar in Honduras retooled its plants to make masks and gowns when it became part of a coalition contracted to supply masks to the U.S. government, according to Jorge Colindres, the producer’s senior director of manufacturing.

“So there was a period of time that we were mostly doing PPE,” Colindres said. “Then we started converting back to T-shirts. But we had a very good Q4 last year and it continues to date. The demand has definitely shifted, with a lot of online sales. All of the T-shirts and basic fleece products are in high demand.”

SanMar is going “full speed ahead” building a new 800,000-square-foot textile plant in Honduras for increased capacity, he noted.

“With companies struggling getting goods out of Asia right now, with all the logistical problems that are happening, I think will start motivating some companies to rethinking their supply chains…and relooking at Central America.”