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Guatemala Eyes $4B in Fabric Investments

Guatemala expects to draw $4 billion in fabric investments, notably synthetic yarn, as it looks to boost exports to neighbors such as Nicaragua and Honduras to help them scale apparel shipments to the U.S.

“We are looking at $4 billion in textile investments from zero last year,” Alejandro Ceballos, president of top trade lobby Vestex, told Sourcing Journal. “A textiles plant can take two to three years to install so we expect this money to gradually come in in the near to medium term.”

First in line to earmark such investments, seen as crucial to elevate Central America’s output of value-added and performance sportswear for U.S. labels, is Spain’s Nixtel.

The Barcelona-based firm plans to spend around $400 million to install a knit fabric mill in Guatemala City that’s expected to employ 300 people directly and 100 people indirectly.

“They are looking for a 10,000-square-meter site and plan to bring machinery from Barcelona and the U.S. where they are closing sites,” said Ceballos.

Nextil could not immediately be reached for comment.

Ceballos said Korea-owned Mundo Textil and a slew of other unnamed makers are also expanding existing facilities or intend to open new ones to bolster synthetic yarn production in the region and that the bulk of the projected investment will be funneled toward that.

The type of fabric that will be scaled up includes most of the categories that enjoy U.S. free-trade benefits under DR-CAFTA, including synthetic polyester and microfibers such as those ranging from 40 to 150 strands, the industry leader said.

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Guatemala is gradually becoming a much bigger exporter of fabric than clothing, especially for its Central American neighbors that use it to make T-shirts, underwear and athleisure among many other products for export. Fabric shipments, notably to Nicaragua and Honduras, are forecast to hit $400 million or 100 million pounds in weight this year, up 2 percent in dollar terms and from 70 million pounds in 2020 when the pandemic scotched demand.

Meanwhile, apparel exports to the U.S are forecast to rise 8 percent to roughly $1.6 billion amid surging demand from American brands. The majority of the garments set to leave port are casualwear, however, rather than the higher-end work wear Guatemala has historically supplied, Ceballos said.

“We are doing simpler clothing, mainly for Walmart and Target, including shorts, T-shirts and clothing to wear at home,” he said. “The factories that once did blazers, polos and suits have restructured to do this.”

Ceballos said Honduras and Nicaragua also continue to attract investments to step up both textiles and clothing production. El Salvador, however, has seen some firms depart amid political volatility and President Nayib Bukele’s threats to deepen taxes on maquilas, he added.

In related news, El Salvador’s decision to adopt Bitcoin as legal tender could also help it woo new investments, however, particularly from companies or crypto entrepreneurs interested in putting their holdings to work.

“There will probably be many investments from Bitcoin players who can turn the crypto into cash but Bitcoin is also very volatile, so adoption will depend on whether businessmen are willing to hold it even though it can fall in value,” Ceballos concluded.