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Modas Garment Factory Shutters in Guatemala, Cascading Effect Feared

MEXICO CITY – More than two dozen Guatemalan apparel factories could close this year as suppliers seek cheaper production outposts in Nicaragua, Haiti or Vietnam, top executives said.

“We could lose another 20 to 25 factories of the 200 we have,” said Alejandro Ceballos, president of leading apparel chamber Vestex. “Guatemala specializes in high-value apparel that’s more expensive than other places so unless these factories can streamline quickly, they may close.”

Ceballos’ comments came after Modas B.I., a 20-year-old factory that made clothing for the likes of Forever 21, Saks Fifth Avenue and Nordstrom, shuttered last Friday, axing 800 workers.

“They made high-end women’s blazers and blouses,” said Ceballos, adding that the plant’s Korean owner shifted production to Asia to cut costs amid shrinking demand for premium apparel in the aftermath of Covid-19. “Customers are looking for better prices so they decided to close everything, pay employees and move production to Vietnam” where it’s much cheaper.

Modas sold its machinery and equipment to rival Hansae for an undisclosed sum, Ceballos revealed.

Many manufacturers are hanging on a “loose string” because while U.S. orders are gradually recovering, trademarks demanding fashionable short runs are seeking bigger price cuts to satisfy recession-hit consumers.

Guatemalan factories are now at 7o percent capacity compared with much lower rates when orders began to drop in March as the pandemic began to spread.

The industry’s revenues are down 15 percent so far this year to around $1.2 billion, according to Ceballos. This includes U.S. shipments comprising 60 percent of revenues and fabric exports (such as cotton and texturized polyester) to other Central American nations, comprising 40 percent.

While employment in the sector is still down 60 percent from pre-pandemic levels, the region has its eye on the upcoming U.S. election, which is further fueling uncertainty.