With a predominantly SME presence, the Argentine textile industry has proven to be very sensitive to policies and economic fluctuations, which has led to alternating periods of growth, with job creation, with others of strong destruction of companies and jobs.
It’s a chain of six links that adds value as it gets more complex; from cotton, wool or synthetic fibres, to the garment marketed to the public. Suspected of being non-competitive and dependent on protectionist policies, the textile sector has been among those that have increased prices the most in recent years. It slowed down a bit at the end of last year, when, according to INDEC, the item “Clothing and footwear” accumulated an increase of 169%against a general increase in inflation of 211%.
But let it be the Index Zaraconsidered the Big Mac of clothing internationally, as demonstrated by the statistics of INDEC They are coincident in the sense that Argentine clothing it is expensive. The explanations are different: they range from the “Argentine cost” but also point to inefficiencies of the sector itselfalthough some of its segments are very competitive.
As a whole, the textile value chain generates 539 thousand jobs.
According to a report by Founda center dedicated to policy research for sustainable development, the textile industry is one of the few value chains where all links are native, although some produce with imported inputs.
“In 2005 only the industrial phase of the supply chain it represented 1.6% of GDP. Towards 2021 it had fallen to 0.9%. The loss of participation in the sector is a global phenomenon resulting from China’s advancement in world trade, with products at very competitive prices and due to the space that sectors such as the metallurgical or chemical industry were gaining,” he said. Nadia Shuffer, economist and researcher at Fundar.
cotton
Javier Koberstein is an agricultural producer from Coronel Du Graty, in the southwest of Chaco, who planted 490 hectares of cotton last season. “We started last November, but first the rains and then the heat, which reached 50°C, forced us to replant, two or even three times. We were coming from a terrible drought that lasted three years and the El Niño rains played tricks on us,” he said.
The producer reveals that in normal cycles yields in the area can exceed 2 thousand kilos per hectare, but that this year the yield was lower in quantity and quality. “We hope to get to 1,000 kilos per hectare,” estimates Koberstein, who has only one employee, but usually hires several workers for the harvest, which he considers a real challenge. “It’s very difficult to get people to work, because I can’t pay them more than they earn on social plans.”
Argentina currently produces 250,000 tons of cotton, of which 170,000 are consumed in the domestic market and the rest is exported.
Marcelo Falcosecretary of the Argentine Association of Cotton Producers, states that the price of cotton, in the average quality, is around 1.61 dollars per kg.
“The impact of fiber on the final production cost of a garment is usually 4%. The break-even point for a producer using the technology is a yield of 700 kilos. If it goes below that value, you lose money,” says Falco.
At the end of the harvest, the producer uses the services of a gin, specialized in separating the fiber from the seed and stores the cotton in 240 kg bales. “Clean, sorted fiber not only has a higher price, but can also be stored and sold to spinning mills when conditions improve,” adds Koberstein.
Spinning and weaving
Spinning production is the first link in the industrial segment. Through an 80 meter long production linethe cotton fibers are twisted together, giving rise to an ecru colored thread which is then wound into cones.
Jorge Leonespinning director Enod, manufacturer of yarns and fabrics in its factories in La Rioja and Morón, underlined that this is a capital and energy intensive activity. Two years ago Enod invested 25 million dollars in the La Rioja factory, to produce 1,400 kilometers of denim per year.
“We use very efficient and large machinery. 60% of our costs correspond to inputs, then comes energy and labor. At the end of the yarn production, the value of the product is doubled regarding the original price of the fiber,” he added.
In Iberá textilefrom the Corrientes locality of Laguna Brava, they receive the raw yarn in 4 kilo cones, with the aim of transforming it into various fabrics or fabrics. Pablo Yeramian, director of the company, explained that the costs are concentrated in a few items: yarns, with an incidence of 40% on the total; chemical products, usually imported (25%), and the rest in work, tax pressure and energy.
“We have about 10% of the total cost in fuel oil that powers the steam engines, because the gas doesn’t get to Corrientes,” he noted.
100 people work at Textil Iberá. “In Argentina there is a faulty circuit, which penalizes the added value,” said Yeramián. “The more value added, the higher the cost to the country, or in other words, the closer it is to a primary good, the more competitive it is.”
In this connection, the average profitability margin is 20%. Value similar to that existing in the dry cleaning process, which depending on the complexity of the processes, can reach 28%
Industrial dry cleaning
It is one of the key stations in the long journey of transforming cotton into garments. There the fabric from the weaves is dyed, receives printing, if applicable, and then finishing or textile finishing. In this phase the product is differentiated based on its thickness, quality or destination, which can be different types of clothing but also upholstery, curtains, etc.
Marco MeloneI head over Italcorea company with 105 employees spread across two factories says that until November it was processing up to a million meters of fabric a month, but by March production dropped to less than half.
“We receive the raw fabric and over three days the product passes through 30 machines that operate 24 hours a day, on three shifts. In the end you get the fabric with the characteristics for which the line was programmed.”
Between 2021 and 2023 the company equipped itself with cutting-edge dyeing machinery: a 4.0 digital printing machine and high-speed looms. A total investment of 600 thousand dollars. Meloni said that at the exit of his factory, a meter of blue gabardine fabric, which weighs about 400 grams, costs 4 thousand dollars. Meanwhile, a yard of swim shorts fabric, which includes polyester, costs about $2,000.
For the entrepreneur, who sells his production to clothing manufacturers, wholesalers and big brands, the tax burden is around 38% and energy represents 30% of the total production cost.
Preparation and sale
Labour-intensive par excellence, apparel manufacturing adds maximum value to the chain, delivering finished products for sale to the public. The entire value chain largely depends on this link.
Hernan Ebekiantitle of Geppetto, a children’s clothing manufacturer, says a pound of T-shirt fabric cost between $8,500 and $10,000 in mid-March. With that amount, the company could produce six T-shirts for 7- or 8-year-olds, each of which was priced in the company’s online store between $6,000 and $7,000, a 35 percent discount. At Gepetto, with production plants in Catamarca and CABA, the highest costs fall on raw materials and labor, divided into design, printing, cutting and sewing functions. In times of wage arrears, labor costs become less important.
“Our sales slowed in January. There is an almost massive change in the purchasing strategy of our customers, who ask for few units: those needed to sell in the coming weeks. They don’t buy jackets or hoodies to sell in the winter,” Ebekian said.
Unlike shopping malls, where rebranding usually quadruples the wholesale price, the entrepreneur emphasized that in the conventional retail channel prices do not increase more than 100% of the cost. “In our distribution and sales channel, as well as that of our multi-brand customers, prices are usually double our costs. Otherwise they will not be able to remain in the formal market,” the entrepreneur said.
While informal circuits such as La Salada or Avenida Avellaneda, with prices 30% to 40% lower, indicate that the cost of white labor in Argentina Is it very expensive.
Source: Clarin
