Weaving ahead

Guatemalan textile industry benefits from free trade agreements and strategic location.

Last July, Nextil, a Spanish garment manufacturing group, announced that the company would open a new production facility in Guatemala. The investment amounted to USD 47.16 million and operations are expected to start in 2023. Similarly, in 2020, Nordstrom transferred its private-label volume production to Guatemala.

In a similar trend, US companies are increasingly moving their production centres to the Americas and Guatemala offers access to the Atlantic and Pacific oceans in addition to the Pan-American Highway.

A former official at the Ministry of Economy outlined, “Guatemala has been known in the west for political instability, violence and corruption but a new country is emerging. A country of 18 million people with a growing number of entrepreneurs and workers seeking training. We are blessed with outlets to the Atlantic and the Pacific oceans and a close maritime proximity to ports on the US West Coast.”

“Guatemala has been known in the west for political instability, violence and corruption but a new country is emerging. […] We are blessed with outlets to the Atlantic and the Pacific oceans.”

Former official, Ministry of Economy, Guatemala

The country is now seeing the benefit from the signing of a free trade agreement with the EU which has boosted investment and allowed Guatemalan companies to obtain EUR1 certificates, which enables the import of goods at a reduced tariff. The certification preserves the origin of goods, granting special treatment when entering the EU and the US.

“Spanish, American and even Mexican investors are starting to favour Guatemala”, explained a regional trade analyst, “due to low production and logistics costs, but also due to the recovery that the American Union is having on its economy.”

“Spanish, American and even Mexican investors are starting to favour Guatemala due to low production and logistics costs, but also due to the recovery that the American Union is having on its economy.”

Regional trade analyst, Guatemala

At the end of August 2021, clothing exports in Guatemala amounted to USD 1 billion, registering a 34.2% increase from 2020 and an 8.8% increase from pre-pandemic levels in 2019. One third of Guatemalan textile exports are destined to the US.

The Central American textile industry is expanding, providing opportunities for the Northern Triangle Countries: Guatemala, El Salvador and Honduras. All of them have targeted the textile sector as a growth platform and have significantly increased their exports to the US.

The challenges and risks can’t be ignored though, companies operating in the country need to deal with political instability, labour informality and supply chain disruptions. “Security and poor transport and communications are the main problems. In some areas, less than 100 kilometres of road can take three or four hours to pass due to the poor quality of the infrastructure. In ports, you have both issues: slow loading and unloading due to old equipment but also the risk of criminal gangs hijacking entire cargo operations!”

Looking to the future one Guatemalan textile executive has higher hopes, “I want Guatemalan technicians to become bosses and sell their patents on fibres, machinery and innovation. The biggest risk I see is that both companies and the government fail to advance into a new era that unites production with education to build a specialisation in the textile industry.”

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