Colombia's textile and clothing industry is rushing to take advantage of its new quota and duty-free access to the US where exports in the first 11 months of 2003 surged by 48 per cent. But, in the race to secure a foothold in the American market, manufacturers are up against a shortfall in locally-produced fabrics and the expiry of ATPDEA at the end of 2006. Leonie Barrie reports.

If proof was needed of the dramatic impact trade agreements can have on the textile and clothing trade, take a look at Colombia. Recent legislation which provides preferential access to the US market has revived this Latin American country's apparel exports to the extent that textile firms are now calling on outside investors to form alliances and joint ventures with their businesses to help meet demand.

Perhaps better known for its more infamous reputation as the country with the world's highest risk of terrorist attacks and the world's largest grower of coca bushes - from which cocaine is made - Colombia's clothing companies have been among the most recent winners in the US-backed war on drugs.

Since 1 November 2002 the industry has benefited from an extension to the Andean Trade Promotion and Drug Eradication Act (ATPDEA) which provides incentives for non-narcotics production. This revised law now gives textiles and apparel quota and duty-free access to the US market - the country has enjoyed duty and quota-free access to the EU through the Andean GSP (Generalised System of Preferences) since 1990 - providing they meet certain conditions on fabric and yarn composition and on the origin of raw materials.

The Coltejer stand at Colombiatex

The results have been dramatic. Colombia's garment exports to the US between January and November 2003 surged by 48 per cent to US$449.8 million according to the US Department of Commerce. In comparison, clothing exports to the US in the same period of 2002 were worth US$303.2 million.

The introduction of ATPDEA has also provided a much-needed boost from the recession of the past couple of years. In 2002 textile and clothing exports fell to their lowest level in three years as the country continued to struggle against years of internal strife and increasing competition from CBI (Caribbean Basin Initiative) countries which enjoy unlimited quota-free and duty-free access to the USA in the case of clothing made from US components.

The timing of the deal has also helped buffer the industry against the relative strength of the Colombian peso against the dollar, which has posed a problem for exporters, and the currency crisis in Venezuela, Colombia's second largest export market after the US.

The Colombiatex exhibition centre in Medellin

And buyers are flocking to take advantage of the new opportunities to source competitively-priced apparel from a country that is just 3 hours by air and 4 days by sea to the US, and where costs per operator hour of US$1.82 are on a par with those of Morocco and Tunisia.

At the recent Colombiatex fabric, components, supplier and machinery show in Medellín, the number of overseas exhibitors among the 380 stands was up 22 per cent to 82, including 20 firms from the US and 25 from Brazil. And of the estimated 434 international visitors at the event, there were 47 buyers from 31 US companies.

According to Mauricio Gómez, the Miami-based trade commissioner for Proexport, the Colombian Embassy's commercial office: "47 US buyers were at the show to find textile mills and full package suppliers or explore strategic alliances or investments in the industry.

"ATPDEA has had a huge impact on trade between the US and Colombia but we're still hoping to grow even more."

Alicia Mejía, director of show organiser Inexmoda, adds that: "Buyers can see the opportunities here and are determined to take advantage of them. In fact, business started at this show could amount to $50 million. Colombia is changing, and we have proved yet again that things can be done."

Colombia at a glance

  • Location: Northern South America, bordering the Caribbean Sea, between Panama and Venezuela, and bordering the North Pacific Ocean, between Ecuador and Panama. It is the only South American country with coastlines on both North Pacific Ocean and Caribbean Sea.
  • Climate: Tropical along coast and eastern plains; cooler in highlands
  • Population: 41,662,073 (July 2003 est)
  • Ethnic groups: Mestizo 58%, white 20%, mulatto 14%, black 4%, mixed black-Amerindian 3%, Amerindian 1%
  • Religions: Roman Catholic 90%
  • Languages: Spanish
  • Literacy: Total population: 92.5%
  • GDP: Purchasing power parity - $251.6 billion (2002 est)
  • GDP - per capita: purchasing power parity - $6,100 (2002 est)
  • Population below poverty line: 55% (2001)
  • Unemployment rate: 17.4% (2002 est)

Leading export sector
Accounting for around 9 per cent of Colombia's industrial GDP, the textile and clothing industry is an important component of the country's economy.

In fact, it made up 8 per cent of total Colombian exports in 2002 (worth US$736 million) and was the fourth largest export category by value after oil (31 per cent), chemicals (15 per cent) and coal (10 per cent). Apparel and textiles even beat Colombia's coffee exports, accredited with a 7 per cent share of the total. Likewise, textile and clothing companies represent 10 per cent of Colombia's manufacturing sector and account for 12 per cent of total manufacturing employment, providing jobs for about 200,000 people directly and a further 600,000 indirectly.

The industry has a history in 807-based production sharing arrangements - now classified under the 9802 tariff regulation - under which garments are assembled in Colombia from US-made fabric and only incur duty on the labour, not the fabric and trims. But today an increasing number of Colombian firms have moved into full package production.

The sector is well-positioned to meet this demand as the entire chain of production, from raw material - including some domestic cotton production - to woven and knitted fabrics, threads, trims, and apparel manufacturing can be sourced locally. Moreover, in many cases these operations are vertically integrated with companies offering design, cutting, washing, dying and printing services too.

The strength of these vertical set-ups and the self-sufficiency of the main textile and apparel producing areas are thought to have evolved from Colombia's volatile security situation. Violence by narcotraffickers and terrorist groups means that travel by road outside the major cities can be dangerous - but is becoming less so as the crackdown on criminal activity takes hold - and as a result all resources needed for garment production are located near to each other.

But this is an added bonus for buyers, as Susana Gutierrez, director of Schwab de Colombia, the branch office of Ralph Lauren Childrenswear licensee S Schwab Company, explains. The set-up is "so convenient. I have all the suppliers here and they come to visit us and if we have a production problem we can go to the factory and evaluate what's going on."

It also means that the freight infrastructure is well-developed - and cheap. According to figures produced by Inexmoda, the cost of air freight from Colombia to the USA is just US$0.85 per kg compared to US$1.51 per kg from Mexico and US$3.80 per kg from Korea.

Crowded aisles

Pockets of production
There are pockets of production across the country. Medellín is the centre of Colombia's apparel industry (accounting for some 50 per cent of total production) and home to some of its largest companies, followed by Bogota (36 per cent) and Ibague. The main exports include babies' and children's clothing, underwear, sportswear, denim and corduroy bottoms, suits and knitwear.

The textile sector is small, and includes fibre producers, spinners, weavers and fabric manufacturers. In total there are 533 companies, of which 400 are small and medium size businesses (SMEs), between them generating 52,000 direct jobs. On the apparel side, there are approximately 348 clothing factories, more than half of which have between 20 and 60 machines.

In total, the textile industry has an annual production of around 800 million square metres of cotton, polyester, nylon, viscose, and wool fabrics. But this falls far short of surging demand from local apparel producers, with the result that yarns and fabrics, including denim and synthetic textiles, have to be imported in increasingly large amounts.

According to the National Industrial Survey carried out by the National Association of Industrialists (ANDI), sales of yarns, fabrics and trims increased by 9.7 per cent between 2002 and 2003.

Swimwear and underwear from Invista

Proexport, however, points out that total textile exports from Colombia between January and November 2003 dropped by 4.7 per cent to US$152 million. This represents the fact that full package manufacturers are using more locally-produced fabrics. 21 per cent of textile exports went to Ecuador followed by Venezuela (15 per cent); Mexico (14 per cent); the US (10 per cent); and Peru (8 per cent).

Not surprisingly, garment exports over the same January to November 2003 period were up 6.4 per cent to US$606 million. Obviously ATPDEA had a key role to play here, with 51 per cent of the products exported to the US taking advantage of this agreement. The main garment export markets are the US at 65 per cent; Venezuela (7 per cent); Mexico (6 per cent); and Ecuador (4 per cent). The top EU export market for Colombian apparel is Germany, although this has a share of just 2 per cent of the total.

The main export products are men's and boy's trousers which grew by $21 million between 2002 and 2003.

ATPDEA access

ATPDEA at a glance
Special access conditions depend on the fabric and yarn composition and on the origin of raw materials.


  • Apparel articles sewn or otherwise assembled in one or more beneficiary ATPDEA countries, in the United States, or both;
  • May be sewn with threads of foreign origin;
  • All dyeing, printing, and finishing of the fabrics are carried out in the US.

Regional fabrics/yarns

  • Apparel articles sewn or otherwise assembled in one or more beneficiary ATPA countries, or in the United States, from yarns wholly formed in the United States or in one or more ATPA countries;
  • There is an annual quota of 2% of total imports of the United States in square metre equivalents;
  • The quota starts as of 1 October 2002, and increases annually by 0.75% up to 5% in the last period of 2006.

Llama, Alpaca, Vicuña

  • Apparel articles from fabrics formed in ATPA countries, from yarns produced in ATPA countries, if such fabrics or components are in chief value of llama, alpaca or vicuña.

Short supply

  • Apparel articles made with foreign yarns or fabrics, if the articles are considered as being in short supply in the Unite States or ATPA countries;
  • Apparel articles made with fabrics or yarns designated as not ready available in commercial quantities in the United States.

Special rules for bras (in addition to assembly and regional materials).

  • Special rule: Garments classified under subheading 62.12.10 will be eligible for preferential treatment if the cost of the fabrics formed in the United States, excluding adornments and accessories - is less than 75% (average) of the aggregate declared custom value, during the preceding one-year period. The period starts in October of each year.

Other rules
Certain products are eligible for preferential treatment:

  • Accessories may have foreign origin, if the value does not exceed 25% of the cost of the components of the assembled article;
  • Interlinings may not exceed 25% of the cost of the components of the assembled article;
  • Yarns not from ATPA countries, if the total weight of all such yarns is not more than 7% of the total weight of the article;
  • Apparel articles with nylon filaments may be eligible for preferential treatment if they come from Canada, Mexico, or Israel;
  • Socks of all types (wool, nylon, etc) are eligible for preferential treatment

Under the terms of the expanded ATPDEA, apparel assembled in the Andean region (Colombia, Peru, Bolivia and Ecuador) from US fabric or fabric components or components knit-to-shape in the US may enter the US duty-free in unlimited quantities.

Apparel assembled from Andean regional fabric or components knit-to-shape in the region may enter duty-free subject to a cap. The cap is set at 2 per cent of total US apparel imports, increasing annually in equal increments to 5 per cent.

There is widespread concern, though, that 49 per cent of Colombian garment exports are still unable to take advantage of ATPDEA compared with Peru (88 per cent utilisation), Bolivia (89 per cent) and Ecuador (74 per cent). This reflects the fact that Colombian garment producers cannot obtain enough raw materials locally or regionally to satisfy demand.

In response, textile and apparel firms are looking for investors to help them expand their production capacity to take advantage of the benefits offered by ATPDEA. In the Antioquia region - where Medellín is located - for example, textile companies plan to invest $60 million by the end of 2006 in expanding their capacity.

Fabricato-Tejicondor, Colombia's largest textile company with a total capacity of 8 million metres per month and annual sales of $170 million, has already invested $32 million on updating its facilities and plans to spend a further $15 million in 2004 on new machinery. Mr Gustavo Builes Sierra, assistant to the president in the product area, says ATPDEA helped fabric sales rise by approximately 50 per cent in the last year.

Trend display

Fabricato-Tejicondor makes a range of cotton poplins, twills and canvases for shirts and trousers, denim and indigo products, and fashionable cotton blends for customers such as Nautica and Polo Ralph Lauren. Mr Builes Sierra adds: "Two years ago the company exported 11-12 per cent of its total capacity; in 2003 it was 22-25 per cent and in 2004 will be approximately 30 per cent."

Coltejer, a vertically integrated fabric manufacturer producing more than 112 million square metres of indigo denim, corduroys, twills and other fabrics each year for customers like Benetton, Levis, Oxford Slacks, Lee, Jones, Liz Claiborne, Polo Ralph Lauren, and LL Bean, is also on the technology upgrade trail.

According to Juan Giraldo, export manager for the US and Canada, Coltejer has invested $22 million from both national and international sources in expanding and upgrading its manufacturing and processing facilities. The company exports 30 per cent of output to Europe and 70 per cent to the US (its largest customer), Canada, Mexico and Venezuela - and sells $130-140 million worth of piece goods per year.

Likewise, leading wool and wool-blend fabric and tailored clothing manufacturer Everfit-Indulana has spent $3 million restructuring its business and expanding its capacity for the export market, and $1 million on a new yarn facility in Venezuela - specifically to take advantage of ATPDEA which states that yarn can only be imported from the US or certain Latin American countries.

The main market for Everfit-Indulana is the US, which took 87 per cent of its total exports in 2003 compared with 47 per cent in 2002. Customers include Gap, VF Corp, Kenneth Cole and Tommy Hilfiger. In 2004 fabric exports are forecast to increase by 6 per cent with a production of 4 million metres.

President and CEO María Luisa Mejia Arango explains that the company also plans to update its weaving plant and finishing facility as well as automate its fabric dyeing plant, adding: "We would like to find an investor from Colombia or abroad to help grow the company even further. We also need the government to offer fiscal incentives/tax breaks and clear and stable rules to attract investment."

But Colombia's apparel and textile firms are racing against time to secure their position on the world stage. Not only will competition increase when quotas are removed worldwide at the end of 2004, but the looming implementation of the new CAFTA agreement will increase competition at the lower end of the US clothing market.

And crucially, the extended ATPDEA deal is set to expire at the end of 2006.

Negotiations on the Free Trade Area of the Americas (FTAA) are scheduled to be completed by 1 January 2005 and a target of December 2005 has been fixed for putting the agreement into practice. But Colombia is also pushing for a bilateral free trade deal with the US and industry observers are optimistic that this will happen.

Medellin: the centre of Colombia's apparel and textile industry

"The chances of a free trade agreement are very high," notes Jorge Julian Rico, Levi Strauss & Co's branch area manager, Latin American region, "and we're trying to get accumulation included as part of this to make Colombia more competitive again.

"Colombia still has a lot of opportunities to grow and must set a strategy based on its proximity to the market, delivery of fast-to-market fashion and, of course, cost."

By Leonie Barrie.