Honduras apparel industry says business as usual
Despite still being engulfed in a political crisis three weeks after the Honduran president was forced into exile, business in the fourth largest apparel supplier to the US market has largely continued as usual, industry sources have told just-style. Factories continue to work without disruption and orders are going out on time, as Leonie Barrie reports.
Playing down reports of growing unrest and rising tension in the country, industry executives say the leadership upheaval has had little impact on the clothing industry and that companies are continuing to fulfil all their order commitments to customers.
"It's business as usual in Honduras," confirms Daniel Facusse, president of the Asociacion Hondureña De Maquiladores (AHM), the country's Apparel Manufacturers' Association which represents 240 textile, apparel and service companies. "In no way and at no time has business been interrupted."
"All of the orders are going out on time," adds Tony Medina, president of Thread and Trim Suppliers, a local firm that sells a range of fastenings, interlinings, tapes, elastics, and screen printing and heat transfer equipment to apparel makers.
"The new government is giving its support to make sure that we stay in business, especially in this time of world economic turbulence."
Even Canadian sock maker Gildan Activewear said events at the end of June, which saw president Manuel Zelaya ousted by the army ahead of a disputed constitutional referendum, had "no impact" on its operations or its employees.
That said, there are also signs that US apparel importers and retailers are watching the situation closely, amid fears that any deterioration could force them to switch sourcing to other parts of the region.
Trade groups representing US textile and apparel importers and retailers have sent a letter to President Barack Obama emphasising the need for "predictability and stability" in Honduras and stressing its "importance" for the US textile and apparel supply chain.
They also described the country as "the linchpin to the western hemisphere supply chain for this sector."
Honduras is the third largest market for US textile mill products (US exports were $1.4bn in 2008), and the largest DR-CAFTA (Dominican Republic - Central American Free Trade Agreement) supplier to the US.
It is also America's biggest sock supplier after temporary tariffs on imports of cotton socks were lifted at the end of last year.
Labour unions have also stepped into the fray, calling for an urgent review of trade with the country, for global sanctions to be imposed on Honduras unless democracy is restored, and for the suspension of GSP+ preferences that give it duty-free access to the European Union (EU).
While some businesses and roads in the capital, Tegucigalpa, are reported to have been closed amid protests by supporters of Zalaya, Facusse says the claims are exaggerated.
"The last couple of weeks have been seamless," he says, "apart from a few groups supporting the ex-president in the streets. If you didn't know it had happened you wouldn't notice anything different."
He dismisses claims of a military coup, describing events instead as a "constitutional transition of the presidency."
Zelaya - an ally of Venezuelan leader Hugo Chavez - was removed from office after the supreme court order found he had been illegally trying to change the country's constitution so that he could be re-elected for another four-year term in January.
The moves, Facusse says, were taken to protect the constitution and reinforce democracy in Honduras, and apparel customers and investors are reassured by the way that things have been handled.
Apart from an initial five-day curfew and a 48-hour period when borders with El Salvador, Nicaragua, Guatemala were closed, "imports and exports have been going through the ports, roads, and all plants and factories have been working as usual.
"None of the apparel business was interrupted," and Puerto Cortés, the largest Atlantic port in both Honduras and Central America, "was open permanently so the import and export [of apparel] took place on a regular basis."
In fact, any disruption was felt more by its three neighbours who move merchandise from one country to another under DR-CAFTA.
Tony Medina also points out that most of the protests have been confined to the capital Tegucigalpa, which is four hours away from the northern town of San Pedro Sula and the Sula valley where the majority of apparel firms are based.
As for claims that workers' rights have been suspended, and that the new government has made moves to cut wages, Facusse explains the legal framework that protects workers' labour rights is still intact, and that any attempts to change them will be defended vigorously.
While there are no signs yet that US apparel importers and retailers are switching sourcing to other parts of the region, many Honduran apparel companies will undoubtedly be shifting some production to factories in neighbouring countries as a common-sense approach.
But as Medina notes, the biggest loser if this happens is the local work force, of which 110,000 direct workers are employed by AHM member companies.
It's a view echoed by industry consultant Mike Flanagan, chief executive of Clothesource Sourcing Intelligence, who says: "Unions always want embargoes...do they seriously want their workers thrown out of work, which is what an embargo means?
"As far as things stand now, there's no evidence of anyone in the west wanting to ban Honduran clothes. Most apparel sourcing companies are used to the fear of their supply being disrupted; but it does affect the confidence of potential investors."
With apparel exports a cornerstone of the Honduran economy, maintaining deliveries is a prime objective.
As one of the five Central American countries to have signed up to DR-CAFTA, around 98% of Honduras' apparel exports go to the United States where most benefit from duty- and quota-free access based on their fibre content and the country of origin of the fabric or fibre.
The country's close proximity to its largest customer has also given it an edge in terms of speed to market, making it a popular choice with retailers who are postponing orders until the last minute or seeking fast replenishment of key items.
"We're very close to the US - only two days by boat or two hours by air - so Honduras has a very good speed to market and a good production base which allows retailers to place orders at the last minute and be served in a timely manner," Facusse explains.
Even so, while exports to the US rose 3.7% in 2008 to $2.604bn, the slowdown in US retail sales combined with competition from low-cost countries like China, Vietnam and Bangladesh is painting a different picture so far in 2009.
In the year to 31 May 2009, Honduran apparel exports to the US edged down 4.9% to $2.4bn, with this fall accelerating in the first five months of 2009 when exports tumbled 21% to $772.5m.
In fact, Medina sees the economic downturn in the US as far more damaging to the Honduran apparel industry than the country's current political upheaval.
However, it is also clear that the situation is not yet over.
Despite being forced into exile in Costa Rica, Zelaya insists he is still president - even though congressional leader Roberto Micheletti has already been sworn in as his successor. And earlier this week, talks to try to resolve the political crisis broke down without agreement.
Nevertheless, the Honduran apparel industry continues to put on a brave face.
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