Venezuela's textile and apparel industry expects sales to grow 8% to 10% this year, boosted by strong consumption on the back of high prices for crude oil, the lifeblood of the country's economy. But despite the robust sales forecast, experts suggest it's a very different picture, as Ivan Castano reports.

Industry experts argue that Venezuelan demand for textiles and apparel is being "artificially and temporarily" boosted by the government, which buys large amounts to fulfil its social aid programmes or "misiones," which include free or discounted food, clothing and education for the poor.

However, the state is doing nothing to slow an invasion of clothing and textile exports from Asia and other countries in South America. It has also failed to invest (or promote spending) to modernise the industry, executives add.

"There's high demand for apparel but there has been no new investment or jobs created in a long time," says Mariela Osorio, executive director for Venezuelan apparel chamber Camara Venezolana del Vestido (Cavediv).

Imports have soared 80% in the past year, strangling the industry and putting many people out of business, she adds.

According to Osorio, the state has kept the bolivar high (and manipulated exchange rates) to boost imports because it is cheaper to import clothes and textiles than to buy them locally.

It must act to boost exports and improve the trade's competitiveness, she adds.

"We have high rates of imports, contraband, brand counterfeits and a very permissive customs system," she comments.

Venezuela is holding national elections early next year, which current president Hugo Chavez is expected to win because of a weak opposition system.

Observers are mixed about what Chavez's new term will bring for the industry. Some
say nothing will change and that the industry will begin to suffer if the government slows purchasing or oil prices plunge. However, others hope the government will help turn around the industry.

"We expect to get worse but we are taking a wait and see approach to see what happens," Osorio says. "This government says one thing one day but something else
the next. You can't trust them."

The Venezuelan government did not return phone calls.

Textiles industry seen doomed
Carlos Lira, general manager of Caracas-based apparel firm Ideas Textiles Karli, says the textiles industry will soon disappear because of the Asian import blitz, which is prompting manufacturers to restructure or become importers. Many have also closed shop, Lira adds.

"The industry is going to disappear little by little," he says, predicting that the textiles and apparel sector will grow only 2% in 2006.

"The industry can't grow so much [referring to the 8-10% estimates], there are massive cheap raw material and apparel imports and this is really hitting the industry."

To survive, hat-maker Lira is moving into the industrial-clothing trade and hopes to start making anti-acid and fire-proof uniforms for petrol or automobile-industry workers in the near future.

Others are more hopeful
Aquiles Ortiz Nunez, who leads Venezuela's biggest textiles lobby Asociacion Textil Venezolana, says the industry is confident that Chavez will introduce "some measure" to bolster the industry's competitiveness.

In the meantime, he said many textile producers are transforming themselves into importers, particularly of cotton thread, which is expensive to obtain in Venezuela.

Douglas Montes de Oca, who leads cotton producer Textilana, says Chavez could devalue the Bolivar by 5% next year.

"They've said they are going to restrict textile imports but haven't explained exactly how," he comments. "I think that they will do something because this is an industry that generates a lot of jobs in Venezuela."

Echoing other observers, he says a lot is needed to rev-up the industry.

The informal market must be tackled and there needs to be major investment to modernise the production chain, he says. If not, Venezuela will not be able to compete
with more efficient neighbours such as Colombia and Peru, which are gaining fortunes by exporting to the US.

Colombia has introduced duties for imports and it's supporting its industry with export and research aid, Montes de Oca says. "This is not happening in Venezuela."

Montes de Oca adds that while exports account for a small portion of the industry's revenues, the government should work to strengthen ties (something it has failed to do recently) with the Andean Community (CAN) trade block to boost future trade with its

If the state does not help the industry, textiles production will end in 5-10 years, Montes de Oca predicts.

Cooperatives surge
Meanwhile, the government is working to expand its socialist cooperative system of mixed government and privately-owned enterprises.

As part of that effort, the state set up Invetex in May and observers expect more of these companies to flourish in the future.

"Cooperatives are a socialist system and an opportunity for the government to implement its agenda, so we expect this concept to continue to grow," Osorio says, adding that she wouldn't be surprised if the entire industry was eventually transformed into this ownership model.

Montes de Oca agrees. "If the government needs 20,000 uniforms for state employees they are likely to give this job to a cooperative to sponsor its socialist policies," he says.

The state is likely to cooperatise the apparel industry more readily than textiles, Montes de Oca adds.

Because of outdated machinery, "you need a lot more investment to introduce this concept in textiles manufacturing," he says.