Brazils textile and apparel sector expects to generate 10,000 jobs this year

Brazil's textile and apparel sector expects to generate 10,000 jobs this year

Brazil's textile and apparel sector expects to generate 10,000 jobs this year and lift revenues by 1% to BRL123bn ($39bn) as Latin America's largest economy begins to emerge from its worst recession in history. 

"We are starting to see light at the end of the tunnel," says Rafael Cervone, president of the Brazilian Association of Textile and Clothing Industry (ABIT), adding that real growth will be 1% but nominal revenues will increase 5% as inflation eases and production rises 4%. "We had a very difficult political situation and we were very worried, but confidence [in the economic recovery] is growing very fast."

The sector lost 30,000 jobs to 1.47m last year, when real-term revenues shrank 8% as Brazil's economy hit rock bottom with a 3.6% contraction and 7% inflation.

But now that the economy is forecast to gain 0.5% to 1%, retail sales and exports are expected to rise 2% and 7% respectively, Cervone says. In 2016, they fell 10% and 8% respectively, he adds.

Speaking from ABIT's French colonial mansion headquarters in Sao Paulo, the executive says makers' profits and investment are also firming up, with margins seen rising 2% to 3% this year when they will spend $550m versus $479m in 2016.  

Odebrecht, tainted beef scandals

Cervone's views came as Brazilian Supreme Court Judge Edson Fachin issued a shocking list implicating one-third of President Michel Temer's cabinet and Congress in the huge 'Operation Car Wash' scandal. The 2014 case saw builder Odebrecht bribe government officials to obtain lucrative contracts with state oil giant Petrobras, and has been widened to include nearly a dozen countries, culminating in a $2.6bn fine.

The politicians could face jail sentences, while Temer is also being investigated for accepting donations to unfairly win the presidency – something that could undermine efforts to overhaul the economy.

Asked if the case, coupled with a huge tainted-meat scandal last month, will hit the garment sector, ABIT's international division manager, Renato Jardim, says this is unlikely.

"The Odebrecht's case has been going on for the past three years and even though very important people have been named in the list, Brazilian society and investors were already expecting this.

"As long as Temer's agenda moves forward, we shouldn't have a problem but if at some point it [the scandals] affect it, then we could have a problem and investors could look elsewhere."

Those investors may also have been concerned about the carne fraca or tainted-beef scandal, which rocked Brazil in March and prompted China and the EU to suspend meat exports amid claims they contained cardboard and excessive acid levels to mask rotting.

"High labour, environmental standards"

The executives insist the case won't affect the international quality perception of Brazilian fabric and garments. 

"We are known for having high standards for social labour and the environment and our cotton is 90% certified by the Better Cotton Initiative," claims Jardim. 

Brazil maintains Better Cotton top spot

For his part, Cervone notes Brazilian authorities exaggerated the beef case as only four slaughterhouses were said to be involved in any wrongdoing, not the entire sector. 

"The news was given as if the whole sector was involved and when countries sent inspectors, they realized it was not as bad as it seemed."

Cervone says this year's investment hike will go to modernise the sector. 

"We have been spending to update machinery, particularly for spinning, weaving and special finishes for denim, swimwear and home textiles," he says. 

This includes new polyester and spandex fabric blends in the key denim portfolio, which now boasts 250 categories, Jardim adds. 

He believes global shipments will gain 7% from just over $1bn last year when they shrank 7.8% as recession-hit firms outsourced production. 

Brazil expects Argentina's economic rebound will help boost orders for its denim and other fashion, while Paraguay should also increase buying as brands Dudalina and Herring open stores there.

"Argentina is the first market we expect to recover, but the strategy is to continue selling to Latin America and Europe," Jardim says. 

Cervone adds ABIT is lobbying Brasilia to negotiate free-trade deals with Mexico, the US, Europe and Japan to help open future doors for Brazilian products. Simultaneously, it is asking the government to simplify bureaucracy, lower taxes and improve labour to help boost its fortunes.