Apparel, textiles and footwear make up the largest portion of Nicaraguas manufacturing base

Apparel, textiles and footwear make up the largest portion of Nicaragua's manufacturing base

Nicaragua, one of Central America's leading apparel producers, has been suffering a decline in exports to the European Union (EU) this year, except for one category that is bucking the trend: T-shirts.

According to the EU statistical office Eurostat, total revenue from the country's apparel and footwear exports to the region dropped 6.8% to EUR178.2m (US$195.4m) in the first half of 2019 from EUR191.2m in the same period in 2018.

However, revenue on exports of knitted or crocheted T-shirts, singlets and other vests surged 50% to EUR14.2m from EUR9.5m over the same period, the numbers show. The biggest buyers in 2018 were the UK, Belgium and the Netherlands.

Dean García, executive director of the Nicaraguan Association of the Textile and Clothing Industry (Asociación Nicaragüense de la Industria Textil y de Confección, or Anitec), says one helpful trend boosting the value of exports to the EU this year has been higher prices. 

"International prices are favouring us at this time, which has helped reduce the impact of lower volumes," he told Nicaraguan Spanish-language newspaper El Nuevo Diario in August.

Nicaragua's apparel production has dropped since the country fell into recession last year with a 3.8% contraction, according to the World Bank. The economy is forecast to reduce by another 5% this year, the worst in Latin America after Venezuela, which is suffering one of its worst crises on record. 

Shrinking economy

The shrinking economy is largely a response to a political disaster that erupted in April 2018 when a government-led crackdown on protestors left an estimated 300 people dead. The United States responded with economic and political sanctions in December 2018, which have since been tightened on the leftist regime of President Daniel Ortega.

The EU has yet to follow suit, however, which could encourage trade with Europe, even though the European Parliament has pushed for such action. "The political crisis has severely dented investor and consumer sentiment and is contributing to a very sharp contraction in investment," the World Bank said in its global economic outlook released in June. 

While the sanctions do not directly affect clothing manufacturers, García said the collateral damage is a slowdown in investment. Buyers, he added, have said that while they will maintain existing contracts, they may not increase them. 

Indeed, Nicaraguan exports of apparel and textiles to the US rose only 1.1% in volume terms in the first half of 2019 from the year-earlier period – even though they increased 15% by value to US$838.8m from US$728.7m over the same period thanks to higher prices, according to data from the US Office of Textiles and Apparel (OTEXA). 

With the US and the global economy expected to slow over the next few years, Nicaraguan apparel makers are seeking to diversify exports – which may mean focusing on product lines delivering sales success, such as T-shirts.

"The idea is to look for new markets, or emerging markets, where we can sell our products that we cannot sell in our traditional markets," García said. "The plan we have is to explore in a good way the European Union because what we export to Europe is relatively little for the sector. It would be good to see what opportunities can be found there."