Bolivia's textiles industry is not afraid of Evo Morales' nationalistic drive and expects its trend-setting president to strike a new trade deal with the US that will boost the industry's growth. Ivan Castano reports.

Despite rumours that Morales' anti-American propaganda will prompt the US to punish Bolivia by offering a less-favourable deal, most observers say Bolivia will obtain a six-month extension of the Andean Trade Promotion and Drug Eradication Act (ATPDEA), which ends in December, and sign a new accord in the second half of 2007.

The new agreement should be as good - or better - than the prior one, predicts Antonio Handal, general manager for La Paz-based shirt maker Dinatex.

"They could negotiate some of the conditions differently but for most products, the agreement should stay the same."

He adds: "Bolivia's trade volumes don't impact the US much and they are going to have to show a good disposition if they want Morales to change its coca supporting policies."

Still, some acknowledged that Bolivia's failure to win a new commercial accord with the US would bring checkmate to the textiles industry.

"Exports would drop drastically, we would have to pay 23% duties and all investments would go elsewhere," warned Gerardo Velasco, general manager of top industry association Camara Nacional de Industrias (CNI), adding that some industry players are worried about Morales' extreme socialist politics.

Losing the US market, where Bolivia sends 97% of textile and apparel exports, would be disastrous for the industry, which will take years to recover, Velasco added.

"The industry would lose very strongly and could collapse," he said.

Still, Velasco is hopeful that Bolivia will sign the deal, which should help boost exports by 30-40% annually, helping the industry grow strongly in coming years.

In 2006, Bolivia's textiles and apparel industry is forecast to grow 36% to over US$170m, helped by a strong economy and exports, according to Velasco.

Stinking ropa usada
There is another issue the industry is very worried about, Velasco said: used clothing or "ropa usada," which dresses well over half of the population in Bolivia, Latin America's poorest nation.

According to Velasco, the state is fighting to curb the trade and is expected to introduce policies to ban imports (mostly from the US and Germany) this year.

"The trade is so widespread that much of the middle class buys used clothes in special stores and it's a very profitable business," Velasco explains, adding that the market's advent has prompted many local suppliers to close up shop and enter the sector, breaking up the formal industry.

"There needs to be a reconversion process to end this undignified and socially destructive activity," Velasco charges, adding that the government could help through aid, especially now that its coffers are swelling from high gas prices.

Still, observers acknowledge that it will be very hard to force ropa-usada dealers to pack up in a country as impoverished as Bolivia, where the black market is said to move 70% of the economy.

Marcos Iberkleid, president of leading textiles firm America Textil, says quantum efforts are required.

"It's going to be very tough and complicated to end this problem," he says. "There will have to be huge investments and the industry's production and commercial infrastructure will have to change drastically."

Seeking new markets
Ropa usada apart, Bolivia's small manufacturing camp, mostly comprised of knitwear suppliers, must become more competitive and seek new markets, observers say.

The country has a long tradition for making hand-embellished textiles and fine apparel (such as alpaca sweaters and coats), and should continue to exploit this niche, says Iberkleid.

Bolivia also has fast speed-to-market rates and enhancing these will help it beat competition from slower-moving Asian rivals, Iberkleid adds.

Bolivia should also set sights on new and fast-growing markets such as Chile, which has less protectionist policies than ATPDEA or Mercosur countries, according to Iberkleid.

Velasco added that Bolivian producers are also looking for business in Mexico, Spain and Scandinavian countries.

"Against sweatshops"
In April, Bolivia's government was rattled after six Bolivian textile workers died in a factory fire in Argentina where 1,600 mills were reported to employ 4,000 Bolivians -including children - in enslaved conditions.

Ironically Morales, who is Bolivia's first indigenous president and has made a fashion statement by wearing his country's folkloric apparel, did not announce any specific measures to help reduce the country's migration problem.

Velasco says the government is working to create more jobs (through temporary employment schemes), but that it doesn't have the capacity to create enough employment to stop people from seeking a better future in South America's richer nations.

Still, for those who stay in Bolivia, working conditions are fair, Iberkleid says.

"Bolivian factories have a high consciousness against sweatshops," he notes. "Companies know they can't abuse their HR and these types of abuses happen in very cheap and mass-volume markets," a business that the Bolivian industry doesn't cater too, he adds.