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June 15, 2022

How to hone apparel sourcing hotspot Honduras’ potential

Pedro José Barquero Tercero, the Secretary of Economic Development for Honduras, explores how the country has the potential to become a forerunner of economic prosperity.

By Guest Author

In the 2021 presidential elections, the people of Honduras decisively demonstrated their commitment to democracy, anti-corruption, and the desire for a new era of liberty, justice, and economic prosperity. President Xiomara Castro’s historic victory and commitment to equitable development, economic prosperity, and the fight against corruption has our nation buzzing with optimism and hope. This unique scenario has laid the groundwork to decisively change the country’s course by partnering with our closest allies. Honduras has the potential to become the forerunner of economic prosperity in the region, especially in the current state of world affairs. As our major trading partner and host of the Summit of the Americas this week, the United States could play a key role in this period of national regeneration.

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Months ago, leaders from our government and private sector began working with their American counterparts on strategies to capitalise on nearshoring trends sparked by the global supply chain crisis. This initiative has legitimate potential to be a major component of President Castro’s effort to deliver economic stability and foster job creation through investments.

The concept of nearshoring is quite simple: bring goods closer to the United States. For example, the Port of Cortes, located in northern Honduras, is only three days by boat to Houston and three hours by plane. The proximity to the United States, a qualified workforce, and the strong economic benefits Honduras offers are attractive to American companies investing in Honduras.

On the contrary, elongated supply chains for apparel and consumer products from China and Asia have broken down, driven by the global pandemic, rising freight costs, and labour shortages.

These pressures have forced companies to recalibrate their supply chains out of Asia and nearshore more production to Honduras and the entire Western Hemisphere via the Dominican Republic-Central America- Free Trade Agreement, also known as the US-Central America and Dominican Republic Free Trade Agreement (CAFTA-DR), which allows for the duty-free import of thousands of products.

Crucially, CAFTA-DR ensures that nearshoring is mutually beneficial to the United States, Honduras, and workers in both countries. Rules in the agreement ensure that key textile and apparel industries must use American and regional inputs to receive duty-free entry into the United States, which guarantees that job creation is symbiotic. Likewise, the agreement enshrines protections for workers in both countries and solidifies their right to safe working conditions, unionise, and strike.

For years, Honduras has been a prominent textile and apparel exporter in the hemisphere due to our proximity to the US, the textile rules of origin and import benefits from CAFTA-DR, and the efficiency of our workers. Honduras is the fifth most affordable producer in the world with US$2.78 per unit (measured in square meter equivalents), according to the World Bank.

Honduras is an immediate supply chain alternative. For example, in a matter of days, US cotton harvested by Texan farmers, a state that has produced 40% of US cotton in recent years, could be transformed into a T-shirt by Honduran workers employed by American companies, creating thousands of jobs in our country. Furthermore, this finished product can later be retailed at a store in California in a matter of days and not weeks.

While only modestly realised so far, nearshoring is already taking hold. In conjunction with Vice President Kamala Harris, President Castro and our private sector leaders secured significant investments from several American companies in recent months. For example, Parkdale Mills and Intradeco Holdings have invested hundreds of millions of dollars to expand regional coproduction with our textile, yarn, and apparel manufacturing industry, which is one of the strongest in the region and a practical area for initial nearshoring focus. Nearly $1bn in textile and apparel investment is expected in Central America this year alone — a historic level.

These recent investments exhibit an entirely new opportunity for Honduras to achieve both global prowess and domestic prosperity vis-à-vis the textile and apparel manufacturing sector, all while ensuring that American workers enjoy the same gains.

Experts contend that more investments and shifts in supply lines to Latin America can be expected, as companies struggle to navigate the supply chain issues in Asia.

The convergence of these macro factors, President Castro’s election, and the recent investments by leading US companies has brought a breath of fresh air to the partnership between the United States and Honduras.

President Castro, Vice President Harris, and these forward-thinking US companies have laid a sturdy foundation for a generational nearshoring effort. It should be everyone’s hope that leaders in the American administration, Congress, and private sector use the Summit and months to come to formalise a nearshoring programme and expand economic solidarity with the people of Honduras.

About the author: Pedro José Barquero Tercero is the Secretary of Economic Development for Honduras. He was formerly president and executive director of the Chamber of Commerce and Industries of Cortés, a corporate organisation that brings together the private sector of the northern area of Honduras.

This article was originally featured on Medium.

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Free Report
img

How can brands navigate the post-COVID-19 Apparel market?

In 2021, the Global Apparel market remained at 3% below pre-pandemic levels, with Europe and LATAM lagging behind. If they want to see full recovery, brands must look ahead. GlobalData is therefore offering this free report, Future of the Apparel Market Post Pandemic, to assist companies in adapting to the future market. This report explores the following topics:
  • Latest forecasts for the online apparel market out to 2025
  • How different regions and categories will perform, including which regions are lagging behind and which are performing at pre-pandemic levels
  • Which categories within the Apparel market are displaying resilience
  • Which brands are driving online spending
  • Impact of inflation on the Global Apparel market
  • What the biggest trends are that apparel businesses must adopt to succeed
Read our report on the Future of the Apparel Market Post Pandemic to gain valuable insights on how to best position your brand in a post-COVID-19 world.
by GlobalData
Enter your details here to receive your free Report.

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