In autumn 2004, Mexico's textiles and apparel industry was struggling to survive under a soaring rate of contraband textile goods. While the trade's sales have since declined by 16%, observers say that more is needed to reduce its negative impact on the industry, one of Mexico's largest employers. By Ivan Castano.

According to Antonio Kuri, general manager of Mexico's National Textile Industry Chamber (Canaintex), sales of contraband textiles totalled US$8bn last year, accounting for 50% of the market. That compares with sales of $9.5bn in 2004, representing 60% of it, he says.

Kuri's comparisons are more optimistic than those given by the Mexican Chamber of the Central Textile Industry in October 2004, which said the black sector comprised 70% of the industry's sales.

"The contraband problem has improved," Kuri says. "There have been more criminal arrests and bands dismantled, particularly those of Korean origin."

However, Kuri acknowledges that further action is required to tackle the problem in an industry that's scrambling to find its feet amid stinging competition from China and other Asian players.

China conquered the US textiles market last year, hurting Mexico, which sends 95% of its textile exports to the world's biggest market. The Asian incursion was blamed for triggering factory closings and thousands of job losses in the country.

In new efforts to combat the underground market, the government and the industry are set to launch a not-for-profit organisation and a separate commission ruled by state and business officials.

"We are going to multiply our efforts and launch joint actions to fight contraband," Kuri notes.

Industry seen growing 10%
As they seek to ruin their fake-goods rivals, spinners and weavers continue to restructure their businesses to make more innovative and fashionable products, Kuri says.

"There is a lot of innovation in design and fashion and many technological advances are being incorporated to modernise our production facilities," he notes. "Fashion is very fast changing and the counterfeit sector isn't fast enough to compete in that."

Fuelled by the restructuring, Mexico is becoming a well known exporter of fashionable (and pricier) jeans, women's apparel and unisex jackets and coats. It is also exporting higher quality threads and fabrics, he says.

If the industry's anti-contraband measures and streamlining efforts gather pace, sales could grow 10% in 2006, Kuri estimates. He also hopes exports, which fell 7% to $9bn in 2005, will gather pace and reach $10bn this year.

But not everyone is so optimistic
Mauricio Olvera, owner and manager of apparel firm Grifo, says many factories continue to close up shop in Mexico and that there is a big surplus of production capacity.

"It will be a miracle if we maintain last year's growth levels," he notes. "A lot of apparel producers are still closing and many producers continue to buy from China."

While agreeing that counterfeit levels are down, Olvera says greater efforts are required to wipe out the black market.

Customs needs an overhaul
The state's actions are working and the media is helping expose gangs and politicians linked to illegal trading, Olvera comments. However, he says custom regulations need to be changed and simplified.

"Right now it's a lot easier to buy contraband than to import your own manufacturing materials," Olvera explains. "Import rights are very expensive and the process to bring merchandise is a disaster."

Shipment arrivals are often delayed as a result of inefficient customs and unnecessary red tape, Olvera adds.

Mexico also needs to undertake several structural reforms to motivate spinners to produce locally, according to Olvera.

"We have one of the highest energy prices in Latin America and very high taxes," he points out, adding that transport security must also improve. "One of my delivery vans gets stolen every month or so and do you know where that merchandise is being sold? The black market."

Francisco Avila, operations manager at apparel maker Yale de Mexico, adds Kuri overstated his estimates about the size of the counterfeits market.
 
"The situation is better but not that much. I think the market has declined by 10% and there's still a lot to do," Avila says.

The government is not doing enough to reduce sales of illegal merchandise in streets and markets, he comments.

"You still see a lot of dealers in the street selling huge amounts of contraband. This is happening all over the country, in big and small cities and it needs to stop."

Avila agrees that the customs system needs an overhaul. On a recent trip, he and his wife brought a heavy load of merchandise from the US. "The process to bring it into the country was a mess," he says.

By Ivan Castano.