US apparel manufacturer HanesBrands says it has invested US$5.2m in new technology and staff in El Salvador in the last six months and plans to inject a further $5.2m in the Central American country by the New Year.
The international manufacturer has so far this year set up a new garment dyeing facility at its San Juan Opico, La Libertad department plant, expanded its sock production in the same complex, and increased its workforce to meet global demand.
“In total, the company will have invested $10.4m this year and have hired 430 new employees,” René Villarreal, vice president of HanesBrands operations for Central America, told just-style.
Villarreal hailed the installation of the finishing line as an important added value operation for the country that focuses on cut and sew: “We are the only company in El Salvador to possess this technology,” he says.
As well as socks, the Winston-Salem, North Carolina based company produces undergarments, T-shirts, tights and girdles in El Salvador – around 80% of this output is exported to the US.
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In July, Hanes launched a new lingerie line under its EcoSmart brand, which is manufactured in El Salvador and sold online and in 40 Target stores within the US. The underwear is made with environmentally-friendly products and methods, including recycled plastic bottles and American cotton cultivated without excessive chemical inputs. Hanes also makes use of renewable energy in El Salvador and its packaging is 100% recyclable, according to Villarreal. Its marketing targets Millennial and Gen-Z consumers.
Trading environment
The investments come amidst significant diplomatic and economic changes, potentially improving the trading environment for companies operating in El Salvador.
The country’s left-wing Farabundo Martí National Liberation Front (FMLN) government last month said it was abandoning its diplomatic relations with Taiwan to formalise ties with mainland China, and formally entered the Customs Union of Central America.
A more integrated Central American regional economy – the Customs Union, also called the Northern Triangle Customs Union, harmonises 98% of internal tariffs and will allow for 95% of products to move freely across borders between Honduras, Guatemala and El Salvador – should have positive effects for US corporate investment and American trade with the region, according to Salvadoran economist Dario Alfaro. The Customs Union will also facilitate digitalised paperwork, cheaper transport logistics, public infrastructure improvements and industry clusters.
“This means that trade [between the US and the Customs Union] will be more time- and cost-effective, but imports and exports will also be diversified and increased,” Alfaro told just-style.
He said that simultaneously starting diplomatic relations with China and entering the Customs Union marks a historic juncture for El Salvador’s international trade. “The country has taken a one-way ticket to become an open economy.”
One key element are the plans under discussion at El Salvador’s Legislative Assembly to create a new ‘special economic zone’ industrial hub on the country’s south-eastern coast that would encompass Port of La Unión. The Chinese government is tipped to invest in this zone, which the port authority executive committee says will have a special textile industry section. Indeed the Taiwan News has argued that the Salvadoran switch followed a refusal by the Taiwan government to invest in the project.
The US, currently engaging in a trade war with China, is unhappy with the move, with the US Ambassador to El Salvador, Jean Manes, noting on Twitter: “In hindsight, it seems that few are the countries that do not feel disillusioned with the results of Chinese investment in their country. Be careful!”
