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Cheap Chinese textiles slam Peru's garment industry

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(Globalpost/GlobalPost)

Seamstresses in Lima's garment district are usually busy at this time of year, with Christmas requests from vendors across the Americas. Cheap Chinese imports however are ruining their market.

Until recently the district -- a 20-block area, packed with 25,000 clothing manufacturers and vendors, known as the Gamarra business emporium -- was doing thriving business.

But ever since a free-trade agreement between Peru and China came into effect in 2010, and similar agreements have been signed with Colombia and others, Gamarra merchants have been hemorrhaging customers.

"We should already be working on the Christmas apparel. Colombians, Ecuadorans, Venezuelans and Brazilians come here and take everything for their stores, but up to now they haven't arrived," said seamstress Irma Cayetano.

Cayetano rents a three-square meter room in a Gamarra building for $300 a month to work as a dressmaker. But this year she's done little business.

Fellow seamstress Astrid Iparraguirre sits in front of her idle sewing machine working on a crossword puzzle.

"There hasn't been much to do lately because of clothing imports," said Iparraguirre, who has worked at Gamarra for the past five years.

Gamarra hasn't lost all of its customers: many items are still sold around Peru and across the region, including the United States.

Millions of t-shirts, for example, have already been ordered by Brazilian vendors for the 2014 World Cup.

But since July sales at Gamarra have dropped 50 percent compared to the previous year, and the merchants have lost nearly one-third of the market to cheap Chinese imports, according to Diogenes Alva, head of the main Gamarra business association.

Dizzying array of options

Arab and Italian immigrants were the first to set up textile shops in the area at the end of the 19th century. Small merchants flocking to the area created a boom in the 1960s.

Today at Gamarra you can find bolts of fabric piled meters high in one store, industrial-sized spools of thread in another, and buttons, zippers and eyelets in a third store.

There is plush, high-quality Peruvian cotton fabric for polo shirts, poly-cotton blends for shirts and skirts, and denim for blue jeans and trucker jackets.

You can also find top-quality alpaca wool fabric and hire a tailor to assemble a sharp suit, or hire a seamstress for a custom-made wedding gown.

You can get lost searching for sexy undergarments among the underwear mannequins. You can buy one, or order them by the thousand.

The options are dizzying -- but even though prices are low, the price of Chinese garments are even lower.

"We've lost 30,000 jobs in the last times, in great measure due to imports from China," said Alva, with the local business group.

Alva said that Chinese products are 40 percent cheaper than the Peruvian apparel, "making it very difficult to compete."

Thanks to the Free Trade Agreement with China, a kilo of shirts or t-shirts made with acrylic fabric is sold in Peru at a wholesale price of $5 or less, about three times cheaper than similar Peruvian items, which are mostly made of cotton.

"It's impossible to compete," said Manuel Ito with the Peruvian Industrial Association of Clothing Manufacturers.

Some 3,000 business people in the apparel business are on the verge of bankruptcy, Ito said.

Merchants selling Chinese apparel however are smiling.

"We offer more designs, the quality is very good and prices are lower," said Graciela Noriega, a vendor at one Gamarra's 150 clothing retail stores.

David Chen, a Chinese businessman who arrived in Peru ten years ago looking for work, recently opened his own operation to import garments from Asia.

"Business is going well because the Peruvian providers do not have enough products or accessories to offer," Chen said. "They can't compete with the prices of China or India."

Alva said that his group "wants to defend Peruvian industry, but many merchants have abandoned the battle and have their items prepared in China."

Between 2005 and 2013 Chinese imports replaced some 237 million Gamarra items, according to figures from Peru's Customs office.

Carlos Puris, a former Gamarra tailor, said that it was a big mistake to sign the free trade agreement with China.

"They make apparel like us and now were ruined," he said. "I've been told of Chinese factory ships that anchor off (the port of ) Callao and assemble items there with Peruvian cotton."

"We can trade with China," said Fabian Cuya Caritas, who has worked in Gamarra for 40 years, "but without them driving us into bankruptcy."

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http://www.globalpost.com/dispatch/news/afp/131110/cheap-chinese-textiles-slam-perus-garment-industry