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The endless damage of imported garments against Peruvian production

Entering the third year of the pandemic, the Peruvian textile and clothing industry is far from reaching a true recovery. This situation is explained by the lack of protection of government policies against imports, the lack of financing and little interest in eradicating informality.

While in that same period —in which the local labor force had to interrupt its production for a few months to avoid contagion—, imported clothing continued to enter en masse and at comfortable prices.

Imports sweep

According to him Institute of Economic and Social Studies (IEES) of the National Society of Industries (SNI), the Peruvian production of clothing registered a growth of 27.5% between January and August of this year, compared to the same period of 2020. However, they detail that the result is due to a mere statistical rebound after the paralysis of economic activities with the arrival of COVID-19.

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And compared to pre-pandemic levels, the sector weighs down a contraction of -24.2%.

On the other hand, the volume of imported garments rose 56% compared to last year, totaling just over 324 million units (see infographic).

In addition, the SNI observed that although in the first eight months of 2021 there is a slight increase of 0.6% in the average total import price compared to 2020; however, it is noteworthy that garments of Chinese origin registered a drop of -4.0%.

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Even reviewing the average admission price between 2016 and 2020, an accumulated reduction of -45.1% is seen. For Chinese clothing, the variation reaches -52.7%.

According to data from the SNI, the situation affects more than 94,000 mypes that cannot compete on equal terms with the prices of many importers or with the department stores that dominate this sector.

The duty to apply safeguards

“It has been a difficult year. We believe that it could have been avoided if decisions were made in the Executive on safeguards. We can’t stand it anymore,” said Susana Saldaña, president of the Gamarra Peru Association.

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The leader regretted that the dialogue with the Government of Pedro Castillo since, at the beginning of his management, portfolios such as the Ministry of Economy and Finance (MEF), the Ministry of Production (Produce) and the Ministry of Foreign Trade and Tourism (Mincetur) recognized that there was a will to apply this measure in favor of mypes.

It is worth remembering that the Government of Francisco Sagasti turned its back on the application of safeguards to the entry of Asian garments, despite the fact that Indecopi recommended provisionally executing them for 200 days, seeing that imports were multiplying considerably and at a different rate than that of local production.

In this sense, Saldaña hopes that after ex officio a new Indecopi investigation to apply safeguards is initiated, the Executive’s Multisectoral Commission — made up of MEF, Produce and Mincetur — will finally take action on the matter.

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“You cannot lie and say that higher prices will be paid (for safeguards) or that the industry will be affected. You have to unravel myths. This is not protectionism. Garments are imported for less than a dollar and they are sold at S/ 80, S/ 100. The cost of production for the same garments costs us differently”, summarized the business leader.

Saldaña specified that for the production of garments such as a polo shirt, the real production cost ranges between S/ 8 and S/ 10, and the unit is sold for up to 20% more. “Last year, with the increase in input prices due to the rise in the dollar and the political noise, we had to absorb our profits to continue subsisting,” he noted.

Criteria

According to Antonio Castillo, manager of the IEES, Indecopi acts based on what is established by the World Trade Organization (OMC), since the data show that there is a causal relationship of a possible damage to the Peruvian industry with the increase in imported garments.

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The specialist recalled that Peru has one of the lowest tariffs in the region (barely 11%), unlike neighboring countries such as Colombia (40%), Brazil (35%) and Ecuador (24%).

Castillo emphasized that after completing the investigations, Indecopi will recommend the percentage that should be executed to improve competition.

ComexPerú questions the safeguards

Jessica Luna, general manager of ComexPeru, argued for this newspaper that the safeguards would cause great damage to national production since the imported product will become more expensive. Luna alleged that the Indecopi investigation grouped clothing as a single product, for which socks, shirts, sheets and other garments were mixed, which caused errors in the measurement of damage because imports were analyzed in units of different products and not with their respective values.

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“You can’t mix potatoes with sweet potatoes,” he landed. Luna, in that sense, explained that there is not a massive increase in imports, since it only rose 3% from 2016 to 2020, and 10% between January and June 2021 compared to 2016.

Data

Scope. The productive and commercial chain linked to the textile and clothing sector generates more than one million jobs nationwide.

Composition. The clothing sector is made up of 93,861 companies. 99% are mypes. The manufacturing business fabric has the largest share in the industry: 23.2%.

Rank. China occupies 90.9% of imports. Bangladeshi 3.3%.

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