Colombia’s textile industry

Colombia is recognized internationally as a country which possesses great strengths in the textile and apparel businesses and, specifically, in the fashion business.  The different international fairs are a clear example of the strengths of the textile-apparel business, as well as of the huge efforts being made to modernize the industry and respond to the demands placed upon fairs of this type. Besides, one can identify the potential Colombia has as a reference point for other Latin American countries with regard to innovation, development and design

Colombia is a reference point for Mexico and other countries in Latin America regarding the design and development of textile –apparel products, which translates into products with a high aggregate value

The Colombian textile-apparel sector is one of the nation’s key industries, responsible for 9% of the country’s productive GIP, 24% of employment in manufacturing and 7% of total exports.  The Colombian government implemented economic reforms at the beginning of the 90s in order to open the country’s economy to foreign investment through tariff reductions, financial deregulation, the privatization of state companies and a more flexible exchange rate. 

The textile-apparel sector is made up of near 450 textiles factories and 1200 apparel factories with more than 20 workers in each one of them. They are located largely in seven cities of the country, mainly in Medellín, which represents 53% of the country’s textile production and 35% of the clothing production.

Geographic distribution of the textile industry 

Antioquia: 53% 
Bogota: 40% 
Rest of the country: 7% 

Geographic distribution of the apparel industry 

Antioquia: 35% 
Bogota: 35% 
Rest of the country: 30%

Considering that the Colombian industry will face various challenges during the year, these challenges include, global slowdown, contracted consumer spending, arrival of more brands in the market, growing inflation, higher interest rates, etc.

The Colombian textile sector accounts for 0.8 per cent of GDP, 7.5 per cent of manufacturing GDP, 2.4 per cent of exports and also generates 17 per cent of industrial employment

COLOMBIAN CURRENCY

Colombia’s peso currency, which has depreciated nearly 60 percent in the last year, will stay near 3,000 to the dollar for “a good while” because of low oil price. The currency reached a record low of 3,043.9 pesos to the dollar on Wednesday, bringing depreciation to 59.3 percent over the last 12 months.

One could not classify the depreciation as either good or bad, but said the fall in the price of oil, Colombia’s largest export and source of foreign exchange, would have negative fiscal repercussions.

Colombia’s finances have been hurt by the global fall in the price of crude, which provides nearly a quarter of government income.

Analysts expect Latin America’s fourth-largest economy to expand about 3 percent this year, down from 4.6 percent growth in 2014 and below the government’s 3.6 percent target.

The state-run oil company, Ecopetrol SA, is already struggling; they’ve cut their 2015 output target by 7.2 percent. They plan now to produce 760,000 barrels of oil per day, down from previous expectations of 1 million barrels per day, while investment spending will be down 26 percent from this year, the report said.

One side effect with long-term consequences is that investment in the oil industry has also dropped significantly, reducing the possibility Colombia will find new oil wells before its current wells dry up around 2020.

“Colombia requires an urgent crash plan to significantly increase [oil] exploration.  If the industry doesn’t do this, they can’t increase the reserves of petroleum that they need to achieve the fiscal stability of the country.

The country’s government has proposed to begin fracking in order to push away the country’s oil expiration date.

A long-term reduction in oil revenue will affect how much the country can invest in diversifying the economy and its export sectors in preparation of a post-oil period.

If at that point more than half of Colombia’s total exports come to a halt, there is no saying what the consequences will be for the peso and Colombia’s inflation rate, which generally speaking goes up when the peso goes down.

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