Colombia: Ready For Business
The impending U.S.-Colombia Trade Promotion Agreement and Colombia's fashion and business expertise are attracting U.S. textile companies to find opportunities in the Colombian market.
Janet Bealer Rodie, Managing Editor
With implementation of the U.S.-Colombia Trade Promotion Agreement (CTPA) only a few months away,
Colombia is becoming a rather attractive market for U.S. textile exports. U.S.-Colombian trade has
been carried out since 1991 under the Andean Trade Preference Act (ATPA) and since 2002 under the
Andean Trade Promotion and Drug Eradication Act (ATPDEA), which have provided duty-free entry into
the United States of qualified goods from Colombia and other Andean nations, but U.S. exports into
Colombia have still been subject to duties. And a recent lapse between expiration and renewal of
the acts led to higher duties and uncertainties that adversely affected that trade. Once CTPA is
implemented, those duties will be removed, and U.S. inputs into Colombian textile and apparel
products will become more competitive price-wise with inputs sourced from other Latin American
countries that already have free trade agreements (FTAs) with Colombia.
The needle-shaped Coltejer Building, built by textile manufacturer Coltejer S.A., and the tallest building in Medellín, has beem emblematic of the city and its textile industry.
Colombia also has largely erased the stigma it bore for years from violence inflicted by the Revolutionary Armed Forces of Colombia (FARC) and other terrorist groups. The scars — diminished today under a stable, well-supported governmental structure — have not totally healed, but visitors can move about especially in urban areas in relative safety, although caution is still advised. Even the city of Medellín — once labeled the murder capital of the world and home to the notorious Medellín drug cartel that held power in the latter part of the last century — has made considerable progress in creating a stable, safe environment and cultural milieu in which its citizens can move from one area to another without fear and its children can grow up with a sense of ambition and hope for the future. And, in an affirmation of the city's improving security, global and regional political, cultural, sports and other organizations are now scheduling important meetings and events in Medellín.
City Of The Eternal Spring
Situated some 6 degrees north of the equator at an elevation of 4,839 feet in a valley surrounded by Andean mountains and traversed by the Medellín River, Medellín boasts a springtime climate year-round. Dubbed the "City of the Eternal Spring," Medellín is known for its beautiful flowers and lush, semitropical environment.
Having approximately 2.25 million inhabitants and ranking second in the country, after Bogotá, in population and overall industry size, the city has invested heavily in its Metro system including rail and bus lines designed to enable inhabitants of various barrios to move freely and safely within the metropolitan area. It also has built parks, libraries, schools and other educational and recreational amenities.
Mike Todaro, managing director of the American Apparel Producers' Network, Atlanta, has visited Medellín two or three times over the last several years and has been astonished by its transformation in recent years.
"I really felt safe and free there," he said of his most recent visit to present a seminar at Colombiatex de las Américas, a major textile trade show held each January in Medellín. "There were an unprecedented number of people walking around. The streets were relatively empty last time I was there five or six years ago. In many ways, Medellín is a remade and new city, with new malls and incredible new construction."
Medellín is the center of Colombia's textile and apparel industry, which boasts a number of large manufacturers that do business in a global climate, and quite a large number of smaller manufacturers and brands that serve a more localized market.
In addition to Colombiatex, which is focused on fashion systems and apparel production including technology, materials and machinery, the city also is home to Colombiamoda, a trade show held annually in July and focused on finished apparel. Both shows are produced and organized by Inexmoda, Institute for Exports and Fashion — a Medellín-based private, nonprofit organization that offers support for what it calls the Fashion System, including providing tools for research and innovative development, commercialization, training and internationalization.
Colombiatex exhibitor C.I. Jeans, one of Medellín's largest jeans manufacturers, stresses its environmental and social responsibility initiatives.
Colombiatex De Las Américas
Colombiatex de las Américas 2012 was the 24th edition of the exhibition, which was established during Medellín's darker days. With the improving security of more recent years, the event has become what many regard as the most important show of its kind in Latin America. This year's show featured 416 exhibitors, of which 33 percent came from 19 countries outside of Colombia. The event generated business opportunities worth US$120.5 million — $1.5 million more than in 2011 — and saw a 9-percent increase in visitors, for a total of 15,477 — of whom 9,247 were Colombian buyers and visitors and 6,230 came from 46 other countries. In addition, 16,080 people attended lectures at the Inexmoda Knowledge Pavilion, which featured presentations on development of a Fashion System for Colombia, various technologies, CTPA and other topics; and another 1,015 logged in online.
Proexport Colombia, an agency that promotes exports, foreign investment and tourism, was on hand to help international buyers meet with Colombian exporters exhibiting at the show.
Thirteen U.S. textile manufacturers were represented through the Cotton USA Sourcing Program, organized by Cotton Council International, Washington. The program has regional offices in Bogotá. Among those having booths in the Cotton USA Sourcing pavilion were Antex Knitting Mills, Los Angeles; Buhler Quality Yarns Corp., Jefferson, Ga.; Frontier Spinning Mills Inc., Sanford, N.C.; Jo-Mar Spinning, Belmont, N.C.; Mount Vernon Mills Inc., Mauldin, S.C.; Parkdale Mills Inc., Gastonia, N.C.; Tuscarora Yarns Inc.; Mt. Pleasant, N.C.; and Zagis USA, Lafayette, La. In addition, American Denimatrix — comprising Lubbock, Texas-based Plains Cotton Cooperative Association's (PCCA's) American Cotton Growers denim manufacturing mill in Littlefield, Texas, and its Denimatrix denim apparel manufacturing facility in Guatemala — exhibited fabrics and jeans in Colombiatex's Denim Review pavilion.
Some of the U.S. exhibitors have been coming to Colombiatex for a number of years, while others came this year for the first time, largely because of anticipated opportunities arising from implementation of CTPA. Textile World spoke with several exhibitors as well as U.S. visitors during the show, and found that the initial optimism carried through to the end of the show.
American Denimatrix has been doing business in Colombia for 10 years, according to Jack Mathews, vice president, marketing and sales, PCCA. "It has always been a very good market in terms of the needle and level of sophistication of the needle and quality," he said. "Many big brands have been sourcing in Colombia for years, but always garments that came back to the U.S. We began about a decade ago to service this market from a technical and development contractor point of view. With CTPA, duties will be zero, so what has been a pretty closed market will open up."
Mathews believes that with CTPA's implementation, U.S. vertical brands and retailers that had retreated from dealing in the Colombian marketplace because of duties and uncertainties now will come back. And he sees opportunities for U.S. manufacturers to sell product for the Colombian market.
"We're here to talk to folks about the local market. We've shipped a lot of product to Colombia over the years, and the end product has always come back to the U.S. Now we want some of it to stay here," he said. "Colombia is a different market — there's much more female opportunity than male opportunity, so stretch is very important," he continued, noting that 30- to 40-percent power stretch is in demand, as opposed to the 20- to 25-percent comfort stretch that is popular in the United States; and improved recovery and lighter-weight fabrics are also in demand.
"It's a great denim market," he added. "The customer gets it, and they're very innovative here and changing all the time."
CTPA Loomed Large
A lot of business was conducted at the show, and for U.S. exhibitors, the impending implementation of CTPA was an important factor.
"We're looking for manufacturers and brands that would like the option of getting better yarns and fabrics for programs that will stay in Colombia, and will not necessarily be shipped back to the United States," said David Sasso, vice president of sales, Buhler Quality Yarns, which spins premium yarns and has built a reputation for reliability and quality. "You can always find cheaper yarns, but without the tariffs, maybe we're more competitive and reliable. If a brand is looking for some assurance and transparency that you can't get with Asian yarns, then we're it," he said.
Tuscarora Yarns was showing yarns and solutions for the denim market as well as for the knit market. Besides spinning yarn, the company develops fabrics for its customers, said Thomas McCall, director of business development. "We're introducing at this show our first colored denim in bright colors," he said. "We've been able to demonstrate that we can do denim in colors that have never been seen before in traditional denim — bright yellows, tans, all garment-dyed in one hour in a dye machine. As opposed to buying traditional indigo denim where you have to order 10,000 yards, we can do as little as 2 yards with this denim."
McCall said there was a good response to Tuscarora's products and that the company received a sample order from one of the largest textile companies in Colombia. He feels CTPA brought energy to Colombiatex and expects to sell into programs that will serve both U.S. and Colombian markets. "As soon as everything is in place, there will be a place for us to do business here in Colombia," he said.
Zagis USA Director of Marketing Steve Johnston also reported good activity. "We made a lot of good new contacts and reconnected with a previous contact," he said. "We've done little to no business in Colombia because of the duty on yarn from the United States into Colombia, but with CTPA enactment imminent, there's a lot more confidence that business will come to fruition, and we're encouraged and optimistic that Colombia will be a good long-term customer for our U.S.-made yarns."
Johnston expects Zagis will sell to some companies serving the South American market, but primarily will sell its yarns to companies that are making product for the U.S. market.
Jo-Mar Spinning, a division of Honduras-based Grupo Karim's and a first-time exhibitor at Colombiatex 2012, was established in 2010 when Grupo Karim's bought an idled spinning mill from R.L. Stowe Mills Inc., which closed its doors in 2009. According to David Miller, vice president, the plant produces 150,000 pounds of combed ring-spun fine-count cotton yarn per week. Grupo Karim's also has another yarn spinning operation in Honduras, and its distributor Pride Yarns maintains five warehouses in Central America and Mexico to hold inventories of various yarns - including yarns from other spinners that do business in regional FTA areas - and to provide logistics services to customers.
Miller said he was very impressed with the quality of the exhibitors and visitors at Colombiatex: "It's fascinating to understand what their needs are for regional yarns. They are preparing for the implementation of CTPA, and the more astute apparel manufacturers are targeting U.S. retail and need to use U.S. or regional yarns. Jo-Mar has primarily been talking to knit apparel manufacturers that are already exporting to the U.S. but need more production. They really don't need U.S. yarns for the Colombian market, which opens up opportunities for our Honduras operation, where costs are a bit lower. Jo-Mar's target is Colombian apparel for the U.S. market."
Parkdale operates a joint venture (JV) in Colombia with Medellín-based Grupo Crystal-Vestimundo. The JV, Colombiana de Hilados, serves both the U.S. and Colombian markets, with about 60 percent of product remaining in Colombia, said Dan Nation, president, Parkdale International.
Nation is optimistic about opportunities opening up because of CTPA, and about the way the agreement has been structured. "The Colombian agreement is the one to follow. FTAs should be with our neighbors, not Vietnam," he said, referring to Vietnam's part in the Trans-Pacific Partnership the United States is currently negotiating with Pacific Rim countries.
"Colombia is going to be a good market. ATPDEA extension lapses hurt the supply chain, but we're in the process of rebuilding it," he added.
"Colombia's got a really good textile base with a lot of good textile knowledge, a fabulous work ethic and good businessmen," Nation said. "It's a consuming market, so when we do this agreement, the pie gets bigger instead of all of us fighting for a bigger piece of same-size pie. It also gives us opportunities that previously Mexico had to export yarn into Colombia for the local market. Mexico has had an FTA with Colombia for years, and with the duties on U.S. yarn, we couldn't beat their costs. Once CTPA is enacted, we can be competitive."
Color and finish were both on display for Spring/Summer 2013 denim fashions.
Denim Rules In Colombia
"Colombiatex is the biggest show in Latin America — and for all of America, it's the biggest show for denim," said Carlos Maqueda, director, technical support, American Denimatrix. "Fashion in Colombia is fantastic — there are fabulous washes and styles. Denim is very big in Colombia, especially in Medellín. "
Denim Review featured 11 exhibitors from Colombia, the United States, Spain, Brazil, Peru and Turkey; but quite a few other denim exhibitors from various countries were to be found in other pavilions.
Color and finish were both stories to watch at Colombiatex, as exhibitors presented jeans in vibrant yellows, greens and reds as well as in the traditional indigo with all sorts of faded and distressed looks. Finishing processes that require no water or chemicals were on stage as jeans maker Marithé + François Girbaud, France, and Spain-based finishing machinery maker Jeanologia S.L. promoted and demonstrated Jeanologia's waterless, chemical-free GFK Laser and G2 technology for applying distressed and worn effects on finished products. The technology is also used by American Denimatrix and other jeans makers.
Denim Review exhibitor C.I. Jeans S.A. sells 85 percent of the jeans it produces to such U.S. brands as Levi's® and Polo Ralph Lauren, and 15 percent to customers in South and Central America and the local market. The Medellín-based manufacturer employs 3,000 workers and produces 150,000 units per week. Among the company's denim fabric suppliers are American Denimatrix and Medellín-based Fabricato S.A.
C.I. Jeans is an industry leader in environmental and social responsibility. "All our workers get the right salary, are paid on time and receive all required benefits," said Director Andres Berdugo Gómez, stressing the importance of transparency. "We serve the world. We must comply in all legal respects and believe all should be on a level playing field."
Asked about what CTPA means for his company's business with the U.S. market, Berdugo said: "I'm pretty confident that business with the U.S. will increase. Now that we have a long-term ATPDEA extension [until July 2013], and once we finalize everything with CTPA, we will get the results. All our customers know we have a very reliable operation with competitive prices, they will receive the right product at the right time, and they have someone they can talk to who will understand their needs in terms of product price and place."
Berdugo, who sits on Inexmoda's Board of Directors, believes Colombiatex is the most important show in America related to trends and the industry: "It's an opportunity for the world to see all the capabilities we have in Colombia. Also, a lot of U.S. companies come to Colombia to present their product because the Colombian market is very important and very knowledgeable in terms of fashion and product. I believe it's very important in terms of trade, fabric and full-package opportunities."
And, with CTPA expected to go into force sometime this year, textile decision-makers in both Colombia and the United States look to be ready to sieze those opportunities.
Colombian Textiles: A Few Statistics
According to Colombia's National Administrative Department of Statistics, Colombian households in 2011 purchased apparel worth 14.8 trillion Colombian pesos (US$7.68 billion), an increase of 14.6 percent over the previous year, when such purchases totaled 12.9 trillion Colombian pesos (US$6.51 billion). In the first 10 months of 2011, the country's textile and apparel industry exported goods worth US$925.1 million — including apparel worth US$590.9 million and other textiles worth US$334.2 million, and representing an increase of 8 percent over exports of US$859.7 million for the year-earlier period. The U.S. Department of Commerce's Office of Textiles and Apparel reports that of the total textile and apparel exports for that period, US$227.7 million were shipped to the United States.
Inexmoda reports other relevant statistics: In 2011, the textile and apparel industries contributed 1.4 percent of Colombia's gross domestic product (GDP) and 10.7 percent of its manufacturing GDP. These industries also employ 20 percent of the country's workforce, including more than 130,000 direct and 200,000 indirect employees.
Social Responsibility And Sustainability: Supply Chain Partners Work Together
During a recent plant tour hosted by two of Medellín's main textile manufacturers, social responsibility, sustainability and a supply chain partnership known as Eko PET Textil were points of emphasis.
Enka de Colombia S.A. — a manufacturer of nylon filament yarn, polyester staple yarn, nylon tire cord fabrics and Eko PET polyester staple fiber processed from recycled polyethylene terephthalate (PET) bottles — has made a point of hiring disadvantaged people including single mothers, ex-guerillas wanting a second chance to return to a civil life, and people who were forced to leave their homes to escape violence in their communities.
Enka's recycling plant processes one million PET bottles per day into pellets that are transported to its fiber plant at the same site to be made into Eko PET fiber. The company collects the bottles from 61 recycling centers it maintains and staffs throughout Colombia. As part of the process, three different plastics must be separated: polyethylene (PE) bottle caps, polypropylene (PP) labels and the PET bottles themselves. Nothing goes to waste, as the PE and PP are used for other products such as benches and fencing.
At Enka de Colombia's recycling plant, crushed PET bottles are transformed into pellets that are sent to the company's fiber plant to be made into Eko PET fiber (below).
Enka provides Eko PET fiber to Textiles Fabricato Tejicóndor S.A., a vertical fabric manufacturer that employs 6,000 workers at several plants in the Medellín area. At its denim plant, Fabricato blends the fiber with cotton sourced 40 percent from Colombia and 60 percent from Texas. German Serrano Gómez, director of quality and product development, said Fabricato has been processing recycled PET fiber into fabric for garments for more than two years, and also uses the fiber for filling and nonwovens.
Fabricato's Eko PET denim is made into jeans and other garments for Wrangler®, OFFCORSS® and C.I. Uniroca S.A. The entire chain forms the Eko PET Textil partnership.
Colombia And The World Marketplace
In addition to FTAs with Mexico, Peru, Honduras, Chile, most other Latin American countries and Canada, as well as the impending TPA with the United States, Colombia has signed a FTA with the European Union; is negotiating FTAs with Turkey, South Korea, Panama and Israel; and has begun trade conversations with Japan. Inexmoda President Carlos E. Botero discussed the implications for Colombia arising from all these trade opportunities.
With the return of sourcing programs to the Western Hemisphere in response to less favorable developments and complications in Asia, Colombia presents an attractive sourcing base for U.S. brands and retailers. "When you look at Latin America, Colombia is a little more attractive than other countries because our economy is going well and the security issue has gone way down. Colombia, Brazil and Peru are booming; and Mexico is having a lot of security problems now," Botero said. "So now we have the TPA with the U.S., and we really see opportunities to get that sourcing — the companies are prepared for it." Other pluses include existing relationships with certain U.S. brands and retailers, the relative proximity, Spanish-speaking populations in the United States and the fact that many Colombians speak English.
Botero noted that although salaries conform to legal requirements, some companies need to become more professional and formalized, and government programs are in place to help companies work on management, information use, technology and bilingualism.
Inexmoda President Carlos E. Botero
"Colombia needs to provide full-package solutions, and not just cut-and-sew," Botero said. "For example, C.I. Jeans has set a big process in motion to offer full-package. And more companies are offering design. One company is managing inventory for U.S. retailers. People are adding value to the process, and not just providing the garment."
Botero also stressed the importance of participating in diverse markets. "We don't want to be like the maquiladoras in Central America," he said. "In 2008-09, countries like Mexico, Peru and the Central American countries had difficult times because they were focused 100-percent on the U.S., and the U.S. decided not to buy because of the financial crisis. The good thing that has happened in our country is that we have our own brands, and so we took advantage of our own market.
"And that also coincided with the situation in Venezuela," he added, referring to problems Colombian companies were having getting paid by Venezuelan customers. "So we gave support to doing business in the internal market, and that's the reason it's growing so much. I think we learned that having and promoting companies that make brands are important — they cannot depend only on one market, so we have a strong internal market and also produce for export.
"With the global recession affecting the markets, we have been successful in exporting our brands within our neighborhood: Ecuador, Peru, Mexico and Chile," Botero continued. Asked about the penetration of Colombian brands in the U.S. market, he said: "To be in the U.S., you have to invest for a lot of stores, so opportunities for brands to go into the U.S. must be through retailers. For example, one company here developed a special brand for Nordstrom." He also mentioned catalogs and the need to identify niche markets. "Plus, there are a lot of Colombians living in the U.S. and Spain, so nostalgic markets work as well," he added.