According to Karin de León, director of investments for the Vestex costume and textile sector, the investment of up to US $ 1.2 billion is in pause due to the tariff measures imposed by the United States. Data shared by Vestex indicate that 11 companies are waiting to be able to invest in Guatemala. Of these, five are Koreantwo Colombians, a China, a Turkish and an American.
De León states that in 2024 US $ 1,930 million in the area of textiles and costumes were exported, which represented a growth of 7% compared to 2023.
He also mentions that 88% of exports in the sector are directed to the United States as a finished product. In addition, he stressed that 22% of textile inputs to clothing factories are sent to the Central American market, which then export to the US market.
The Investment Director comments that since the eighties foreign companies began to see the country as a strategic production point due to its proximity to North America: “In the end, we are a country where The sector was born to supply the North American market. ”
What are these economic, strategic and logistics factors that make Guatemala a competitive destination for the textile industry?
Among the elements that are relevant to investments and the reason why the sector has strengthened and grown is undoubtedly the location. We are in a strategic location due to closeness, the issue of really having the two ports – both in the Pacific as in the Atlantic – does give us a clear advantage.
The investor also takes into account the factors of the economy, and Guatemala has a very stable economy. According to the Bank of Guatemala, last year we ended up with 3.5% of GDP growth. In addition, we have more than 20 years having a stable exchange rate.
And then, entering the sector theme of how the ClusterGuatemala has a Cluster Quite integrated, a value chain where the workers are already the opportunity to find most of the services they need to export their products in Guatemala. And from the hand of the value chain, also the ability of our people, the manual ability.
What has happened is that the Guatemala industry has been positioning as an industry where products with high added value are made. At this time, 54% of exports are added value, which means that Guatemala does not export those products that we call them basic, such as T-Shirtsunderwear. On the contrary, quite elaborate products are made and we also have a flexible chain. They are made from pants, bags, dresses and baby clothes.
What are the growth projections they have on foreign investment, exports and employment for the next two years?
The truth is a little complicated to mention in This moment projections. This year, with the issue of commercial policy of the United States, it has become an atypical era. No one expected the measures that the United States is taking and that, without a doubt, has been a disruptive in the issue of exports and what it can generate in terms of investments.
We came with a quite thriving dynamic since the time of the pandemic. If we go a little further back, the textile sector has been the one that has managed to specify important foreign investments and reinvestments in the country; That is directly reflected in the generation of employment. However, we did see a slowdown since the beginning of the year.
We already had a couple of new confirmed investments that are currently in pause. It is not a cancellation, but given this scenario of tariffs, all are being held waiting to see what will happen.
As for projections, if we had come in normal conditions, we may have been able to expect a growth very similar to the one we had last year, which we ended with a 3.5% growth in the sector.
Because at this time, seeing the last figures of the Bank of Guatemala, we have grown up, until May, 0.26%. When we compare ourselves with the world, where many of the competitors have decreased, having a 0.26% growth is not bad.
What has been the impact of this new commercial dynamic between the United States and Guatemala? How can tariffs positively or negatively affect Guatemala?
Right now it is affecting us in the same way. “For Guatemala, tariffs are 10%.” Without a doubt, Asian countries are our direct competition. China, Vietnam, Bangladés, Pakistan are from the countries that supply the United States and that are direct competition for Guatemala. Uncertainty is the worst that can happen to the industry. There are many projects, from the investment point of view, which are detained.
Right now we are waiting on July 9, which is the date where the 90 days culminated that President Trump gave of the deadline to be able to negotiate with some countries or reach agreements and establish those additional rates. So no one is moving a finger in investments or in production orders.
What happens? Well, orders, orders that were already established before, are already ending. Here the issue is how the issue of payment of the additional tariff will be divided or how to be played, because, of course, who has the responsibility of that payment is the importer, but it is not that the importer will always pay.
At this time they should already be putting orders for the end of the year and nobody is requesting anything, because everyone wants to see if from Guatemala it really will enter 0% or what will be the treatment for the other countries. The impact has been hard, because production orders are low and companies are not operating at their full capacity.
How much money do these investments represent that at the moment it has not been possible to execute for this problem?
Of the investments that we have been attending and that we have in prospecting almost already confirmed, we could be talking about US $ 1.2 billion of investments.
The most recent example we have: a company, three months ago, gave us the good news that, after all its prospecting – after almost two years evaluating other countries – they had decided to place a textile and finished plant in Guatemala. A month ago they informed us that the project had not been canceled, but that it was in Standby even new news. We know that this depends on the commercial policy of the United States, because these Asian companies, mainly, are looking to come to Guatemala to supply the United States.
What is that sheet to reach a better growth in the textile sector?
Without a doubt, we have important challenges. As a country, because I believe that it is not secret, nor is it exclusive to the costume and textile sector, the challenges we have in infrastructure, mobility. That, for us, is vital.
They are not only problems that we are having in ports, but of internal mobility of the country. So the infrastructure issue is vital for the sector, even to mobilize the load towards Central America. We are a sector that is fully integrated with Central American countries.
Another very important challenge, and where we are making us lose opportunities for investments, is the issue of processing. We have slow processes, extensive processes, lack of clarity in processes, nothing is systematized.
After having the clarity of the rates, the companies will want to move – and fast – to start producing here and from here to export to the United States. That is, if they are having obstacles to export direct from Asia, what they want is to move to find other access roads to the North American market. Here, a company to start operations and export is taking no less than 10 months; They go to El Salvador and in 45 days a company is operating.
So, that is a transcendental factor for the issue of investment operations. We have the example of two very large manufacturing companies that were about to make the decision to invest between Guatemala and San Salvador. Seeing all that time of time in process, they went to El Salvador and there they are already operating. So, the issue of processing for us is vital.
The other issue that is a great challenge is the cost of labor. We have, as a country, the challenge of being able to generate much more formal employment. We have industries such as clothing and other manufactures that could easily train people so that, very quickly, begin to get involved in the sector. But when we see the manufacturing costs, we do not compete with our neighboring countries. We are a fairly expensive country in terms of labor costs; Manufacturing is escaping. So, without a doubt, that is an important challenge.
I would say that another important challenge is the issue of generating conditions for investment in the interior of the country. We have always insisted a lot on the potential that the port to port has and in everything that could be generated from employment. From the capital city to the ports of the Atlantic there is a lot of potential, but we do not have the conditions to receive investments.
What nationality are companies that wish to settle in Guatemala?
They are Asians; For the textile sector we have a strong Korean investment, some from Türkiye and other Asian countries.
You also have to take into account the items in which the investment is coming, which is important. In the supply chain we can see two types of investments: in the textile part, which is where we have really managed to specify new investments from the pandemic. This is because the cost of electricity offered, especially compared to Central America, remains much more competitive.
The issue of having the possibility of having different sources of supply – especially from renewable sources – has been a vital element for investments in Guatemala. However, investments in the textile sector are capital intensive, but not so much in labor. Where it has really been much more difficult to specify investments is in the issue of manufacturing, for the issue of labor costs.
What are the main specializations that are developed in Guatemala?
The item where we have had the greatest investment is in spinning, because the Free Trade Agreement previously gave us the advantage of entering the United States exempt from the import tax when the spinning is made in one of the member countries of the treaty. So, there was a great space of opportunity. Also in fabric production.
Then we see one of the important items where Guatemala has grown: the manufacturing area, which is in sports and athletic. The part of making threads has also been related to the production item of synthetic cotton mixtures or yarn and synthetic textile production. We have also had important investments in finishes.
What are currently the main regions of Guatemala where investment is being received in question to the textile and manufacturing area?
Without a doubt, it is the south of the country. The costume and textile industry, in 88%, is concentrated in the department of Guatemala. This is because of the way he grew up.
The manufacturing part is in Guatemala, Mixco and Villa Nueva.
The textile part, for important elements such as electricity and water use, has been established further to the south of the country: Palín with an investment of US $ 90 million in this area and Escuintla, with an investment of US $ 100 million.
What has been the socioeconomic impact of the textile sector in the country?
The textile and preparation sector is one of the main sources of formal employment generation in the country. According to a study we have, it represents 3.3% of direct GDP and 5.3% indirect. Here we are including all related industries. And generates about 180 thousand direct and indirect jobs in the country.