Peru: Chain reaction

Nowadays, the cotton t-shirts, shirts and blouses are the top products in the global sales ranking and occupy the first positions in the list of non traditional exported products. Recent figures reveal that the jobs of nearly 7.5 million Peruvians depend directly on indirectly of exports and certainly, an important share depends on Textile and Apparel sector given it’s labour intensive characteristic and multiplication capacity of the benefits of the international trade on the economy.

Today, the main market for Peruvian apparel exports is United States that in 2007 received 58.6% of total sales and in the first semester of 2008 imported 482 million USD from Peru. Certainly, the slowdown of the U.S. economy is beginning to impact in the sales to this market but with the consolidation of the preferential access of the ATPDEA under the PTPA, Peru may be able to face giant competitors like China that produce at very low costs, mainly because of the poor wages paid to the labour force.

But, besides the U.S. there are other interesting markets for Peruvian apparel products and, facing the entry in force of the FTA with Canada and the extension of the preferential access to Mexico for instance, Peruvian companies have the opportunity to expand sales even more. A clear example of success is the case of formerly little producer of Huancayo that received me a while ago and showed me that success is around the corner for those who put all their effort, given the fact that in a relative short period he managed to give an important step forward and became supplier of an exclusive golf shop. I am sure that this is only one of many cases.

Additionally, it is important to notice that, due to the economic stability and the new network of preferential agreements, other producers in the region with potential in the sector are starting to look our country with attention and therefore, it is no longer surprising to hear about investors missions from Colombia or Ecuador that wish to take advantage of the amplified market. This, besides increasing the sector’s contribution to employment, sets bases to promote strategic alliances and technologic developments in order to position our supply and exploit better the benefits of liberalization.

In this context, dear reader, it is evident that our country has position itself as a relevant competitor in this sector in the global arena even when the share of the market is still reduced. Therefore, given the difficulty to compete with China and other big producers, Peru has to adopt a differentiation strategy and focus on products with a higher added value and innovative designs; and in this challenge, the development of regional chains and associations could be the key.