Peru Looks to Latin America to Grow Apparel Exports

LIMA, Peru—The heavy industrial looms inside the Creditex weaving facility are pumping out high-grade cotton fabric that soon will be found in men’s dress shirts sold under the Ike Behar label in the United States and in L.L. Bean catalogs.

The vertically integrated company, with $80 million to $100 million in annual revenues, spins enough yarn and weaves enough fabric to keep up with the 2.1 million units of clothing it cuts and sews every year.

Creditex’s secret ingredient for success is Pima cotton, that long-staple material that transforms ordinary shirts into buttery-soft garments that melt against your skin. The company buys about 40 percent of all Peru’s Pima cotton production and recently acquired a 1,300- acre cotton farm.

“The long fibers really make a difference,” said Miguel Ortiz de Zevallos, the company’s chief technology officer.

Creditex exports 95 percent of its finished product to the United States, Europe and Latin America, relying on a higher-grade garment to compete against the panoply of cheap goods coming from countries such as China, where labor costs and raw materials are cheaper.

That has helped Peru pump up its apparel and textile exports last year by 28 percent to more than $1.5 billion. But if you dig down deep into those figures, you’ll see that actual unit volumes creeped up only 1.4 percent.

“We are counting on high-quality goods to export and not big volumes,” admitted Jose Luis Silva, the country’s minister of exterior commerce and tourism, who was at a ribbon-cutting ceremony to open PeruModa, a three-day apparel and gifts show, with 260 exhibitors, held April 26–28.

In recent years, Peru has been aggressive in promoting its unique apparel industry. At the same time it has been concentrating on developing a larger market among its Latin American neighbors whose economy have been stronger than the U.S. economy. One of those is Brazil, whose gross domestic product shot up 7.5 percent in 2010.

To illustrate Latin America’s importance, PromPeru, the government export-promotion group that organizes PeruModa, invited nearly 500 buyers to the show—with all expenses paid. Of those, 190 were from Brazil, and another good chunk was from Mexico.

The shift toward Latin America was nudged along by the U.S. economic recession that started in 2008. The U.S. recession hurt companies such as Nettalco Industries, a $60 million knitting mill and apparel-producing company in Lima. Its business with the United States plummeted 20 percent in 2009, said Dennis Rivas, the company’s product-development manager. Nettalco’s main U.S. customers for its polo and rugby shirts and other knitwear have been L.L. Bean and Lacoste.

That 20 percent dip was pretty much made up with new sales in Brazil.

“Our best year with sales to the United States was in 2008, and then in 2009 everything declined,” Rivas said. “Sales to the United States grew in 2010, and last year was a very good year. But we are still 10 percent below 2008.”

Artimoda, which makes T-shirts and other knit tops, also felt the economic downturn in the United States. The company, with 300 employees and 10 sewing lines in Lima, used to export 40 percent of its production to the United States. Now it is less than 20 percent.

“We decided to concentrate on Brazil to make up the difference,” said Alayda Muñoz, a company salesperson. With new agents in Brazil, about 40 percent of Artimoda’s production heads west to Brazil.

A recent trade agreement between Peru and the United States, which eliminates tariffs on clothing made from regional yarns, has not been a boon yet for Peruvian apparel makers because most Peruvian apparel already entered the United States duty free under a program called the Andean Trade Promotion and Drug Eradication Act, which had to be renewed by Congress every year.

But Peruvian apparel makers noted that the free-trade accord adds more certainty for customers that duty-free regulations are here to stay and could boost garment production down the road.

It’s in the yarn

Against the backdrop of Peruvian music being played on the trade show floor, buyers were seeking out new factories and placing orders for clothing whose selling point is Pima cotton or alpaca yarn.

Pima cotton goods are particularly popular among makers of infants’ and childrenswear whose clients want an extra-luxurious feel for young bodies.

The high-grade cotton is of utmost importance to William Banti, president and chief executive of Billy Joy, a childrenswear company outside of Chicago whose brands are Lemon Loves Lime for girls and Gnu Brand for boys. 

He and his wife and business partner, Joy Chu, have been coming to Peru for the last five years to do production and seek new factories. “Our customers love the Peruvian cotton,” he said. “It is very durable.”

Ronnie Berk, owner of Little Journeys, a Chicago women’s contemporary apparel and accessories company that she founded 20 years ago, has been working with indigenous women in the Andes to produce unique goods sold at museum gift shops, catalogs and stores. She was looking for new sources of cotton and alpaca yarn. “Peru has really beautiful textiles, exquisite fibers and good craftsmanship,” she said.

Exhibitors on the floor said Peru’s reputation for high-quality yarns and fabrics has been helping the apparel industry market itself as an alternative apparel source while capitalizing on value-added goods.

Bergman Rivera Organic, headquartered in Lima, began to capitalize on value-added goods in 1992, when it started working in organic cotton. It was the first company in Latin America to be fully certified under the Global Organic Textile Standard, from field to garment. It makes yarns, fabric and garments shipped to the United States, Japan, Sweden, Canada and Brazil.

The company works, for example, with U.S. companies such as Indigenous Designs, which sells to Whole Foods Market, and Egg Baby by Susan Lazar, a childrenswear and maternitywear company in Brooklyn, N.Y. “When the market is good, it s very good” said Orlando Rivera, the chief executive of the company.

The market has been good for the Lima-based Alpaca Trading Co., which has been growing at a 20 percent annual rate for the past 10 years, said Aldo Norero, the company’s chief executive. His sister runs the U.S. arm of the company in Amherst, Maine.

There has been growing demand for alpaca, but customer service is king. “We are trying to provide a good product and good service,” he said. “We try to resolve problems immediately because there is always more competition.”