At least six out of 10 garments sold in the country are made in clandestine workshops

CORDOBA.- At least six out of ten garments sold in Argentina are made in illegal workshops, which allows them to be sold up to 50% cheaper than those made in the informal circuit. From the Chamber of the Clothing Industry they point out that between 50% and 55% of the costs in the mall are taxes, occupation (rent) and credit cards; clothing represents between 20% and 25%. Clothing produced in black reduces all of those items.

From the Chamber, the manager Alicia Hernández explains to LA NACION that –unlike fabric factories- informality is "very high" in clothing production: "The dressmakers of the '60s today work for various productive units and, in addition, Bolivian immigrants constitute an important and qualified labor force.They work in informal workshops that they later sell in areas identified as Avellaneda and Flores in the City of Buenos Aires; at the La Salada fair (its creator, Jorge Castillo, is in prison accused of being the head of an illegal association) and in the 'saladitas' in the interior of the country".

The "saladitas" are a format that in recent years has spread throughout the country; according to surveys of the Argentine Confederation of Medium Enterprises (Came) they represent close to half of the trade in the provinces. Hernández points out that, at certain times, in these markets there are contraband merchandise but, in general, they stock up on clothing in the informal circuit. "The sectors with fewer resources are the ones that buy there and, in certain items, such as sportswear, also the middle ranges," he adds.

Clothing manufacturers emphasize that producing in the informal sector strongly reduces costs since it limits them to fabrics (cheaper because they do not use pure cotton), to cheaper labor and, in addition, they use less design. "It's as if they produced in China or Bangladesh," they graph. The Chamber estimates that non-formal labor doubles that with a blank employment relationship: 100,000 compared to 50,000 registered.

At least six out of 10 garments that sold in the country are made in clandestine workshops

From Fundación Protejer, its president, Yeal Kim, even believes that 60% is a "conservative" number; historically the percentage of clothing in black is very high and it may grow with the crisis." He cautions that that level of informality is "impossible" in cloth-making. "In the purchase of inputs, clandestine workshops do not make a difference; the key is in the workforce, which -if it is formalized- doubles the cost. It is clearly unfair competition and it worries the sector a lot," he laments.

More impact than imports

The delayed exchange rate was a determining factor in the fact that between 2016 and March of last year garment imports skyrocketed. In 2016, clothing for US$430 million entered through customs and the Chamber estimates that Argentine purchases abroad quadrupled that value. "We saw the greatest impact on the industry in 2017, where it was very complex to sell because both end consumers and factories had equipped themselves," says Hernández. "Last year the devaluation came when the 2018/2019 summer was already bought by the companies".

In import operations, 30% deposit is paid when carrying out the operation and the remaining 70% is paid when the order is shipped at origin. In order not to lose what has already been delivered, the companies complied with the agreement and the clothes entered in June. According to the Chamber, of the total garments sold in shopping malls and brand stores, between 10% and 15% is the average that is brought from abroad; with the dollar at $20 that value climbed up to 25%.

Last January the value of imported garments fell 31% year-on-year, but compared to December it rose 60%. 58% entered from China.

The top 20 importers accumulated 73% of the total value entered (a dozen totaled 57%), which deepens the trend towards concentration since the average for that number of companies was around 52% and 36%, respectively. Zara and Falabella were the ones that earned the most, US$7.8 million and US$2.6 million, respectively. Anyway, both of them brought less clothes than a year ago.

Hernández warns that, unlike the big global brands, in Argentina there are no local companies that have production plants in China, Cambodia, India or Bangladesh: "They buy and bring; they do not produce. Argentina does not have the volume to do so It is basically the domestic market and some export to Latin America." In 2018, foreign sales totaled US$21.3 million at FOB value, which implies a 34% year-on-year drop.

In terms of retail prices, local manufacturers say that importing does not imply big differences. The key, they say, is to be able to count on "different" products or fabrics. Hernández and Kim emphasize that it is the drop in purchasing power that hits the sector the most; the key to revitalizing the industry is to recover consumption.

For Kim, it is a priority to correct the work address law that dates from the 1960s and that is an incentive for informal workshops. In a meeting a few weeks ago with the Minister of Production, Dante Sica, the industrialists told them that the Government will seek to advance in the repeal of this work regime and replace it with the general guidelines of the Labor Contract Law and each agreement. industry group.

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