LATIN AMERICA COUNTRY ANALYSIS & MEXICO

LATIN AMERICA-COUNTRY ANALYSIS

Latin America jeans fashion manufacturing is a very big business niche. Almost every single country in the continent is somehow involved in garment manufacturing, including fashion jeans. Big jeans manufacturing facilities named "maquilas" and free trade manufacturing zones are very common in Spanish speaking countries such as Mexico, Guatemala, Nicaragua, Dominican Republic, Honduras, Colombia, Panama, etc.



Latin America fashion jeans business has a double market, one domestic and one for export. Local citizens use jeans as a common garment for their fitting. Export business is closely related to the United States. USA is the biggest  jeans consumer in the world.30% of the world jeans business is only located to USA and the average per jeans per capita can be as high as 7 jeans per person. Almost 600 million jeans a year is the consumption estimate of jeans consumption in USA. Historically, USA has been a manufacturer of high quality jeans such as famous Levis, Wrangler, Lee, Abercrombie, Gap, Calvin Klein, etc. During the 1990´s due to Nafta free trade agreement a lot of jeans production made in the US moved to Mexico. Mexico became overnight the biggest jeans supplier in the world. Factories could produce per day an average of around 120,000 fashion jeans.  Huge capital equipment investments were done in the borders areas of Texas, Arizona, New Mexico. Jeans in the 1990´s were quite basic clean products with very little special effects on it. With little competition from Asia at that time, Mexico jeans business skyrocketed due to a free trade agreement named Nafta. As time went by, border production moved south of Mexico, in areas such as Torreon, Puebla, etc.

USA was a big cotton producer.at that time and initially most of the denim was produced in the US and ship to Mexico for garment manufacturing. We must keep in mind that labor costs in Mexico during the 1990´s were significantly much lower than US. Today Mexico hols a population of over 110 million and a per capita income of around 10,514 USD vs. 49,802 USD in the United States. The difference is big and the purchasing power of commong Americans is at least 5 times bigger. American firms shipped their workforce to Mexico for better controlling manufacturing units in Mexico. As Mexico became more and professional into the business, wages started to raise, and another exodus of companies towards southern hemisphere started. American denim mills from USA also moved south. Companies that traditionally were established in the Carolina´s moved to Mexico in order to produce denim. Cotton in many instances was duty shifted from USA to Mexico.

Current Mexico´s inflation rate is of around 4,2% while depreciation of the peso versus the USD has been moderate in last 5 years. This is a problem for jeans export manufacturing as the country´s product becomes more expensive to american customers. Wages in Mexico still are low as described below:
Daily minimum wages set annually by law and determined by zone; 62.33 Mexican pesos (aprox. 5 USD) per day in Zona A (Baja California, Federal District, State of Mexico, and large cities), 60.57 pesos per day in Zone B (Sonora,Nuevo León, Tamaulipas,Veracruz, and Jalisco), and 59.08 pesos per day in Zone C (all other states).

Late 1997 and on, the jeans manufacturing in Mexico started to move out of the country to strong competition within and outside the country. Manufacturing companies tried to improve productivity but certainly the gap became too big and companies started moving south. Countries such as Guatemala, Honduras started to increase their jeans production  due to lower costs and more flexible environmental laws. Mexico´s situation is similar to the situation that Turkey is facing with the EU. Mexico is still producing jeans for US market.However, the business volume is not what used to be. Geographical proximity for quick deliveries and convenient traveling is still a big asset for mexican companies.

The challenge for Mexico is to produce value added fashion jeans or basic jeans with very fast deliveries. Keeping inflation under control by fixing monetary policies is also a key factor. Productivity in Mexico also needs to be improved by more automation and technological advances.

We cannot forget that Mexico is also a big consumer of jeans and fashion. Many companies are producing for local market. Some do prefer for their local brands instead of export business because the requirements for producing fashion jeans are easier to accomplish and profits margins are higher as well. 

Some of the brands and jeans producers below:

http://www.cimarron.com.mx/index.php?command=english-manufactura-de-pantalones-cimarron

http://www.riosul.com.mx/root/products.asp

http://www.cmt-denim.com/cmt.html

http://www.grupodenim.com.mx



Denim manuafcturers in Mexico such as:

http://www.globaldenim.com.mx

http://www.conedenim.com/mills.html