081_Textile and Apparel Sector

8/20/2019 081_Textile and Apparel Sector

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September 2009

Textile & ApparelIndustry

ColombiaHard-Working, Commited, Talented

n


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1. Where have we come from?

2. What are we doing now?

3. The reasons why Colombia is an attractive place to develop productionprojects in the Textile & Apparel Industry:

1. For the access to markets2. For the domestic market3. For the industry track record4. For the competitive human resources5. For the legal incentives and special tax regimes

4. Conclusions


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3. The reasons why Colombia is an attractive place to develop productionprojects in the Textile & Apparel Industry.

.

2. For the domestic market3. For the industry track record4. For the competitive human resources5. For the legal incentives and special tax regimes

4. Conclusions


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The country has shown a consistent growthhigher than that of Latin America.

GDP Growth Rate: Colombia (2000 – 2008) %

Projection2009 2010

Col L.A. Col L.A.

Latin Focus 2.1 1.1 3.0 2.9

EIU -3.0 -1.2 1.5 1.7

IMF 3.5 3.2 5.0 4.1

Source: DANE (National Accounts), DNP, EIU (Market Indicators &

Forecasts)Note: * Last Update: April 7, 2009


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Huge increases in FDI, exports and foreignvisitors

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214%

ExportsUS$

Millions

US$Millions

Source: DNP, Banco de la República (Central Bank),Note: * (pr) Preliminary Projection

FDI

Tourism

395%

120%

Millions of

Visitors


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Market confidence: recovery of investmentrating (coming soon)

Risk AnalysisForeign Currency Debt

2003 2008 Outlook

& POOR’S BB BB+

Moody’s Ba2 Ba1

FitchBB BB+

Source: Standard & Poor’s, Moody’s, Fitch


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%

Violence levels have declineddramatically

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Source: Ministry ofDefense

%

0%


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The specialized press has shared ourdevelopment with the world


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.


4. Conclusions


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We increased our preferencial access from 233 million consumersin 2002 to 1.2 billion consumers in 2010

Commercial agenda: preferential access to 1.2

billion consumers

20022010


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2002

2011 Investment agreement agenda:19 IPPA´s with 42 countries, and DTT’s with 23 countries

Double Taxation Treaties (DTT) –International Investment Agreements (IIA)Both instruments will be available to all commercial parties

2010


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Two years as the most reformingcountry in Latin America (2009)

Second “most friendly” country in LatinAmerica in the Doing Business 2007-2009

2007

2009

28 40

43 56

65 62

Colombia jumped 26

spots intwo years!

81 81

117 97

101 113

105 117

121 125 123 136

164 174

Source: Top Reformers Report. World Bank


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Most competitive Free Trade Zones in Latin America:

15% profitability and allow sales to the local market

• Capital Gains Tax 15%

• No Customs taxes are incurred or paid (VAT,

Investment in millions Direct Jobs

US$ 29.81 150


–

13

Tariffs)

• Benefits of international trade agreements.

• Share in the local market

. .


US$ 14.91 500


US$ 1 50

, , , .


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56 Free Trade Zones

Approved Free Trade Zones

14

Figures for New FTZ’s

Total Investment (USD Millions) 4,668

Direct Jobs 39,620

Indirect Jobs 86,137


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Colombia offers legal stability contracts as a

guarantee for investment projects

For amounts greater than US$ 1,500,000

A bonus paid to the Government of 1% of the investment.Conditions

Term Up to 20 years

ApprovedContracts 41 legal stability contracts, as of February 2009


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.


4. Conclusions


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The Apparel and Textile Industriesgenerate more than 800,000 direct jobs,

The Apparel industry production grew11.8% in real terms* from 2006 to2007.

Colombia has positioned itself in recent years as acenter for apparel production and fashion in Latin

America

*Prices from year 2000

w c represen s o e o a a or

force in the manufacturing industry.

Textiles and Apparel exports on averagerepresent 12% of non traditional exportsfrom Colombia, during the last five years.


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The production of fibers and yarns, fabrics and garments grew at a real

rate of -3.3%, 8.6% and 11.8% respectively during 2007.

The textile and garment productionexceeds US$ 2.5 billion annually

Source: DANE (National Department of Statistics)


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Garments, 72% of the totalTextile and Apparel Industry

Total Industry Production - 2007

and is especially strong in garments suchas T-shirts and Jeanswear

.

Fibers and Fabrics share theremaining 28%



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Textile sales by region - 2007 - US$ millions

80% of the industry activity is concentrated in theregions of Antioquia and Bogotá

Region Operating Sales Operating Costs Operating Profits Share of Sales %

Bogotá 1,060.1 818.2 241.9 45.2

Antioquia 974.3 796 178.2 41.6

Atlántico 109.5 92.7 16.8 4.7

Cundinamarca 75.4 57.2 18.2 3.2


Risaralda 66.1 48 18.1 2.8

Tolima 26 24.2 1.8 1.1Valle 17.3 14.4 2.8 0.7

Cauca 7.9 6.9 1.0 0.3

Cesar 3.9 3.5 0.4 0.2

Caldas 2.8 2.2 0.6 0.1

Santander 0.9 0.6 0.3 0.04

Bolívar 0.3 0.3 0.1 0.01

Quindío 0.3 0.2 0.1 0.01

Total 2,344.7 1,864.40 480.4 100.0


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Textile & apparel export industry :12% of non-traditional exports from Colombia

in the last five years.



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CountryWeight in

TonsFOB valueUS$ million

FOB Share (%)

Venezuela 20,213 777 56.2

United States 17 096 283 20.5

Although we export textiles, more than 65% of

industry exports are dedicated to value-addedclothing of knit fabrics: US$ 1,381 million

Main DestinationsGarment Exports – 2008

, .

México 2,725 91 6.6Ecuador 1,904 67 4.9

Costa Rica 632 21 1.5

Peru 656 19 1.4

Puerto Rico 427 14 1.0

Others 6,866 111 8.0

Total 50,518 1,382 100.0

Source: National Department of Statistics, DANE


Total : US$ 1,382 million


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DestinationFOB ValueUS$ million

FOB Share (%)

Venezuela 527.2 71.0

Principal destinationsTextile exports - 2008

Venezuela and Ecuador are the main importers of

Colombian textiles to satisfy domestic industrydemand

cua or . .

Mexico 35.6 4.8

United States 22.3 3.0

Brazil 15.6 2.1

Others 68.3 9.2

Total 742.6 100.0


Total : US$ 742 million


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1. For the free market accessof more than US $207,000million annually*

• Thanks to Trade agreements signed

Europe, Colombia has become aproduction and distribution center forSouth, Central and North America.

• Additionally, transportation costs andlead times are better when

compared to Europe or Asia.

* GDP at 2007 prices, DANE (National Department of Statistics)


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4:30 Mexico City

3:00 Miami

1:40 Caracas

5:30 New York

Bogotá, only a 3 hour flightfrom Miami and 5 hours

from São Paulo and New

5:45 São Paulo

6:10 Buenos Aires

2:30 Lima

York

5:00 Santiago


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2. For the domestic marketof more than US $900 million

• During 2008, textile imports totaledmore than US $952 million andapparel imports US $407 million.

• Colombia mainly imports fibers andsynthetic filaments.

• Market segments such as

Jeanswear and Lingerie are high-volume importers of raw goods andmaterials for production.


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The local textile production does not cover

domestic demand, therefore Colombia importsmore than 50% of textiles used in local industry

Source: National Department of Statistics, DANE - PROEXPORT



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66% of imports are fibers and synthetic

fabrics

Imports originTextile imports - 2008

Country Weight in TonsFOB value

US$ millionFOB Share (%)

China 43,259 191.9 20.2

United States 20,427 125.4 13.2

Mexico 22,033 83.8 8.8

India 29,910 80.5 8.5


Total: US$ 952 million

Brazil 9,514 49.0 5.2

Taiwan 13,250 42.6 4.5

Pacific FTZ in Col 20,093 40.2 4.2

Peru 5,999 35.4 3.7

Pakistan 8,619 31.4 3.3

South Korea 6,997 29.1 3.1

Others 52,994 242.4 25.5

Total 43,259 951.8 100.0


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Cotton fabrics, artificial fibers andfabrics, the most demanded by the local

industry

Local Sales - Textiles - 2006 (%)

Source: DANE (National Department of Statistics), Manufacturing Survey.Exchange Rate: Col$ 2,361 / US$

Total: US$ 3.32 billion


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Colombia mostly imports Garments and Knitted

Clothing Accessories


Total: US$ 407 million

00


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3. For the textile & apparelindustry track record

• Companies such as Coltejer andFabricato have been producing for thelocal market and abroad for over 100

years.

• The textile & apparel market involvesmore than 6,000 companies with sales of more than US $4 billion in the year 2007 .


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Industrial production represents 11% of all

manufacturing activity and 1.7% of ColombianGDP, while generating 600,000 jobs.

Shifting from “807” to Full Package production

More than 100 years of experience anddevelopment

Medellín is the production center for textiles andapparel in Colombia.

schemes to develop the industry vertically,

Colombian companies offer the full service:everything from design in niche markets toLingerie and Jeanswear.

Colombia has specialized in becoming a designreference center for Latin America.


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Colombia is recognized in Latin Americafor its fashion shows, especially for eventslike Colombiatex and Colombiamodawhich attract recognized internationalcompanies.

One of the most important fashion showsin Latin America takes place in Medellín

Colombia has a 0.31% and 0.17% shareof the world market value in textile andapparel production respectively, and0.25% in the fashion show market.


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4. For the competitive

human resources

• Colombia’s labor costs are among thethe lowest in Latin America. Laborflexibility and the availability of skilledhuman capital enables productionprojects in Colombia to be profitable.


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According to EIU*, Colombianworkers occupy second placein labor productivity in LatinAmerica, measured by:• Number of annuall labor

,

strikes,• Labor productivity

Scale: 10: Outstanding – 0: Worst.

Source: EIU * (Economist Intelligence Unit) 2009.


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.

Availability of Skilled Labor Competitiveness - Senior Management

4.13

2.48

3.58

3.52

Venezuela

Argentina

Venezuela

Argentina

Source: IMD, World Competitiviness Year Book, 2008 Score /10

6.89

5.08

4.94

.

6.28

5.79

4.72

.

raz

Mexico

Chile

Colombia

Colombia

Brazil

Chile


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US$ / month

P: ProvisionalF: Estimated

Source: EIU, 2009


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,

Source: Werner International


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00 00

The Colombian Textile Industry workforce ishighly skilled, 22% of the total employed

population works in this industry.

Employee TypeNumber ofWorkers

Total 132,021

Permanent53,097

Temporary 34,791

Others 44,133

*

*Adjusted for inflation and exchange ratem. monthlySource: DANE, Banco de la República (Central Bank), Colombia

The average salary for a TextileIndustry worker is US$ 274 (m) in2009, whereas the minimumsalary is US$ 221 (m). This salaryis locally and internationally

competitive.

Salary & Wages 339.8 million

Monthly Salary 214.5 273.9

Social contributions 229.0 million

Monthly Payroll 144.5 184.5

Monthly Salary Cost US$ 359.0 458.4

Exchange Rate 2,361.1 2,252


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5. For the legal incentives andspecial regimes for foreign trade.

• Colombia is a country with positiveinvestment conditions. Not just competitively,but also in terms of the legal framework,which provides excellent incentives.


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PERMANENT FREE-TRADE ZONECan be new or existing zones, organized as anindustrial park, wherein companies develop their industrial goods and services for trade .

SPECIAL PERMANENT OR SINGLE

ENTERPRISE FREE-TRADE ZONE

Authorized such that only one company, using its ownfacilities, develops their industrial goods and services

for trade.


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Most competitive Free-Trade Zones in Latin America:15% profitability, allow sales to the local market

• Capital Gains Tax 15%.

• No Customs taxes are incurred or paid (VAT,

Investment in millions Direct JobsUS$ 29.81 150

43

Tariffs).

• Benefits of international trade agreements.

• Sales to the local market.


US$ 1.99 – 9.94 500

Investment inmillions

Direct Jobs

US$ 14.91 500


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• 40% deduction on the value of investments made in Real Productive Fixed Assets.

• 100% deduction on industry, commerce, advertising & publicity, and property taxes

so long as they have been paid in the respective tax year and are coincidentallyrelated to the economic activity of the taxpayer.

• 25% deduction of the tax on financial transactions, regardless of the type ofeconomic activit of the tax a er.

• 125% deduction on capital gains taxes for science & technology projects.• VAT exemption on products designated for export.

• “Vallejo Plan”: VAT exemption on the temporary import of raw goods and materialsfor the production of finished goods designated for export.


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Special regime for foreign trade,“Vallejo Plan” for raw goods and materials

Allows: the import of raw goods and materials for the production of a determined amountof finished goods.

Benefit: imports are completely exempt from customs taxes (VAT and Tariffs) for adetermined amount of finished goods.

Obligation: to export all finished goods to third-party countries in a determined period (18months).

User : any company that requests these privileges to the DIAN (National Customs and Tax

Administration).

The “Junior Vallejo Plan” or Replacement Plan


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The “Junior Vallejo Plan” or Replacement Plan

Allows: that goods exporters, whose production process has used a determined amount ofimported raw goods and materials subject to Customs taxes and VAT, may import the same

quantity of raw materials with tax exemptions.Benefit: raw materials imported exempt from Customs taxes (VAT, Tariffs).

Users: any company exporting finished goods.

Customs mechanism used mostly for SMEs

.

Difference with the sale price of raw materials: there is no need to present additionalevidence or samples, just export and import declarations of finished goods along withdescriptions of the raw material.


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The “807 Vallejo Plan”

Allows: the temporary import of raw goods and materials by an “807” type manufacturer fors assembly only into a finished good destined for export

Benefits: 1. Import of raw goods and materials exempt from Customs taxes (VAT, Tariffs).2. Not necessary to pay non-refundable import taxes

. , .

Users: “807” type manufacturers (Assembly only plants)

Obligation: guaranteed export of 100% of the goods produced by assembly onlymanufacturer.

The use of the highly exporting users


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The use of the highly exporting users(ALTEX) framework

Requirements for recognition:

Export activity of more than FOB value of USD $2 million during the 12 months prior toa lication submission.

The value of the direct exports, or value determined through the CustomsIntermediary Society, must account for at least 30% of the total sales for the year priorto application submission.

The use of the highly exporting users


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The use of the highly exporting users(ALTEX) framework

The following is achieved:

Efficiency in the supply chain: Presentation of global shipping applications to make

partial exportations, elimination of physical customs inspections (some exceptions) orsite inspections.

Cash Flow Increase : Single worldwide guarantee to the DIAN, on all imports and.

Taxation: Exemption from VAT in the import of industrial equipment not produced in thecountry destined for raw materials transformation.

In the production chain: Authorization as private deposit for industrial processing.Joint Qualification: Possibility of being both UAP (Permanent Customs Users) and

ALTEX certified.

.

Other frameworks such as the customs deposit


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pauthorization for industrial processing

Allows: the storage of raw goods and materials that will be submitted totransformation, processing or industrial manufacturing.

Users: highly exporting users (“ALTEX”) and Permanent Customs Users (UAP).

Benefit: possibility of importing under temporary import conditions, goods intended for-, .

These imports are for the production of finished goods destined for export only.

Customs mechanism used mostly by textile and metalworks companies


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.

2. For the domestic market3. For the industry track record4. For the competitive human resources5. For the legal incentives and special regimes

4. Conclusions

Recognized companies have invested in Colombia


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DuPont de Colombia S.A.

•In 1963, this company began operating directly in

Colombia in diverse commercial areas such asTextile and Nylon Industry products, advancedfiber systems, polymers and packing materials,lycra, photopolymer sheets for markingpackages, security holograms, and much more.

Recognized companies have invested in Colombia

“Colombia has a privileged geographic

location that makes her a stepping stone,

an equidistant point for all regional markets”

-

Guillermo A. Heins, President & General

Manager for Colombia, Ecuador, Peru and

Venezuela, DuPont

•Through the years in Colombia, DuPont hasestablished important alliances.

•In addition, DuPont de Colombia S.A., thecorporation and the associate companies in thecountry, have made excellent investments in theautomotive, textile, housing, paint and other local

industries.

R i d i h i t d i


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Coats Cadena S.A.

•Coats is the largest manufacturer and provider of industrial sewing and embroidery threads in the world.

•The wide range of Coats products provide solutions for every application – for jeans, athletic shoes, airbags or

Recognized companies have invested in

Colombia

even bulletproof vests.

•Our global product offering, and the availability of our brands of the highest quality, offers the best productsand services to satisfy global specifications in 67countries all over the world. This range of products isbacked up by Coats Sewing Solutions – value-added

services to help you improve your sewing capability,allowing you to offer better-quality sewn products inless time.


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Customized Information

Contacts: with the public and private sectors

Proexport will provide you with world class services

,

On-Site Investor’s Service

Free and confidential: All services are free-of-charge and all informationprovided in the process is treated as confidential.

Trade offices of Proexport


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around the world

Trade offices

Trade agencies


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Documents

081_Textile and Apparel Sector