The apparel and textile industry of Guatemala is one of the most developed and structured exporting sectors in the country, currently one of the main generators of foreign currency revenues from exports of both traditional and non-traditional products, as well as one of the main sources of direct employment for more than 124,000 Guatemalans.

This dynamic export sector, following the cluster methodology, has developed an integration of all sectors related to the industrial confection of clothes.

PROFILE OF THE APPAREL AND TEXTILES

Sixty-eight percent of apparel manufacturing companies represent direct foreign investment, which play an important role in technology transfer and knowledge which they contribute to the development of the industry.

Products:

Guatemala has the leading textile industry of Central America. Textile production in the country is composed mainly of a 30.27% cotton and man made woven fabric, mixes (polyester and cotton) and a 69.73% of cotton knit fabrics, man made fabrics and mixes (jersey, interlock and rib).

The sector offers a strong and varied chain of supplies. Supply ranges from a wide array of finishes and processes in garments such as embroideries, silkscreen printing, dyeing processes; which, added to accessories (buttons, zippers, hangers, needles, labels, weaving thread, etc.) and services (shipping agencies, washing and drying companies, shops that make samples, textile labs, etc.) strengthen production of the whole package.

The main garments that Guatemala exports are:

· Cotton and synthetic fiber knit shirts for men and women

· Cotton and synthetic fiber pants and shorts for men and women

· Cotton, wool and synthetic fiber sacks

· Cotton and synthetic fiber skirts

· Woven blouses

· Baby garments

· Others

Business environment of the sector:

The apparel and textile industry has evolved from the challenges and changes of international trade. The Free Trade Agreement among United States, Central America and Dominican Republic (DR-CAFTA) will attract investment and allow more advantages and opportunities to develop strategic alliances among United States textile industry and the apparel and textiles companies of the region.

Laws and Incentives

· Promotion and Development of Exporting Activities and Drawback Law (Decree 29-89)

· Free Trade Zones Law (Decree 65-89)

Trade Agreements and Preferential Programs

· United States, Central America and Dominican Republic Free Trade Agreement (DR-CAFTA)

· Generalized System of Tax Preferences with the European Union (SGP)

· North Triangle with Mexico

· Central America and Dominican Republic Free Trade Agreement

· Guatemala and Taiwan Free Trade Agreement

· Guatemala and Belize Free Trade Agreement

Competitive Advantages

· Proximity to the U.S. market

· Flexibility in production volumes

· Qualified labor force

· Product differentiation

· Transfer of technology and knowledge of foreign investors

· Superior road infrastructure within the region

· The country has positioned itself as the Regional Business Center

· Industry focused in offering full package

· Annexed sectors and services existence.

The apparel industry relies on an ample supply of local labor force, notably skilled at manufacturing value added and high quality standards products. From 2006, the minimum wage for non-agricultural activities is Q 43.64/day = Q 1,309.20/month, fixed in the Government Agreement 640-2005. A bonus of Q8.33 / day or 250.00 / month must be added, according to the Incentive Bonus established by Decree No. 78-89, later modified by Decree 7-2000.

The sector has ongoing programs in the labor related programs to VESTEX (The Apparel and Textile Industry Commission) of AGEXPORT:

· Alternate Conflict Resolution RAC-: A program managing the Arbitration Center for Labor Conflicts creation, giving importance to dialogue and negotiation, with preventive mechanisms contributing to reduce social, political, economic and human costs which lead to non-resolved conflicts.

· Certification Program in the Conduct Code of the Industry: A labor certification program aimed at satisfying global market demands as well as customers that require higher standards and superior working conditions.

Environmental Impact:

Environmental issues are included in the Labor and Environmental Observation Principals, which are part of VESTEXs Conduct Code. Participating companies of this program recognize that environmental conservation is fundamental and has to be harmonized with economic development of the country so the industry will respect environmental standards and current environmental legislature in the country.

Corporate Social Responsibility (RSE)

RSE is related to corporate decisions and actions linked to ethical values, consequent with legal requirements and respectful of individuals, communities and the environment. Apparel and textile companies are committed to operate beyond the expectations of mutual benefits, rising the industrys competitiveness and contributing to the sustainable development of Guatemala.

The Integral Program of Corporate Social Responsibility at VESTEX includes Health and Occupational Security, a Conduct Code and Alternate Resolution to Labor Conflicts. It is focused on actions which benefit workers directly, such as: free medical attention through clinics in house clinics, financial assistance at dental clinics, low cost medicines and literacy programs.

Another advantage of the industry is the support from government entities directly related with development and competitiveness of the apparel and textile industry. The Apparel and Textile commission of AGEXPORT has participated with these institutions in public-private commissions regarding labor related issues, monetary and credit policies, customs, foreign investment trade opportunities and training programs.

Export Markets:

The main trade partner of apparel and textile exports is United States. In 2005, sales to that market were more than US$1 billion 600 million, from which US$543 million correspond to the national added value (local raw materials and hand labor). Guatemala ranks number 16 among the most important apparel suppliers to the United States market.

A total of 89.18% of the garment and textile exports go to the United States, 2.24% are destined to Mexico, and approximately 6.72% to Central American countries, where textiles are used for the manufacture of garments that are then exported to the Unites States. Only the remaining 1.86% % of Guatemalan exports reaches other markets such as Canada and Europe.

Given that this is a visionary industry which has served as the basis for successful models of industrial development in other economies of the world, this sector has become one of the best alternatives of the area for filling in orders of high-quality garments with unique and differentiated designs, greater added value, and flexibility. In pursuit of promoting our industry, we have created the slogan Guatemala Delivers: Quick-response: Our competitive advantage.

The Apparel Sourcing Show is an annual international fair organized with the goal of strengthening the countrys positioning as a Business Regional Center for this important industry.

More Information:

Tel: (502) 2410 8323

Fax: (502) 24108320 - 21

vestex@apparel.com.gt

www.vestex.com.gt