Textile companies recover after two years of crisis

Ecuadornews:

The industry contracted especially in 2015 and 2016. Companies now record solvency and improve growth expectations. Between 2015 and 2017, sales in the textile sector of Ecuador fell by 28.4%, affected by the slowdown in the country’s economy. In 2018, companies, large and small, began to refloat and there are good expectations for 2019, although not yet at the estimated levels.

The analysis of the economic-financial situation of the textile industry presented in March by the Association of Textile Industrialists of Ecuador (AITE) makes an x-ray of the branches of spinning, weaving and clothing, three of the 10 aspects of the industry with more of companies.

Javier Díaz, executive president of the AITE, explains that between 2012 and 2017 the companies show a good management of their assets, indebtedness and leverage of their businesses. However, the most complex factors are sales levels and accounts receivable from customers. Diaz argues that the contraction of consumption caused that in five years the clothes go down from the fourth to the eighth place, in the products of preference of purchase of the Ecuadorians.

In addition, two years of negative inflation and a decline in public purchases marked the fall in sales. In the last two years these items began to recover, says Díaz. Especially for an increase in foreign trade. “The export in 2018 recovered with $ 105 million, but still far from the $ 200 million (registered before the recession).”

The high costs of production are a constant in the economic activities of the country. In the case of textile companies, the analysis determined that they were reduced. While some companies invested in technology and improved their productivity to optimize expenses, “unfortunately there was also a reduction in personnel between 2015 and 2016,” says Díaz.

In fact, full employment is still stagnant with 53,000 direct jobs, compared to 140,000 inadequate jobs, according to AITE figures. To reverse this situation, the option of employers is to boost the hiring of personnel. They propose to create norms that allow to contract personnel in function of the demand and to pay in function of the productivity. “We need a national pact for employment that does not violate rights,” says Diaz.

Other companies decreased their production. For example, Enkador, a company focused on spinning and synthetic spinning, made the decision to close its spinning lines and texturized by the loss of competitiveness against manufacturers of Asian and Turkish commodities, said Camilo Ontaneda, representative of Enkador.

The firm maintained the production of yarns with added value that are used in embroidery, overlock, leather work, among others. With 250 employees they supply the domestic market and export to Colombia, Peru, Brazil, Chile and countries of Central America.

In addition, promoting the country brand to encourage consumption of national products is another challenge. “Despite having merchandise with the same prices and characteristics, people still prefer what is foreign.”

Cumulative growth

Balance of economic and financial activity between 2012 and 2017

SOURCE: AITE

Assets Liabilities

Sales

The productivity of the workforce decreased from $ 56,300 from sale per employee in 2014 to $ 48,800 in 2017.

Innovation does not stop

Another witness company the situation of the sector is La Esperanza with 20 years in the country. Elena Vizuete, commercial director of the confeccionadora, said that the high production costs impaired their local sales and their exports to Bolivia, market they seek to recover. The company does not give up. It has the support of a loan from the Financial Development Corporation (CFN), to invest in modernization, machinery and working capital.

In addition, they will soon launch their online store to sell surplus production. Entrepreneurs will be able to acquire the products at low cost. They can also buy raw materials or machinery to start a business. La Esperanza will even offer training and advice to access credits in public or private banking.

On the other hand, Textil Tech is a new company that will soon start operations in Quito. Camilo Ontaneda is also the company’s manager focused on the non-woven segment, that is, wet wipes, diaper elements, mattresses, insulation, car accessories, among others. The partners bet on this investment because they are products with added value and difficult to smuggle. Competition in this area is still small in the Ecuadorian market, said Ontaneda, so they aim to contribute to import substitution.

In addition, they will export their products to the south of Colombia. The industries are optimistic that their recovery will continue in 2019, although they consider that there is a little instability in the market. They say that to promote exports, there is more control in smuggling and promote the national industry, will allow to stay on the path of growth.

To learn more about the textile industry, the magazine DESDE CERO, which circulates this April 1 with newspaper EL TELÉGRAFO, presents a report that delves into the importance of the sector in the economy of the country and the generation of employment. (I)

Source: https://www.eltelegrafo.com.ec/noticias/economia/4/sector-textil-signos-recuperacion-ecuador