Since the suspension of quotas in 2005, buyers and retailers have been free to source textiles and apparel of any type in any amount from any country, and apparel sourcing has shifted from the Western Hemisphere to the East due to cost factors. To adapt to this change, the DR-CAFTA (Dominican Republic – Central America Free Trade Agreement)countries focused on strengthening the value chain to compete globally and penetrate new markets. The region managed to attract new investments in yarn and fabric production, trims, apparel and related products and services that have strengthened and reinforced their capabilities and have positioned the region as an alternative now that energy, transportation and labor costs are rising and apparel-labor availability is shrinking in some parts of Asia.
El Salvador has been no exception and, since 2004, the country has been working on executing a strategy that has allowed the country’s textile and apparel industry to develop structural changes in factories and mills by engagement in capacity-building programs and by meeting international compliance and standards in labor and environmental regulations.
The goal was to develop virtual and vertical companies for both replenishment of commodity businesses and the development of niche products that promoted a strategic relationship between textile mills, garment factories and retailers that would reduce costs, increase efficiency and flexibility allowing El Salvador to take advantage of our geographic proximity to the United States. One of the results of executing this strategy was the establishment of a robust and vertically integrated synthetic-textile manufacturing cluster that has developed over the past several years. This synthetics cluster includes polyester and nylon yarn, narrow elastics, circular and warp-knit stretch fabrics and apparel manufacturers for markets such as athletic wear, sportswear, performance wear and swimwear.
Some of the companies included in this cluster are CS Central America, Unifi, George C. Moore Company, Pettenati, Darlington Fabrics, Apparel Production Services (APS), TexOps and ProDept. Over the years, the members of the Salvadoran synthetics cluster have developed a very cooperative network that constantly shares best practices, customer information and trends, suppliers, and an opportunity to address their issues and challenges as a group. They are very much aware that by working as a group they will continue making the country and the DR-CAFTA region more attractive for retailers and global brands to source in the region.
Over the past three years, El Salvador’s textile- and apparel-industry representatives have perceived a renewed interest in the DR-CAFTA region on the part of US and global apparel sourcing executives. They have been receiving a stream of sourcing executives at their manufacturing facilities who are exploring and evaluating and coming back to the region. Sourcing executives are interested in learning about suppliers’ capabilities in yarns as well as narrow- and wide-fabric manufacturers in El Salvador and are rediscovering the apparel value-chain in the region. DR-CAFTA Exports to the USA in 2012 reached $7.8 billion, to which El Salvador (positioned as the 9th apparel supplier) contributed $1.8 billion and was the only DR-CAFTA country that actually experienced growth in apparel exports to the USA.
The American Apparel Producers’ Network (AAPN) carried out a survey to understand the perceptions of 13 senior sourcing executives about sourcing in Asia versus sourcing in the Americas. This research provided feedback on the performance of the Western Hemisphere in areas such as apparel suppliers’ knowledge and experience with US markets, vertical integration of the value chain, speed, costs, and ease of doing business, product development capabilities, social compliance and risk assessment. The results conclude that Americas’ shorter cycle times, new capabilities, speed to market, and flexibility, among other important criteria, are changing the perceptions apparel-sourcing executives have of the Western Hemisphere’s performance versus the East. The survey findings also indicated that the West needs more synthetics, something that El Salvador has been working on for several years and in which El Salvador suppliers possess considerable expertise. Overall the gap between the two regions is not as pronounced as one might have expected before (Avg. West of 3.1 vs. Avg. East of 3.5), so it is likely that the West will come more and more popular among buyers.
An additional factor is that the country has been working on the introduction of new technologies and many companies have invested in obtaining certificates of compliance, since in today's market customers do not consider dealing with a supplier without the requisite certification, regardless of quality, price or reliability of the provider. Compliance certification requires an educational process and there are several alternatives for obtaining this. In El Salvador, 25 companies are WRAP certified and others are certified by companies like Walmart, GAP, and Adidas, among others.
The industry in El Salvador, with the full support of the government through PROESA, the national exports and investment agency, is determined to make El Salvador the globally competitive center of the Textiles and apparel industry in CAFTA and is doing everything possible to make El Salvador the most attractive country in the region for textile and apparel investors.