Cablegate: Brazil: Information On Textiles and Apparel
DE RUEHBR #2236/01 3401536
ZNR UUUUU ZZH
P 061536Z DEC 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 0590
INFO RUEHSO/AMCONSUL SAO PAULO 1278
RUEHRI/AMCONSUL RIO DE JANEIRO 5529
RUEHRG/AMCONSUL RECIFE 7458
UNCLAS SECTION 01 OF 02 BRASILIA 002236
DEPT FOR EEB/TPP/ABT GARY A. CLEMENTS
DEPT PASS USTR FOR KATE DUCKWORTH, CAROLYN MILLER
USDOC FOR ITA/OTEXA MARIA D'ANDREA
E.O. 12958: N/A
TAGS: ECON ETRD KTEX BR
SUBJECT: BRAZIL: INFORMATION ON TEXTILES AND APPAREL
Ref: State 114799
1. (U) Post sends this cable in response to information requested
2. (U) Total 2006 industrial production in Brazil was approximately
USD 284 billion. Through June, 2007 (latest available figures),
total industrial production increased 6.7% over the same period in
3. (U) According to Brazilian Textile Industry Association (ABIT)
figures, total Brazilian textile production in 2006 was USD 33
4. (U) In 2006, textiles and apparel accounted for 1.5% of Brazil's
total exports and 2.41% of Brazil's 2006 total imports. As of
October, 2007, textiles comprised 2.55% of Brazil's imports and
1.44% of its exports.
5. (U) Brazil exported USD 459.5 million in textiles and apparel to
the U.S. in 2006, a decrease of over 9.7% from the previous year.
6. (U) As of December, 2006, approximately 12.5 million Brazilian
workers were employed in manufacturing. ABIT figures show 1.65
million Brazilians employed in the textile and apparel industry.
7. (SBU) Below are answers to the additional information requested
-- Are host country producers receiving lower prices due to
heightened international competition? Have manufacturers received
more, less, or the same number of orders as in years past? Have
foreign investors, particularly Asian investors, closed factories or
otherwise pulled out of local production?
According to a representative of the Brazilian Textile Industry
Association (ABIT), competition from lower priced imports, mainly
Chinese, is depressing market prices and reducing Brazilian textile
industry market share. The ABIT official alleged to EconOff that
Chinese competitors have used under invoicing and smuggling as one
method to reduce or avoid Brazilian tariffs and taxes. He said that
ABIT began partnering with the Brazilian Customs authorities in May
of this year to inspect textile and apparel shipments arriving at
Brazilian ports for under invoicing and mislabeling. According to
him, the result has been an increase of the average FOB on Chinese
imports from USD 8/kilo in April, 2007 to around USD 16/kilo at the
Less overall orders from the U.S. have been partially offset by
increased textile and apparel exports to Brazil's Mercosul trading
partners (including a 34.3% increase in textile exports to Mercosul
aspirant Venezuela from 2005 to 2006). There have not been any
significant closings of factories by foreign investors.
-- Have U.S. and EU restrictions on certain exports of textiles and
apparel from China, effective through 2007/2008, affected export
prospects for host country manufacturers?
This has not had a noticeable effect on the Brazilian textile
-- Has the host government implemented, or is it considering
implementing, safeguards or other measures to reduce growth of
imports of Chinese textile and apparel products into the host
Brazil implemented a safeguard against certain Chinese exports in
January, 2006 (including polyester filaments, silk fabrics, corduroy
and knit shirts) that is due to expire in December 2008. Mercosul's
average Common External Tariff (TEC) increased from 20% in 2006 to
35% in 2007 from 20% to 35% on most garments (including towels and
sheets) and from 18% to 26% on most fabrics from 2006 to 2007.
-- Does the host government have policies or programs in place to
deal with any dislocated workers in the sector resulting from
Post is not aware of any such program.
-- Has increased global competition affected local labor conditions
by causing employers to reduce wages, seek flexibility from
government required minimum wages, or adversely affected union
BRASILIA 00002236 002 OF 002
Brazilian labor law is fairly inflexible and, as a result, unions
and wages have not been noticeably affected in the formal industry,
although the case for wage depression may be different in the
-- Has the host government or private industry taken action to
increase the country's competitiveness, such as improving
infrastructure, reducing bureaucratic requirements, developing the
textiles (fabric production) industry, moving to higher value-added
goods, or identifying niche markets? Does post think that the host
government or private industry's strategy will be successful?
Poor infrastructure, an oppressive tax regime and excessive
bureaucracy have had a negative affect on the competitiveness of
Brazilian industry as a whole. The Brazilian textile industry has
attempted to address lower priced imports by attempting to move to
higher-value niche markets such as swimwear and intimate apparel.
The ADIT official pointed out that the Brazilian textile industry
continues to invest heavily in capital improvements. He noted that
domestic demand, which he termed "generally poor" in the past has
started to pick-up in the fourth quarter of this year. He
attributed much of the improvement to social programs that provide
cash payments to lower income families in Brazil and more disposable
income among some in the middle class.
-- If your host government is a partner in a free trade agreement or
a beneficiary of a preference program such as AGOA, CBTPA, CAFTA or
ATPDEA, what impact does the program have on local sector industry
Brazil's partnership in the Mercosul customs union has helped
increase its textile exports within the block, particularly to
-- Overall, if not already addressed, does post think that the host
country can be competitive in textiles and apparel exports given
heightened global competition?
Realistically, the Brazilian textile industry may be hard-pressed to
compete domestically or internationally with lower-cost imports over
the long-run. There may be some high-value niche markets in which
Brazilian industry will remain competitive both at home and abroad.