Transcript Update on the Mexican garment sector

Update on the
Mexican garment sector
MAQUILA SOLIDARITY NETWORK
Prepared for the MFAF Americas Working
Group Mexico Subcommittee
August 19-20, 2010
The Mexican economy: Signs of recovery?
 2009 was the worst year on record
 Recovery in 2010 has been limited to export-oriented
manufacturing
 Many of the new jobs are low-wage, precarious, and
informal
 OECD on Mexico: “expected GDP growth will not be
sufficiently robust to absorb the deteriorations in the
labour market which accumulated during the crisis,”
Some growth in first quarter of 2010
Source: INEGI
6
Mexico's GDP (% change 2008-2010)
4
2.6
4.3
3
1.6
2
0
Q1 08
-2
Q2 08
Q3 08
Q4 08
Q1 09
Q2 09
Q3 09
Q4 09
-1.1
-2.3
-4
-6
-6.1
-8
-10
-12
-7.9
-10
Q1 2010
Manufacturing sector leading recovery
Manufacturing sector GDP (% change, 2009-2010)
INEGI
Q1 09
Q2 09
Q3 09
Q4 09
Q1 2010
60
54.5
40
20
16.7
14.5
9.9
9.8 8.8
Textiles
Leather
4.4
0
-20
-11.5
-13.5
-12
-12.9
-17
-14.5
-9
-7.1
-1.4 -3.1 -0.3
-1
-10.8
-17.5
-23.9
-25.7
-29
-40
-9.4
-14.2
-16.1
-7
-37.5
-43.6
-60
Total Manufacturing sector
Computers and accessories
Transport Equipment
Garment Manufacturing
Of note …
Although the manufacturing sector is now leading
the economic recovery, it is important to remember
that manufacturing was also the hardest hit sector
during the crisis, accounting for the largest GDP
drop and much of the job losses. In the first quarter
of 2010, however, total manufacturing GDP
increased almost 10%, well above the overall GDP
growth in the same quarter.
Exports also recovering…
 Total exports were up 28.8% in June 2010 from the
previous year and up 36% for 2010 so far (June YTD,
$ value).
 Manufacturing exports were up 36.5% in June 2010
compared to June 2009.
Export & manufacturing growth led by auto sector
Source: Mexican Auto Industry Association
Period
Total Mexican auto
Production
Total exports
Jul-08
144,714
122,144
Jul-09
108,897
90,872
Jul-10
180,083
143,521
Jul 08 YTD
1,199,510
930,771
Jul 09 YTD
711,357
575,561
1,257,734
1,031,393
-25
-25.6
65
58
-25
-26
77
58
Jul 2010 YTD
% change Jul 08 - Jul 09
% change Jul 09-Jul
2010
% change Jul 08 YTD Jul 09 YTD
% change Jul 09 YTD Jul 10 YTD
 Auto exports are up 58%
in 2010, compared to
2009 (July YTD)
 Despite sharp drop in
auto sector in 2009, in
2010 both total Mexican
auto production and
exports have actually
surpassed pre-crisis
levels
Reduction in unemployment rate?
 In June 2010, the unemployment rate was 5.05%
slightly down from 5.17% where it was at a year ago.
The underemployment rate was also slightly down in
June 2o10 at 8.1%, from 8.9% in June 2009.
 But unemployment rate predicted to remain above
pre-crisis levels until at least 2011.
Of note …
 The Mexican unemployment rate tends to be lower
than that of most industrialized countries because
the “economically active” population includes those
working in the informal sector, and those who
receive some form of remuneration but consider
themselves under-employed. More than half of all
Mexicans are said to be employed in the informal
sector.
 The underemployed rate consists of those who are
employed but who express the need and availability
to work more hours.
Informal, out-sourced, and low-wage jobs…
 INEGI: 1 out of every two new jobs created in 2009
were in the low wage sector (around 22 $USD a day
or lower).
 Though maquila jobs were up 8.9% in April 2010
compared to the previous year, directly employed
personnel only increased by 6.3% whereas subcontracted jobs grew by 19% in the same month.
Some increase in Mexican retail sales
 ANTAD sales were up 3.1% in 2010 (May YTD), from
2009 (May YTD)
 ANTAD Clothing sales for 2010 (May YTD) were also
up 9.7% from 2009 (May YTD).
 Retail expansion in 2009: Wal-Mart opened 174 new
stores; Cherokee Group, Gap, and Inditex also
expanded in Mexico
But discouraging US retail sales
 Total US retail and food services sales were down for
the second month in a row in June 2010, dropping
0.5% from May, what some analysts say is a sign of a
slowing US economy.
 But retail sales for June 2010 were still 4.8% above
June 2009
 And clothing sales fared better posting a 0.6% rise in
June 2010 from May, and a 5.7% increase compared
to June 09.
Mexico’s textile and apparel sector
 Accounts for 5.3% of manufacturing GDP, 2% of






manufacturing exports
Sixth most important economic sector in Mexico
Mexico is largest apparel suppler to the US in the
Latin American region
Fifth largest apparel exporter to US market in world
Generates aprox. 400,000 jobs in apparel sector
Generates aprox 130,000 jobs in textile sector
35% of the market goes to export, with 65% destined
for national market
Textile and apparel maquila jobs by state
Fuente: INEGI
Total personnel employed in garment maquila (IMMEX)
per state
19416
20000
19404
18000
16000
14319 14234
14000
12000
10000
8000
6000
3374 3500
4000
2000
7082 6498
5795 5670
724 940 660 625
1627 1642
1171 1248
0
May-10
May-09
831868
315 441 523 502
Contribution by state to total sector GDP
Source: CNIV
State's contribution to total Mexican textile, apparel and
leather sector GDP (%)
25
21.7
20
15.9
15
13.7
9.3
10
7
4.6
5
1.8
0
1.7
4.3
3.4
4.4
3.3
1.6
2.8
1.2
1.4
1.9
Recovery of garment sector post-crisis?
Jobs:
 CNIV: Between March 2008 and March 2009, an
estimated 50,000 jobs were lost in the textile and apparel
sector
 From May 2009, to May 2010 12,521 direct jobs
recovered
Exports:
 Mexico’s apparel exports to the US increased 8.7% ($
value) and 20.6% (in quantity, square meter equivalent,
or SME) for May 2010 YTD compared to previous year
 This is above the world averages of 7.9% and 15.6%
respectively.
International Apparel Trends
Source: OTEXA
% Change in US Apparel Imports ($ value) - May 2010
YTD, as compared to 2009 May YTD
Avg. world, 7.9
Jordan, -1.5
Italy, 2.2
Haiti, -11.3
Egypt, 6.1
Canada, 5.9
Avg. Americas, 5.5
Peru, 6.4
DR, -8.9
Guatemala, 8.7
Avg. Asia, 2.3
Korea, 1.5
Philippines, -11.2
Malaysia, -7.7
Sri Lanka, -7.4
Thailand, -8.6
Cambodia, 3.7
Bangladesh, 0.9
-15.0
-10.0
Turkey, 19.8
-5.0
0.0
5.0
Nicaragua, 13.1
Honduras, 11.4
Mexico, 8.7
El Salvador, 15.8
Pakistan, 8.8
Indonesia, 9.9
India, 11.0
Vietnam, 12.8
China, 14.4
10.0
15.0
20.0
25.0
International Apparel trends (cont’d)
Source: OTEXA
% Change in US Apparel Imports (SME) for May 2010
YTD - compared to 2009 May YTD
Avg. world, 15.6
Turkey, 28.6
Jordan, 6.6
Egypt, 4.4
Canada, 8.5
Italy, 15.2
Avg. Americas, 10.1
Haiti, -3.3
Peru, 17.8
DR, -17.4
Nicaragua, 12.3
Guatemala, 11.9
Avg. Asia, 8.2
Korea, -10.7
El Salvador, 20.2
Honduras, 18.5
Mexico, 20.6
Philippines, 1.8
Malaysia, -7.7
Sri Lanka, -1.6
Thailand, -6.7
Pakistan, 7.7
Bangladesh, 6.3
Cambodia, 20.9
Indonesia, 17.3
India, 18.0
Vietnam, 30.7
China, 22.5
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0