Paraguay's textile industry is demonstrating remarkable resilience and adaptability as it navigates a transformative period. In an exclusive interview with Santiago Colombino, Vice President of the Paraguayan Apparel Manufacturing Association (AICP) and a prominent figure in the sector, insights into the industry's journey from the crisis of 2019 to its current recovery and sustained growth were unveiled. Colombino also addressed ongoing challenges and the future prospects for this crucial component of the national economy.

Overcoming Adversity and Embracing New Opportunities

When asked about the current state of Paraguay's textile industry, Colombino stated unequivocally that the sector has not only overcome the significant economic headwinds of 2019 but has also adapted to evolving market demands, achieving consistent growth. He attributed this progress to a pivotal "national agreement" that introduced a transparent and inclusive model for public tenders. This collaborative approach between the industry and the government has been instrumental in bolstering competitiveness and fostering a more dynamic and resilient industrial landscape.

The industry's ability to capitalize on growth momentum generated during the pandemic further underscores its adaptability. Colombino highlighted the swift and effective response to the health emergency through the national agreement, which enabled the production of six million protective suits in record time. This initiative not only supported the economy during a critical period but also showcased the industry's organizational capabilities. The tender model proved efficient, ensuring timely delivery of quality products under cost control, with the participation of 120 companies and the creation of over 4,000 jobs.

Quantifiable Progress and Export Expansion

The positive trajectory of the textile industry is supported by tangible data. According to Colombino, the sector witnessed a growth of over 4% in production and exports in 2024 compared to the previous year. Notably, exports surged by 17%, with a strong presence established in markets such as Brazil, the United States, and the European Union. The industry directly and indirectly employs over 30,000 people, a figure that could triple when considering the informal sector. Furthermore, exports under the maquila system reached $618 million, with Brazil absorbing 63% of all apparel exports. The import of materials under the Temporary Admission Regime also saw a significant increase of 32%, indicating the industry's sustained production capacity.

The maquila system, a production-sharing arrangement that allows for the import of raw materials and components for processing and subsequent export, has been a crucial instrument in the recovery of exports, particularly to Brazil. However, Colombino emphasized the need to look beyond short-term gains and transition the maquila model into an industry that integrates added value, creativity, and mid-level management training. Small and medium-sized enterprises (SMEs) are poised to play a leading role in this transformation, driving job creation, tax revenue, and sustainable growth.

Navigating Domestic Market Challenges

Despite robust export performance, the domestic market presents its own set of challenges. Local apparel manufacturers face intense competition from low-cost imports, primarily from China, and the influx of used clothing. Nevertheless, domestic producers have maintained a significant presence by focusing on design innovation and quality enhancement to remain competitive. Colombino also noted a positive shift in consumer perception, with a growing appreciation for domestically produced goods. Industrial hubs like Yaguaron are experiencing a resurgence, bolstering employment and local economies.

The persistent issue of used clothing imports, prohibited by Law No. 7084/2000, continues to pose unfair competition and negatively impact the industry, particularly SMEs. While larger brands have managed to retain their market share, the domestic industry as a whole remains resilient, underpinned by increasing production capacity and steady domestic and international demand.

Calls for Government Support and Strategic Policies

Looking ahead, the AICP is advocating for effective public policies and a more streamlined dialogue with the Ministry of Industry and Commerce. Key demands include replicating the national agreement model in new sectors such as the manufacturing of uniforms for schools, the military, and the police, as well as apparel for public works. Furthermore, the association is urging the government to strengthen customs controls to curb the illegal entry of used clothing, an illicit trade that harms domestic producers and distorts the market. Reinforcing regulatory measures is deemed essential to ensure a fair and healthy environment for the sustainable development of Paraguay's textile industry.

A Legacy of Growth and Future Potential

Established in 1951, the AICP stands as one of Paraguay's oldest and most respected trade associations. Its core mission is to promote the Paraguayan apparel manufacturing industry in all aspects, including technological development, training, and productivity enhancement. AICP serves as a key representative of the industry's interests before Paraguayan government bodies and international organizations. Member apparel manufacturers contribute over 60% of the clothing produced in Paraguay, and in 2001, they accounted for 90% of the country's total apparel exports.

Paraguay's textile industry benefits from a long history as a cotton-producing nation and a skilled workforce. It is a significant employer, particularly of women, playing a vital role in energizing local economies. With increasing global attention on sustainable fashion, the industry is also focusing on adopting eco-friendly production methods and fostering ethical labor practices.

The government has been exploring various policy support measures to enhance the industry's competitiveness, including support for technological innovation, operation of human resource training programs, and diversification of export markets. Paraguay's membership in Mercosur has facilitated exports to neighboring countries like Brazil, Argentina, and Uruguay, positively influencing the textile industry's growth.

However, the challenges posed by low-cost competition from Asian countries, particularly China, and the issue of used clothing imports remain significant hurdles. The AICP and domestic industry players are actively working to address these challenges through design development, high-quality production, and brand image enhancement. They continue to advocate for stronger government oversight of unfair trade practices and policies that protect domestic industries.

Furthermore, the industry is proactively exploring new market opportunities through the expansion of online sales channels and participation in international trade fairs. Building on its past resilience, Paraguay's textile industry is poised to pursue sustainable growth through innovation and collaboration, further contributing to the nation's economic development.