Last Wednesday the 12th during his speech at ExpoEfi 2024 at the La Rural property, President Javier Milei emphasized five times that Argentina “is a very strange country.” The references had to do with economic realities that are far from what happens in other countries, at least according to the Government’s view.
He did not mention the situation of the textile and clothing sector, a value chain that together directly employs close to a million workers and that so far this year is experiencing a sharp drop in activity, sales that in the retail commercial channel they plummeted by 35% and prices that shot through the roof.
It is already a commonplace to say that Clothing in Argentina is very expensive, sometimes with higher prices than in large European capitals or the United States.
What happens then? Studies by the Pro Tejer Foundation, which brings together the agro-industrial textile and clothing value chain throughout the country, indicate that, of the price of a premium brand garment in a shopping mall, the textile and clothing industry only represents 8.5%, including the inputs to manufacture them, design and profitability.
As in other productive sectors, The tax burden is very representative, to the point that in this sector it reaches 50.3% of the final value. There you have to consider national taxes (VAT, Profits, bank debits and credits, pension contributions, etc.); provincial, especially Gross Income and municipal taxes (advertising, Stamps, etc.).
In this way, the State at its three levels keeps half of the price of the garment. The case of Gross Income is not minor considering that from the fiber to the final garment, the products cross several jurisdictions, contributing to the famous cascade tax.
Then there is the financing of purchases with a credit card (12.2%), the rental of the premises (12.7%), logistics and marketing (9%), advertising and design (2.5%) and 4.8% brand profitability. These figures have remained more or less stable since 2017, when they did the first study of the cost structure.
Continue reading the story
Activity collapse
“The recession began last October, but from December to now it collapsed, due to the change in the economic scenario,” said Luciano Galfione, president of the ProTejer Foundation and a businessman dedicated to spinning and weaving, the first two links in the chain. .
For Galfione, the macro problems are hitting hard and he stated that the market contracted 40%. “What fell apart is the counter – the retail sale – and within two minutes the entire chain falls backwards.”
The view coincides with that of Claudio Drescher, president of the Argentine Industrial Chamber of Clothing (CIAI), who described the drop in sales so far this year as “very deep and abrupt.”
The chamber brings together some 1,000 brands, designers and fashion companies, to which must be added another thousand clothing manufacturers, some of whom only make clothing for third parties and others have integrated the clothing, fashion and design segments.
“The drop was very abrupt until April, with an average of 35% in unit sales”Drescher explained, appealing to the refrain of “there is no money” due to the very strong increases in rates, fuel, transportation, schools and prepaid bills. In the informal segment of the business, drops can reach up to 50%.
A recent survey by the Pro Tejer Foundation indicates that in the second two months of the year the drop in sector activity deepened compared to the first two months of 2024, while There are “warning signs of impact on employment and possible closure of productive establishments if high levels of idle capacity continue.”
86% of those surveyed attributed it to the population’s loss of purchasing power. Other causes are macroeconomic expectations and the change in the business climate regarding the future, the variation in costs of raw materials and inputs, the greater participation of imported goods in consumption, the exchange rate appreciation and the change in sectoral policies for the industry.
Prices and more
Good news, although clearly not enough, is that in May sales stopped fallingsays Drescher. For that The continuity of purchases in 12 installments was key, now under the Simple Installment formatwhich the Government decided a few months ago and was a demand from the sector.
The strategy of driving sales includes quotas, promotions and discounts. In the sector there are almost all SMEs, some medium-sized, and an SME “cannot finance the summer season if you did not sell in the winter, there is no working capital for that,” explained the businessman.
Asked about the high prices seen in the shop windows, Drescher admitted that clothing prices are high, but clarified that the paradox is that “the margins are small.”
He also mentioned the weight of taxes on the final price of clothing and regarding the comparison with prices abroad, he considered that “the economy must be intelligently open and there must be a correct dollar”, something that now seems to be accumulating a delay.
In relation to prices, Luciano Galfione considered that the Argentine economy “lacks systemic competitiveness” and defended national production, saying that textiles are one of the most competitive sectors. “You have jeans for $10,000 that are sold on Avellaneda Street and other top brand jeans for $100,000 in a shopping center.”
“It is the Argentine story, in the store you are paying for everything except the product, 50% is tax and goes to the State,” said Galfione. In that sense, he said that local businessmen are competing on a “very inclined field” in a very complex scenario.
Despite this, the sector mobilized investments of 1.4 billion dollars in the last three years, and businessmen insist that the sector is on the technological frontier, there is know-how and trained people. “If you order the macro and lower taxes, we will see if we cannot compete”Galfione challenged.
