California Apparel News

In the last year, Colombia’s apparel exports to the United States have declined by more than 27 percent.

In part, the sluggish U.S. economy is one of the problems. But the other quandary is the uncertainty surrounding the future of the U.S.-Colombia Free Trade Agreement.

President Bush signed the Colombia Free Trade Agreement on Nov. 22, 2006. While the Colombian legislature approved the pact on June 14, 2007, there have been no hearings on the matter in Congress even though Bush sent the trade agreement to that legislative body on April 8 for a vote. As required by the “fast-track” authority given to the White House for trade agreements, that vote needed to be within 90 legislative days.

But House Speaker Nancy Pelosi, D–Calif., said she would undo that fast-track schedule so that Congress would have more time to consider the agreement. Pelosi has postponed any discussion on the issue until labor and environmental concerns in Colombia can be resolved.

While many believe the Colombia Free Trade Agreement won’t pass this year, others disagree.

Sean Spicer, a spokesperson for the U.S. Trade Representative’s office, said the Bush administration still believes the pact can be passed by Congress before the end of 2008.

Meanwhile, the trade agreement has entered the realm of election politics. Sen. John McCain, the presumptive Republican nominee for president, was recently in Colombia to show his support for the accord. He then traveled to Mexico to talk about the benefits behind the North American Free Trade Agreement, which is between Canada, Mexico and the United States. NAFTA has been criticized by politicians such as Sen. Barack Obama, the presumptive Democratic presidential nominee, who said he believes Mexico should rewrite certain labor and environment provisions in the 14-year-old pact.

Kaltex acquires majority stake in Coltejer

This uncertainty is weakening the Colombian apparel and textile industry. Coltejer—one of the country’s oldest and largest yarn, textile and manufacturing companies—has been in financial hot water for the past few years, seeing revenues plummet by millions of dollars.

In 2007, the 101-year-old company lost $91.4 million on $160 million in revenues. In 2006, it had a profit of $11.65 million on $188.1 million in revenues.

Revenues in 2008 haven’t improved. During the first quarter of this year, Coltejer showed a $18.3 million loss on $24.8 million in revenues.

The flow of red ink has prompted several takeover bids, including one from Fabricato, Coltejer’s Colombian rival. But in the end, Mexican textile giant Kaltex Group was the winner.

A preliminary proposal has Kaltex acquiring 68 percent of Coltejer’s shares in a deal that will be formally announced on July 15. The exact details of the transaction have not been disclosed yet.

The bid will help Coltejer pay off $297 million in debt, of which $60 million is owed to its 1,800 employees. Coltejer’s largest shareholder is Colombian businessman Carlos Ardila.

The United States used to be Colombia’s most important apparel export market. For the one-year period ending April 30, 2008, Colombia shipped $359 million worth of clothing to the United States, compared with $491.9 million a year earlier.

Recently, Venezuela has taken over the No. 1 spot, with nearly 50 percent of all apparel exports going to that South American country during the first 10 months of 2007.

U.S. companies that look to Colombia as a possible manufacturing spot are growing concerned about whether quota and duty-free apparel imports will continue under the Andean Trade Promotion and Drug Eradication Act, which ends this year but could be extended.

“With all the uncertainty with all this on-and-off-again free-trade agreement,” said Washington, D.C., international trade attorney Jonathan Fee, “I’m surprised apparel imports aren’t down even more.” —Deborah Belgum