Data on the strong rise in the price of clothing in Argentina

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Price increase is one of the greatest economic concerns in our country.So far this year there was accumulated inflation of 17.6%, when the 2021 budget forecast was an inflation of 29% for the whole year.One of the sectors that contributed the most to this generalized rise is textile.

In April (last data available), the “clothing and footwear” it.But the interannual data is even more worrying.Between April 2020 and the same month of 2021 this item recorded an inflation of 79.1%.Exceeds for more than 30 percentage points to the general average and by more than 25 points to the other items that most increased.

Every time the textile industry is discussed, the scene of analysis of this sector returns to the scene: how prices are formed, what happens to taxes and what happens to imports.In this note, we tell you what happened to these variables.

What factors affect prices training

There are diverse hypotheses.The Argentine industrial chamber of clothing (CIAI) - whose vice president is the current president of the public bank BICE and national deputy for the front of all in use of license, José Ignacio de Mendiguren - points out that this remarkable price increase is not a phenomenonUnique of clothing, but also affects other sectors of the economy, such as electronics, cars and construction materials.

"In general these are goods whose prices are not regulated, they are affected by the increases of the dollar and international prices (in clothing impacted via cotton and polyester), and suffered difficulties of production and supply due to the pandemic," said theBusiness entity.

According to the Sector Chamber, between February 2020 and the same month of 2021, textile inputs increased by 84.2%, above the increase of the dollar and the general level of wholesale prices.

And in that same period, the report points out, the price of consumer clothing grew by 62%, “which indicates that both the industrial clothing link and the retail marketing absorbed part of the increases in productive inputs, resigning marginof profitability ".All this, "in a context of strong market contraction," he highlights.

According to the camera, the strong increases in March and April are also explained by a seasonal factor: "The change to the new autumn-winter season, which affects prices for the type of fabrics used and the characteristics of winter clothes".

How is the local production process

"Currently, Argentina has an extended and articulated industrial value chain of clothing, which begins upstream, with natural fiber producers (cotton and sheep wool) and synthetic fibers (essentially polyester)," says a work preparedBy Gustavo Ludmer, Doctor of Economics and Researcher of the Textile Sector.

“This production - adds work - is used as a productive input of spinning factories, which supply the thread to weaving companies, forming a densely chained textile sector.The fabrics work as input for clothing brands, clothing and fashion -creating designers companies, which outsourced the clothing to local and foreign factories.The final product is marketed by a heterogeneous range of premises, to a wide range of consumers ”.

There are several analyzes that indicate, among others, 2 usual problems of the sector: a high tax burden and a high degree of informality.

The Pro Tejer Foundation, whose former executive director is Ariel Schale, current Secretary of Industry of the Nation, maintains in a report that 50% of the final price of a garment goes in taxes.According to this analysis, the "industry" (in reference to the entire production process -algodon, spinning, preparations, etc.-) only explains 8.5% of the price of clothing.

However, in this regard, economist Eduardo Levi Yeyati held on Twitter: "Taxes, such as the margins of concentrated companies, raise the level (but not the variation) of the Argentine cost".And he added that taxes "would only explain the" relative "textile inflation" if their incidence or protection "would have risen more for this sector than for the rest".

Regarding informality, Ludmer's work states: "Various authors emphasize that between 60% and 70% of clothing produced in Argentina, at least, for a clandestine link,".

And he adds: “The remaining portion of the garments (between 30% and 40%) are manufactured by employees registered in Social Security in Factories enabled.In its vast major.Therefore, if analyzed in terms of billing, the formal channel represents more than 60% of the market ”.

What happened to imports

In the first quarter of 2021 the imports of clothing registered their lowest value since 2001, when the registration that the CIAI begins.This floor of products bought abroad is observed both in quantity and money.

The curve of what was bought abroad (always according to the first quarter of each year) shows an important decline between 2011 and 2015;A significant increase between 2016 and 2018, and a reduction marked from 2019 onwards, until reaching 2021, the lowest point of the series, with a 50% reduction compared to the first months of 2020.

Measured in terms of volume, 66.2% of import imports come from China, according to data from the first quarter of the year.They follow, very far from Bangladesh (8.6%) and Vietnam (6.5%).

An analysis prepared by the Ministry of Finance during the management of Cambiemos points out that there are several specializations in this area internationally.On the one hand, Asian economies, focused on export based on abundant human resources and precarious working conditions.Second, more developed economies, such as those of the United States and Europe, which relegate production and reserve the control of design, brand, marketing and distribution.

And, thirdly, countries such as Argentina, which seek to "maintain their production and develop protectionist commercial practices"."They did not abandon the manufacture of less differentiated goods from the market, they seek fiber self -supply, they are basically oriented to the domestic market, generate design and tend to move to niches of high added value," says the official report.

As noted by Daiana Fernández Molero -ex Undersecretary of Microeconomic Programming during the management of Cambiemos- in an article by Seoul magazine, "Argentina is one of the most closed economies on the planet" and "that can be seen in many indicators".

“According to the latest data from the World Bank, our imports represent 15%of GDP, and together with Brazil, we are one of the countries with the lowest percentage in the world and the region (Uruguay 19%, Colombia 23%, Paraguay 35% and Mexico 39%), ”he said.

Ludmer's work takes up the idea that much of what is paid in our country is going in taxes, and adds: “An unrestricted opening to imports would allow the entry of Asian clothing to values to which the Argentine industry could notcompete, which would mean its bankruptcy or its importing conversion, with the loss of national productive capacities and the destruction of thousands of salaried jobs.However, it is, clothing prices would fall marginally, since most of the price would continue to explain costs to the product itself, which would not suffer modifications due to the entry of Asian garments ”.

But there are also other looks: “They will soon arrive arguments of the type: and the employment that is lost if we import more?Social networks (and Argentine politics) are full of iPhone users who explain why it is good for employment than users of other brands more expensive a cell phone, a notebook or their children's clothes.And the employment that is not created?The tourists who are not going to Mendoza?The consumers who go to the outside and not our shops shopping?The companies that do not open?Is that not lost work?Difficult to quantify, ”says Fernández Molero.