Keep Us Strong WikiLeaks logo

Currently released so far... 5420 / 251,287

Articles

Browse latest releases

Browse by creation date

Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z

Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
QA
YM YI YE

Browse by classification

Community resources

courage is contagious

Viewing cable 07SANJOSE1926, COSTA RICA: SNAPSHOT OF TEXTILE SECTOR

If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs

Understanding cables
Every cable message consists of three parts:
  • The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
  • The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
  • The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
To understand the justification used for the classification of each cable, please use this WikiSource article as reference.

Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #07SANJOSE1926.
Reference ID Created Released Classification Origin
07SANJOSE1926 2007-10-31 13:01 2011-03-02 16:04 UNCLASSIFIED Embassy San Jose
Appears in these articles:
http://www.nacion.com/2011-03-02/Investigacion.aspx
VZCZCXYZ0008
RR RUEHWEB

DE RUEHSJ #1926/01 3041338
ZNR UUUUU ZZH
R 311338Z OCT 07
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC 9124
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
UNCLAS SAN JOSE 001926 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EEB/TPP/ABT - GARY A CLEMENTS AND WHA/CEN 
COMMERCE FOR ITA/OTEXA - MARIA D?ANDREA 
USTR FOR - CAROYL MILLER 
 
E.O. 12958: N/A 
TAGS: ETRD ECON ELAB KTEX CS
SUBJECT: COSTA RICA: SNAPSHOT OF TEXTILE SECTOR 
 
REF: A) STATE 114799 B) SAN JOSE 1783 
 
1.  SUMMARY: The textile sector in Costa Rica is a 
relatively small yet productive industry, accounting for 
approximately 7.4 percent of manufacturing exports and 6.2 
percent of manufacturing employment in 2006.  Although 
textile export receipts in Costa Rica have declined by 
approximately 23.7 percent since 2002, the industry has 
successfully maintained its economic viability through 
product specialization, access to a highly skilled and 
efficient workforce, and geographic proximity to the U.S. 
market.  Furthermore, the Costa Rican textile industry is 
reliant on the US market and the preferential treatment it 
receives under the Caribbean Basin Trade Promotion Act 
(CBTPA). The U.S. accounted for 86.4 percent of its total 
textile exports in 2006 and CBTPA lowers the U.S. tariff 
that applies to most of its products from 18 percent to 
zero.  END SUMMARY. 
 
======================================= 
COSTA RICAN TEXTILE INDUSTRY STATISTICS 
======================================= 
 
2.  In response to Ref A, post collected the following 
trade data, which provides context and a snapshot of the 
state of the industry in Costa Rica: 
 
C.R. Textile Exports                 2005    2006   %CHG 
GDP, ($MM)                         19,824  21,390     8% 
Total Exports, ($MM)                7,005   8,198    17% 
Total Imports, ($MM)                9,807  11,576    18% 
Manufacturing Exports, ($MM)        5,369   6,317    18% 
Manufacturing Imports, ($MM)        9,090  10,795    19% 
Textile Exports, ($MM)                616     557   -10% 
As % of Manufacturing Exports       11.5%    8.8%   -23% 
Textile Exports to U.S., ($MM)        540     481   -11% 
As % of Textile Exports             87.7%   86.4%    -1% 
 
C.R. Textile Employment              2005    2006 
Total Employment (pers)         1,776,903 1,829,928   3% 
Manufacturing Employment (pers)   242,683   243,897   1% 
Textile Employment (pers)          15,000    15,000   0% 
As % of Manufacturing Employment     6.2%    6.2%     0% 
 
C.R. Cttn Tex., Rel. Exp to US ($MM) 2005   2006 
62-APRL ARTCLS, ACCES; NOT KNIT       246    233     -5% 
61-APRL ARTCLS, ACCES; KNIT/CROCHET   238    232     -3% 
63-TEX. ART NESOI; NDLECRFT SETS; 
   WRN TXT ART                          0.8    0.7  -13% 
60-KNITTED OR CROCHETED FABRICS         0.4    0.3  -25% 
Total  ($MM)                          485    466     -4% 
As % of Manufacturing Exports        9.0%    7.4%   -18% 
 
C.R. Cttn Tx, Rel. Imp from US ($MM) 2005   2006 
61-APRL ARTCLS, ACCES; KNIT/CROCHET    82     73    -11% 
62-APRL ARTCLS, ACCES; NOT KNIT       102     58    -43% 
60-KNITTED OR CROCHETED FABRICS        31     28    -10% 
63?TEX. ART NESOI; NDLECRFT SETS; 
   WRN TXT ART                          4      5      7% 
Total                                 220    164    -25% 
As % of Manufacturing Imports        2.2%   1.4%    -36% 
 
Note: ($MM) denotes millions of USD. 
Note: (pers) denotes persons. 
Note: Totals may vary from column sums due to rounding. 
Source: PROCOMER, BCCR, CIA Factbook, and tse.export.gov. 
 
=============== 
EMPLOYMENT DATA 
=============== 
 
3.  According to GOCR and industry sources, the total 
number of people directly employed in the textile industry 
ranges from 11,000 to 15,000.  The GOCR Social Security 
Agency?s official estimate is 11,000 while industry experts 
claim at least 15,000 direct jobs as well as another 5,000 
indirect jobs in supporting economic activity such as 
transportation and facility maintenance.  There are 
approximately 40 companies in the industry in Costa Rica. 
Of the estimated 15,000 employees, approximately two thirds 
are employed by four large companies including Sara Lee 
(and its contractors), Vanity Fair (VF), Jockey, and 
Borkar.  Products are varied and include suits, casual 
style pants, knit shirts, underwear, and clothes with high 
tech sport fabrics.  For the 2006 calendar year, Costa Rica 
exported USD 557 million of textiles, of which USD 481 
million went to the U.S.  Seventy seven percent of total 
exports to the U.S. used almost exclusively U.S. inputs to 
comply with CBTPA rules. 
 
============================= 
IMPORTANCE OF CAFTA AND CBTPA 
============================= 
 
4. The continued economic viability of the Costa Rican 
textile industry is viewed as contingent on the nation?s 
timely implementation of the Dominican Republic?Central 
America Free Trade Agreement (CAFTA-DR).  The preferential 
treatment presently extended to Costa Rica?s textile 
industry through CBTPA is scheduled to expire on October 1, 
2008 and implementation of CAFTA-DR prior to that date 
will, in effect, make those provisions permanent.  If 
CAFTA-DR is not implemented in Costa Rica prior to that 
date, expectations are that its textile industry will (1) 
lose its economic competitiveness with CBTPA?s expiration 
and (2) not be reconsidered for CBTPA coverage until after 
the next U.S. administration enters office on January 20, 
2009. 
 
5. Due to the uncertainty surrounding this scenario, Costa 
Rican textile exporters sensitive to the U.S. market have 
declared their intention to move the entirety of their 
operations to other CAFTA-DR countries if the agreement 
fails to be implemented locally.  Industry sources note 
that a significant portion of textile employment -- greater 
than 12,000 -- could possibly move outside of Costa Rica 
without CAFTA-DR. CAFTA-DR?s ratification in the October 7 
referendum was a welcome first step for CBTPA-dependent 
exporters, but they need the agreement to be implemented. 
Therefore, some textile producers and the textile 
exporters? chamber are poised to lobby the national 
legislature for timely passage of implementing legislation. 
 
===================== 
QUESTIONS AND ANSWERS 
===================== 
 
6.  As requested in Paragraph 5 of Ref A, Post offers the 
following responses. We believe this responds to 
Department's questions, but if supplementary information is 
required, please advise. 
 
IMPACT OF INTERNATIONAL COMPETITON: 
 
Q1:  Are (Costa Rican) products receiving lower prices due 
to heightened international competition?  Have the 
manufacturers received more, less, or the same number of 
orders as in years past?  Have foreign investors, including 
Asian investors, closed factories or otherwise pulled out 
of local production? 
 
A1:  Prices in the apparel market are declining not only 
due to the increase in competition, but also because of 
more effective and efficient production processes and the 
decline in prices of raw materials, especially fabric. In 
Costa Rica the companies are receiving the same number of 
orders as last year, but the overall value of textile and 
apparel production is decreasing due to the drop in prices. 
 
Industry sources say that there have not been any Asian 
investors or Asian-owned textile or apparel manufacturers 
in Costa Rica for several years.  A U.S.-owned producer of 
relatively low-end children?s clothing, Garan, is moving 
its Costa Rican operation to El Salvador and to contractors 
in China. 
 
IMPACT OF SAFEGUARDS AND RESTRICTIONS: 
 
7.  Q2:  Have U.S. and EU restrictions on certain exports 
of textiles and apparel from China, effective through 
2007/2008, affected export prospects for (Costa Rican) 
manufacturers? 
 
A2:  In the case of socks, industry experts said the 
safeguards implemented by the U.S. had a positive effect by 
creating uncertainty, at least in the minds of U.S. buyers, 
about the potential supply of products from China, thus 
making supply from Costa Rican companies as more reliable 
(and more desirable). 
 
8.  Q3:  Has the host government implemented, or is it 
considering implementing, safeguards or other measures to 
reduce growth of imports of Chinese textiles and apparel 
products into (Costa Rica)? 
 
A3:  Industry experts revealed that they have discussed the 
possibility of implementing safeguards in textiles. 
However, this is a very expensive and time-consuming 
process in which the sector has to prove damages.  In 1995, 
the Costa Rican Textile Chamber, an industry association, 
tried to make such a case, but was not successful. 
Furthermore, the understaffed Ministry of Economy, 
Industry, and Trade lacks personnel to perform such 
reviews.  As a result, neither the industry nor the GOCR is 
thinking about pursuing safeguards at this time.  Also, in 
the wake of officially recognizing the PRC, the GOCR plans 
on expanding its commercial ties to China (Ref B).  (Trade 
is one of the items on President Oscar Arias?s agenda 
during his October 22-29 visit to China.) 
 
IMPACT ON TEXTILE WORKFORCE: 
 
9.  Q4:  Does the (GOCR) have policies or programs in place 
to deal with any dislocated workers in the sector resulting 
from increased competition? 
 
A4:  Currently, the GOCR does not have a policy or program 
to specifically accommodate dislocated workers resulting 
from CAFTA-DR.  The only form of unemployment compensation 
is severance pay.  If, for any reason, workers lose their 
jobs, they are entitled to one month?s salary for every 
year of work, paid by the employer.  There will be, 
however, additional monies available to the GOCR for labor 
and environment capacity building once CAFTA-DR is ratified 
and implemented.  The Administration committed to USD 20 
million FY 2005 and USD 40 million FY 2006 ? FY 2009 for 
CAFTA-DR countries. 
10.  Q5:  Has increased global competition affected (Costa 
Rican) labor conditions by causing employers to reduce 
wages, seek flexibility from government required minimum 
wages, or adversely affected union organizing? 
 
A5:  Because Costa Rican textile and apparel manufacturers 
have survived due to finding niche products, emphasizing 
efficiency, and employing highly-skilled personnel, neither 
labor standards nor wages have decreased.  Workers are 
relatively paid well and their standard of living is high 
compared to their neighbors in Central America.  Since the 
majority of exports go to the U.S., labor standards have 
increased due to complying with labor certification 
standards required by major U.S. buyers.  Also, given Costa 
Rica?s strong sense of social egalitarianism, any proposals 
to suppress the minimum wage are highly unlikely to be 
approved. 
 
GOCR ACTIONS TO IMPROVE COMPETITIVENESS: 
 
11.  Q6:  Has the host government or private industry taken 
action to increase (Costa Rican) competitiveness, such as 
improving infrastructure, reducing bureaucratic 
requirements, developing the textiles (fabric production) 
industry, moving to higher-valued goods, or identifying 
niche markets.  Does Post think that the host government or 
private industry?s strategy will be successful? 
 
A6:  During the 1990s, the Costa Rican textile industry 
contracted in part due to company dislocation to Mexico due 
to NAFTA.  The remaining manufacturers were the more 
efficient and/or specialized.  Today, the Costa Rican 
Textile Chamber works actively with the Ministry of Foreign 
Trade (COMEX) and Customs to increase the efficacy and 
efficiency of the exporting and importing process.  Customs 
is currently implementing a new registration system for 
imports, although it is not yet up and running.  The quasi- 
government National Association of Industrial Textile 
Exporters works with government and private industry to 
educate the industry on the different importing/exporting 
regimens such as the Special 807 requirements and CAFTA-DR 
requirements.  The Textiles Chamber also works with private 
industry companies to upgrade their capabilities, 
production methods, and services for customers. 
 
Many of the companies in Costa Rica have already found 
niche markets or have begun to offer a broader range of 
services to their customers.  For example, Capas Vaqueros 
manufactures GORETEX for waterproof jackets and garments, 
one of very few companies outside of the U.S. that is 
authorized to do so.  Cordero y Chavarria transitioned from 
only performing cutting and trimming services to offering 
design and manufacturing services for exercise wear. 
Coloplast started making prosthesis bras for women who have 
had mastectomies and now also makes swimwear for the same 
clientele. 
 
With respect to the survival of the textile and apparel 
industry in Costa Rica, the most productive step the GOCR 
can take is to expeditiously implement CAFTA-DR, which will 
facilitate access to the U.S. market.  Lack of sufficient 
infrastructure is an important issue and affects all 
manufacturers, especially those that are located farther 
from the port of Limon or the airport in San Jose. 
Infrastructure improvements are planned to follow the 
implementation of CAFTA-DR as part of the Arias 
administration?s development agenda. 
 
IMPACT OF CAFTA-DR: 
 
12.  Q7:  If (Costa Rica) is a partner in a free trade 
agreement or a beneficiary of a preference program such as 
AGOA, CBTPA, CAFTA, or ATPDEA, what impact does the program 
have on local sector industry competitiveness? 
 
A7:  Most companies rely on the preferences granted under 
CBI/CBTPA to compete against lower cost producers such as 
China.  The industry imports approximately 77 percent of 
its raw materials from the U.S. and exports most of its 
finished products to the U.S., which amounted to 
approximately USD 481 million in 2006, down from 540 
million in 2005.  The price factor, increased Chinese 
competition, and a decrease in demand contributed to the 
drop in value of exports to the US.  Seventy seven percent 
of this amount was exported to the U.S. under the Special 
807 program.  Industry experts see CAFTA-DR as critical for 
the survival of the industry in Costa Rica and the rest of 
Central America.  If Costa Rica does not implement CAFTA-DR 
before CBTPA expires in September 2008, it is unlikely that 
the Costa Rican textile industry will survive with the 
exception of a few special niche products and high-valued 
items.  As noted in para 5, Costa Rican textile producers 
have stated their willingness to move operations outside of 
Costa Rica if they cannot produce without the benefit of 
trade preferences or CAFTA-DR. 
 
13.  Q8:  Overall, if not already addressed, does Post 
think that (Costa Rica) can be competitive in textiles and 
apparel exports with the end of global textiles and apparel 
quotas? 
 
A8: With respect to the threat due to low labor costs and 
expanding production in China, the full effects of the 
expiration of global quotas in Costa Rica have yet to be 
fully understood.  Costa Rica has not yet seen a large 
migration of textile jobs off shore.  This is due in part 
to high efficiency, production of niche products, and the 
benefits of the Caribbean Basin Trade Preference Act 
(CBTPA).  However, industry experts told us that in 2003 
CarterTex moved its operation from Costa Rica to Mexico and 
then later to China due to lower labor costs; this despite 
the fact that the factory in Costa Rica was much more 
efficient than either of those in Mexico or China.  If 
CAFTA-DR is not implemented and the benefits of CBTPA go 
away, experts believe the Costa Rican textile industry will 
significantly contract.  The loss of more than 12,000 jobs 
from the textile industry in Costa Rica would have a 
cascading multiplier effect on supporting businesses and 
consumer consumption.  Costa Rican textile industry 
representatives thus are some of the most fervent 
supporters of CAFTA-DR because the agreement makes 
permanent the tariff-free exporting to the U.S. of their 
products. 
 
14.  Q9:  CAFTA specific: Has the delay in implementation 
for a few countries had a tangible effect on exports to the 
U.S.? 
 
A9:  Overall, the delay in implementation for a few 
countries has not had a concrete effect on exports to the 
U.S. from Costa Rica.  In general, exports to the U.S. are 
growing; however, non-traditional exports such as textiles 
and clothing are decreasing.  This can be attributable to 
China?s increased competition and also a decrease in 
demand.  The perception within the Costa Rican textile 
industry is that if CAFTA-DR is not implemented and if 
CBTPA expires, the industry?s economic competitiveness will 
diminish rapidly.  The prevailing opinion among industry 
experts is that CAFTA-DR is necessary for industry survival 
in Costa Rica. 
 
LANGDALE