Maquilas Shift to El Salvador and Nicaragua

... job losses are raising crime and corruption rates in a country with a long history of crime and political turmoil which have scuppered foreign investment.

By Ivan Castano Freeman
Honduras' textile industry lost 12 textile mills and 8,100 jobs last year as the industry began shifting its operations to nearby El Salvador, a spokesman for leading Honduran maquila association Camtex has confirmed to just-style. "We are very worried," he said. "We are losing a lot of competitiveness, especially with El Salvador and Nicaragua, which have much lower production costs."

According to the spokesman, Honduran wages are 38 percent and 48 percent higher than in El Salvador or Nicaragua, respectively. Energy prices are "the highest in Central America," he added, making it more attractive for textile companies to produce elsewhere.

Nicaragua also has a more favorable import duty and investment environment, he noted, adding that the Honduran government must work to help the industry or that it will likely disappear in a few years.

"We can't continue like this," the spokesman said. "We are asking the government to help but we have no reason to be optimistic that it will do anything."

Honduran Chamber of Commerce official Luis Larach was quoted in local newspaper Nuevo Diario as saying the industry lost 16,000 jobs last year, double Camtex's estimate.

The Camtex spokesman could not immediately comment on Larach's estimates. He said the job losses are raising crime and corruption rates in a country with a long history of crime and political turmoil which have scuppered foreign investment.

According to one observer, the industry must work to become more "specialised and efficient" to beat rivals in Nicaragua and El Salvador. However, for it to do this, wages and energy prices must come down, while road and transport infrastructure must improve. (1/13/12)

Note: This article was reprinted with permission. It was originally published by just-style.com.