Thanks in large part to a booming explosion in the middle class, Brazil’s domestic textile and apparel industry is thriving – but companies in the South American country face challenges in becoming international enterprises.
Today, the textile and apparel market accounts for 3.5 percent of Brazil's total GDP, The industry has swelled to include 30,000 companies that create 1.7 million direct jobs – 13.15 percent of the manufacturing industry’s jobs, according to 2010 data from the Brazilian Textile and Garment Industry Association (ABIT). Brazil remains the fifth-largest textile and apparel producer in the world, and, most significant, is a top performer in several segments in the chain. It’s the second-largest producer of denim and ranks third in cotton fabric production.
But even though Brazil’s textile industry has emerged from its infancy, there’s plenty of room for development in both its domestic and export markets. “Proof of this industry’s potential in Brazil is the leap in growth we saw in 2010.The industry had a memorable year with companies investing, growing, and creating more jobs,” says ABIT president Aguinaldo Diniz Filho.
The BRIC leader
Brazil is noteworthy among the BRIC bloc of developing countries and is seeing a general increase in the purchasing power of Brazilians. Indeed, from 2003 to 2008, 20 million individuals moved up the social ladder. These upwardly mobile citizens are the bulk of the so-called new middle class and include families whose monthly income is between R$1,115 and R$4,807 (approximately US$655 to US$2,827). More than half of the country’s population now falls into this income bracket — and another 36 million are expected to join the ranks by 2014.
The booming Brazilian economy and citizens’ increased purchasing power have boosted domestic textile consumption — especially regarding cotton. In the past year alone, revenues for this industry grew by 9.24 percent, jumping from US$47.6 billion in 2009 to US$52 billion last year. Investments in the market grew by more than 100 percent; in 2010 investors poured in US$2 billion, compared to US$864 million the previous year.
Filho says this growth in the textile industry is a result not only of economic growth but also of advances in policy. Nevertheless, the elevated tax burden, a lack of foreign trade agreements, and some unfair competition still remain, which slow forward growth, especially in exports. “What we need is reduced labor costs, tax-exempt investments, and less taxes and tariffs on exports. In the textile and garment sectors, these measures are essential just as they are in so many other segments of the manufacturing industry,” explains Filho.
The question of currency
Brazil’s over-valued currency also isn’t helping textile market growth. “The under-valued [U.S.] dollar fosters imports and stifles exports. Because the U.S. government continues to issue dollars, the current scenario seems to be for this situation to continue. That is why in order to face this issue the Brazilian textile industry should adopt a strategy of diversifying its agenda, with products with greater added value, seeking innovation in each link of the chain," says Diniz. This means that companies should be constantly looking to give their products an edge, whether through design or technology.
In order for the industry to develop, key players need increased dialogue with the new government and a stronger government position regarding problems as well as the need for tax reform for the industry. Keeping this work in mind and within the broader context of promoting Brazil, ABIT is constantly working to foster development of Brazil's industry status on the international scene. “We want Brazil’s textile industry to once again account for 1 percent of the world’s trade; that means exporting between US$5 to 6 billion annually, which is three times more than the current rate," he says.
Internationalization of the industry
What sets Brazil apart in the fashion scene? Diversity in prints, colors and patterns, creative design, versatility in production, sustainability, and knowledge at every link of the chain. Brazil's distinct style helps to drive the country’s image among the international public.
To underscore this potential and help to internationalize industry brands, ABIT in partnership with the Brazilian Trade and Investment Promotion Agency (Apex-Brasil) have maintained the Brazilian Fashion Industry Export Program (Texbrasil) since 2000.
Over the past 10 years, this 400-company project has amassed US$330 million in the volume of deals that Brazilian brands have secured outside of the country. “We created channels for training, diagnosis, and market studies aimed at global consolidation of brands, associated with competitive edges such as creativity and sustainability,” says Rafael Cervone, the program’s executive director.
To achieve this, Texbrasil develops activities on several fronts: commercial intelligence and promotion, international communication and image. Commercial promotion activities are the foundation of the project and, among other activities, they include Brazilian companies attending international fairs. Support has already been given to 177 events that brought in US$170 million in business for 1,460 participant companies.
Thee so-called Buyer Project aims to join the two ends of the chain: buyers and sellers. “In these first 10 years, 131 of these projects were organized with 884 potential international prospects attending Brazilian events, guaranteeing that US$60 million in business was made by 3,301 Brazilian brands,” says Cervone.
Texbrasil also encourages foreign journalists and opinion-makers to come to Brazilian fashion’s biggest events. In 2010, the program brought more than 90 international journalists from 14 target countries to Brazil. It also worked on publicizing Brazilian brands at international fairs through local press relations agencies that promote companies in each country.
To help to strengthen trade relations between countries, the program maintains a Commercial Intelligence division that carries out market studies in order to identify business opportunities and check whether Brazilian products and brands are ready for other markets. “Everything is analyzed, segmented and made available to Texbrasil companies. Their profile is outlined and we provide data on the target market to be studied in accordance with objectives,” the director explains. Since 2001, 29 prospects have been studied, resulting in 900 buyer and international agent referrals.
How brands benefit
Bia Brazil is one brand that has already reaped positive results since it joined Texbrasil in 2006. Since then it has gained international recognition and recently won in the "Marketing Star” category at the 39th RS Export Awards, given by the Association of Marketing and Sales Directors of Brazil. This category recognizes brand consolidation, management of distribution channels and company sales. Company owner Beatriz Dockhorn believes that being a Texbrasil member made a difference when it came to successful exports. “The activities, such as international fairs and business talks, strengthen the client’s relationship with the factory,” she says.
The Texbrasil Program has also opened the doors of the international market to the Coco Doce brand. “Participation in Texbrasil’s product clinics and creative process workshops has given us the opportunity to listen to the opinions of international consultants who look at the style, quality, color and price of our products," says JosÉ Augusto Vicente, the company’s director of international relations.
Alessa, another program brand, has won over consumers and taste-makers in the international market. The main factor is in knowing how to transmit the Brazilian lifestyle and identity to the finished product. Designer Alessandra Migani acknowledges that Texbrasil has a significant impact on internationalization. “Through contact with project consultants, we learn to recognize the importance of characteristics such as creativity, identity, finish and on-time delivery of items sold in other countries," she says.
This article was written for Apparel by the Brazilian Fashion Industry Export Program (Texbrasil), developed by ABIT (Brazilian Textile and Apparel Industry Association) in partnership with Apex-Brasil (Brazilian Trade and Investment Promotion Agency).