Wednesday, March 30, 2005

How can CAFTA help this situation?

As the biggest-name clothing brands hunt for bargains halfway around the world, the factories that became the engine of Central America's formal economy are starting to sputter.

In the first two months of this year, authorities said, 18 plants in Guatemala, Honduras, Costa Rica and the Dominican Republic closed; some 10,000 jobs were lost.

Nicaragua, with Central America's worst poverty and lowest wages, is the only country that has had an expansion in its young garment industry. Textile powerhouses like Guatemala and Honduras, the third-largest clothing exporter to the United States after China and Mexico, have managed to maintain a rough stability. But industry representatives said they expected orders to dry up at many factories by summer.

So far, the ending of the quota system - a 1974 pact known formally as the Multi-Fiber Agreement - has hit hardest in El Salvador. Part of the reason, industry experts said, was that four years ago, this country adopted the dollar as its official currency, giving it no leeway from a devaluation to keep exports competitive. As a result, it has the highest labor and transportation costs in the region.

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