Page 56 - New Cloth Market November 2022 Digital Edition

INTERNATIONAL BUSINESS PAGES

has signed. These agreements, which The Zonas de Desarrollo Económico who can more easily determine the
include CAFTA-DR, Mexico, and the Especial Públicas (Special Public Eco- regime that offers the greatest ad-
European Union-Central America As- nomic Development Zones –ZDEEP in vantage for their operations if they
sociation Agreement (EU- CAAA), pro- Spanish) are geographically defined have clear guidance.
vide opportunities for the apparel and extra-customs areas within the national
• It is an advantage to be the clos-
textile industry. CAFTA-DR gives pref- territory to develop industrial goods
est neighbors to Central America,
erences to the textile and garment pro- and services or commercial activities,
the main market for the textile in-
duction sector. with a temporary customs regime and
dustry (yarns and fabrics), and to
tax benefits. They are regulated by
For those companies in the sector that another important market such as
Decree 30-2008, which amends Law
export, there are special regimes with Mexico.
22-73 of the Congress of the Republic.
benefits such as exemptions from in-
Currently, there are four authorized • However, there is an opportunity to
come tax (ISR in Spanish), value add-
ZDEEPs in operation and eight more generate greater garment manufac-
ed tax (VAT) and import taxes. These
currently completing the authorization turing capacity and investment in
include the Law for the Promotion and
process by ZOLIC, which is the gov- the country and to search for mar-
Development of Export Activities and
erning entity, and the Superintendence kets for price-competitive finished
Maquila, Decree 29-89, which exempts
of Tax Administration. garments in the United States, in
the payment of ISR for 10 years, re-
order to use the raw materials
funds VAT and import taxes on machin- Lessons Learned through Guatema-
(mainly fabric) produced in Guate-
ery, and exempts taxes on raw materi- la’s experience
mala as an alternative to exporting
als, packaging, labels, intermediate
• The existence of a strong business it to garment factories in the region.
products, and fuels. If companies op-
association in the apparel and tex-
erating under Decree 29-89 wish to sell Honduras
tile sector (VESTEX) is a strength
their finished products in Guatemala,
for sector development. It is an el- The textile manufacturing industry is
they must nationalize it; that is, pay
ement that can be leveraged to the country's leading export sector,
the corresponding VAT+import taxes.
convey confidence and certainty to generating US$8.3 billion, and a growth
Companies that produce goods linked new investors about the potential of 15.81% from 2010 to 2020. Accord-
to the apparel and textile industry, as for establishing operations in Gua- ing to figures from the Honduras Man-
well as companies that produce other temala. In addition, it represents a ufacturers Association (2022), total
products and/or services complemen- strength, due to its ability to raise manufacturing in the country generates
tary to this industry, are eligible under and coordinate the needs of the sec- 179,435 jobs, of these, 146,000 are
Decree 29-89, in addition to companies tor with public authorities, and to direct jobs in the textile industry, in
that produce services related to infor- have an impact on initiatives that addition to 500,000 indirect jobs in the
mation technology (IT). are favorable to the development manufacturing sector in general. There
of the industry. are 19 textile companies (spinning and
Free Trade Zones and Special Public
weaving mills) and 72 apparel-manu-
Economic Development Zones Free • Value chain integration in the sec-
facturing companies operating in the
Trade zones are regulated by a specif- tor allows for efficiencies in the sup-
country. The sector accounts for a 7%
ic law, Decree 65-89, and its amend- ply chain that support the sector's
direct contribution and a 29% indirect
ments, Decree 06- 2021, which defines competitiveness. It also promotes
contribution to the country's GDP.
them as areas of delimited physical training and the detection of oppor-
land that is subject to a special cus- tunities to strengthen the cluster, Guatemala shows stronger economic
toms regime. They may be established by identifying new service provid- and trade indicators than Honduras. In
in any region of the country and not ers and/or input suppliers, as well 2020 Guatemala received over three
only in specific geographic zones, and as investment opportunities from times the foreign investment received
enjoy exemptions from import taxes, yarn to garment, thus generating by Honduras. Guatemala's exports in-
income tax and VAT. There are three greater verticality in the industry. creased by 9.26% in a decade (2010-
types of users –industrial, service, and 2020). In terms of GDP growth, in the
• Despite the complexity of having
commercial–, depending on their eco- same decade, Guatemala surpassed
three special regimes for the oper-
nomic activity. Honduras by achieving 90.79% growth,
ation of textile companies in the
while Honduras grew 50.43%.
Currently, according to information from country, the Free Trade Zones, the
the Ministry of Economy, there are Special Public Economic Develop- Guatemala's GDP per capita for the
seven Free Trade Zones operating in ment Zones, and Decree 29-89 year 2020 (US$4,603) was almost dou-
the country, with little availability of (Law for the Promotion and Devel- ble that of Honduras (US$2,389). Ac-
space for new users that require large opment of the Export and Maquila cording to the Office of Textiles and
amounts of square meters. Activity) are options for investors, Apparel of the United States Depart-
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