The textile and apparel industry comprises a significant proportion of the global economy. The industry makes up approximately seven percent of the worlds exports and is mostly dominated by the United States, Italy, Asia, China and other developed countries (United States International Trade Commission, 2015). Guatemala is one of the countries whose economy relies on the textile and apparel industry. This is evident in the nations high GDP and large population, which make it the largest and fastest growing economy in Central America. The textile industry makes up 4% of Guatemalas diversified economy that includes 149 apparel processing firms and 39 textile manufacturers. The industry has created over 90,000 employment opportunities especially for women. Due to the large size and significance of the industry, its continued survival has been shaped by political interests and international trading.
Further, the textile and apparel industry is considered to be unique. It has been critical for the economic development of the newly industrialized nations and developing countries mostly due to the numerous job opportunities available for women in the industry. In Guatemala the sector also has minimal barriers to entry. Hence, entrepreneurs need a small startup capital and factories can start businesses with unskilled or semi-skilled labor, what adheres to international and local legislations. Guatemalan apparel and textile industry also aims at meeting consumer needs through quality, applying new technology, and efficient supply chain and response time. However, there is a range of factors that affect the textile industry in the country such as limited outsourcing channels and political instability. This report will detail the pros and cons of various factors that impact the international trade of Guatemalas textiles and apparels. It will also provide an in-depth cultural analysis of the working environment and its effect on social interaction and international trade based on the findings from the country.
Factors that Impact International Trade in Textiles and Apparel
One of the major factors affecting the global trade patterns in the textile and apparel sector in Guatemala is the elimination of quotas. This decision is expected to increase the global trade due to three main reasons that justify it. Firstly, the quotas are discriminatory since they apply only to some exporting countries. Secondly, implementation is not done globally but rather on a bilateral agreement, hence, different terms of agreement on product coverage or restrictions may hinder efficient international trade. Third, the exports are limited that in turn restrains transactions between the importing and exporting countries (USAid, 2004). However, the impact of the removal of quotas may differ in various regions. It may be an opportunity for the expansion of trade in Guatemala because of the minimal market restrictions. On the other hand, it might be a threat to some businesses since the limited restraints on suppliers are likely to expose the market to intense competition. The quota system served as effective protection for exporters particularly in the developing countries (Adhikari & Yamamoto, 2015).
Another factor is efficient infrastructure and business climate. The primary aspects of consideration of this factor include political and financial stability, and favorable working conditions (United States International Trade Commission, 2015). Efficient infrastructure is also fundamental for smooth trade operations and the buying processes. However, it is a disadvantage because purchasers and potential investors tend to focus on a few financially and politically stable nations. Guatemala intends to penetrate current promising markets including Europe, Asia and Mexico. Political or financial instability may prevent Guatemala from entering into potential trade agreements with the new markets that may improve sales or supply of raw materials.
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The local and global availability of inputs is an additional factor that significantly affects the ability of firms in the textile industry to promptly meet order requirements in the shortest possible time (World Trade Organization, 2015). Vertical integration among firms based in Guatemala and its surrounding regions is crucial for a competitive advantage and the future growth of the clothing industry. However, quotas have reduced the long-term demand for the textile fiber. Thus, leading producers have been discouraged from establishing fabric manufacturing firms particularly in highly productive regions with cheap labor (Adhikari & Yamamoto, 2015).
The levels of domestic demand impact the trade patterns in the textile industry. Rapid economic growth in Guatemala results not only in a rise of purchases and importation of apparel, but also increases consumers purchasing power that in turn leads to an increase in market demand. However, one major drawback of this factor is the fact that the slow growth in the nations wealth has reduced consumers ability to purchase clothing and luxurious outfits (United States International Trade Commission, 2015). Additionally, the industry in Guatemala lacks various sources of textile that limits countrys imports to fabric, yarn and fiber. Most textile mills in the country do not focus on the production of synthetics or cotton.
Further, the expansion of textile and apparel enterprises across Central America and the globe in general has led to labor and management changes. Firms in Guatemala have also upgraded in terms of industrialization through sourcing networks that have enabled firms to avoid labor shortages and also access cheap and skilled labor. However, cheap labor may not be competent and firms may tend to lack focus on profitable products.
Guatemala Cultural Belief and Value System
Guatemala has very unique cultural and social systems that shape and define all social and economic aspects of the country. Guatemalans avoid risks and uncertainty in all spheres of life. They tend to be very process-driven and focused on the procedures and policies. In addition, they depict a strong desire to understand what is happening with their lives and tend to be uncomfortable when a situation facilitates uncertainty (Stephen, 2015). Furthermore, they thrive in terms of responsibility, an aspect that is perceived in the society to provide security. Thus, Guatemalans strongly believe in laws, strict rules and regulations. The culture tends to be very settled when the aspects of peoples lives are within the realm of their control as they believe that it offers consistency and eliminates uncertainty in their lives (Everyculture.com, 2015).
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However, the Guatemalan culture and belief systems, as well as the country, experience high cases of inequality in regard to power and wealth. Though one might be led to believe that they have a problem with accepting such a condition, in fact they embrace the structure. The society is very structured and it focuses much on strict rules and regulations (Stephen, 2015). If Guatemalan society decides that inequality is acceptable in terms of power and wealth, such kind of life will usually be acceptable.
Guatemalans believe in working together with the people they are comfortable and have an opportunity to develop close relationships with. Individuals in the country thrive in the environment that fosters collectivism, togetherness and focuses largely on family and groups (Stephen, 2015). Thus, this implies that for the society to be happy, they need to spend more time together. Moreover, it shows that they are loyal and dependable citizens.
The Guatemalan culture and belief system is more feminine than masculine. This implies that both men and women in the country share similar values. This means that the Guatemalan culture is very different in regard to sharing of roles. Primarily, womens role in the culture focuses on the nurturing arena, while men take responsibilities for the agriculture, business and manufacturing (Everyculture.com, 2015). However, such roles appear to be interchangeable as both men and women play similar roles and hence, are treated as equals.
In Guatemala, the society values togetherness and often prefers working in large groups. The value of togetherness often leads to the institution of solid trust and close relationships with people they work (Stephen, 2015). As a result of collectivism, a change in Guatemalan society is usually not accepted and caution needs to be exercised before it is introduced. However, due to their strict respect and adherence to rules and regulation, they can perhaps accept it.
Impact of the Cultural Beliefs and Values on Behavior and Decision-Making
Guatemalan values and cultural beliefs impact the decision making process immensely. Guatemalans tends to avoid uncertainty that has made them bureaucratic in decision making processes (The Hofstede Centre, 2015). In textile industry, all stakeholders involved have to be consulted and a full chain of command must be followed to ensure there is no uncertainty before the decision is made. Therefore, they tend to avoid decisions that pose significant risks (The Hofstede Centre, 2015). Due to immense inequality and strict adherence to the rules, it is easy to influence the decision and ensure it favors people in power. As a result, the countrys trade system has been corrupted by acceptability of the inequality, especially in regard to power and wealth (Stephen, 2015). In addition, strong adherence to the rules creates an illusion that the society is fair that gives those in power an opportunity to exploit the law abiding citizens.
Due to Guatemalan collectivist culture it is essential to understand the power and influence of the union in decision making, especially in the textile industry. However, their togetherness makes it easy to bargain for the good pay and benefits (Stephen, 2015). Thus, even multinational firms need to understand that Guatemalan collectivism value gives them a strong bargaining power. Though gender inequality in decision making process in uncommon, it is important to understand that both men and women in the country share similar values (The Hofstede Centre, 2015). Thus, women are perceived equally in a company.
Social and Political History that Impact on Internationalized Relations
The Guatemalan political system has been affected by violence and instability over the decades. The high power within the system caused scandals, resistance and conflicts due to dictatorship, inconsistent leaders and several political parties that limited the residents rights to democracy. These events of political instability not only derailed the countrys economic growth, but also inhibited interregional trade agreements since the business climate seemed unfavorable. Although efforts were put to foster the industrialization and modern developments in the 1990s, privatization of major infrastructure by the state also discouraged foreign investors.
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Further, the new government in Guatemala has caused conflicts in various sectors of the country such as farming, rural communities and trade unions. Government has been involved in major corrupt deals that have caused disintegration of trade agreements that were crucial to the nations textile and apparel industry (Blogger, 2015). As a result, firms in the industry have a limited supply of raw materials and market to sell the textile products. Moreover, male dominance in the state infringed the rights of women and also resulted in violent disputes (Everyculture.com, 2015). Such uncertain events limited the countrys ability to establish international relations. Also, the country lacks diversity in regional and local commercial activities because a large part of the trade sector highly depends on the production of traditional crops including bananas, maize and coffee (Everyculture.com, 2015).
How Guatemala Builds Strong Relationships
Long-term relationships in Guatemala are created through social interaction. Their culture of collectivism has developed the networks with other countries, which are a valuable achievement in the textile industry. Their cooperative nature clearly abhors individualism and self-reliance. In the case of conflicts or important meetings the government officials are expected to hold social talks and maintain dignity even in situations where differing opinions may cause misunderstandings. Additionally, the efforts put into the integration of the supply chain and production processes have added a value to the textile and apparel production. This has enabled Guatemala to stay abreast with consumer needs despite the global competition from international producers, particularly Asian countries and China. The government has also made efforts to promote research and development and bilateral trade.
It is important to mention that Guatemala is among the major Central American countries that have benefitted from the cooperation with American textile and apparel firms. Elimination of quotas on the related products has led the countrys textile and apparel industry to remain competitive despite the challenges faced by its residents. The countrys exceptional port facilities, not to mention its central location, provide it with a competitive advantage in regional trade activities since they improve the efficiency of product delivery and transportation of goods and manufacturing inputs. Continuous success of the trade sector in Guatemala depends on the implementation of new technologies and establishment of a favorable investment environment that will attract more foreign investors.