SUNS 4310 Tuesday 27 October 1998
THE BLUE JEANS BATTLE IN VENEZUELA
Caracas, Oct 23 (IPS/Jose Zambrano) -- Asian jeans have triggered a pitched battle in Venezuela between the government, consumers, industrialists and retailers, which has even acquired overtones of an all-out "people's war," waged to shouts of "Say No to 4,069!"
Thousands of customers shopping in the 500 stores of the popular casual wear retail chains Graffiti, El Fortin and Pepeganga signed their names to petitions saying "No!" to Finance Ministry Resolution 4,069.
The petition drive, which got underway Thursday, is protesting the resolution, which set a new reference price for imported denim pants at 23 dollars a kilo, compared to previous estimates of five dollars.
"These lists of signatures will be presented to authorities, because on the side of our interest is that of millions of Venezuelans, who have the right to use quality garments without shouldering the cost problems of inefficient producers," Carlos Sultan, the owner of Graffiti, told IPS.
On the other side of the fence stands Jose Uthman, the proprietor of the Petsusin factory, who said the government measure would allow local industry "to compete in more equitable terms, and will push up sales of nationally-produced garments."
Minister of Industry and Commerce Hector Maldonado said the decision was designed to "fight under-invoicing, through which importers defraud customs by declaring merchandise at lower than real values in order to pay lower taxes." He admitted that underlying the resolution was the need to boost local textile production after the entire manufacturing sector was hit hard by a year of recession, with tens of thousands of jobs lost.
The retailers association, headed by Antonio Fernandez, denounced the measure as protectionist, arguing that it ran counter to international treaties signed by Venezuela in the framework of the Andean Community subregional trade bloc and the World Trade Organisation (WTO).
But the biggest gripe of local retailers is that the resolution artificially quadrupled the price of imported clothing, "to gratuitously favour the industrial sector, without that sector moving a finger to draw in new investment, raise wages or manufacture higher quality products," said Sultan.
"I don't know who the government is trying to protect, but it leaves us, the people, naked in the midst of the crisis of income we are experiencing," Teresa Linars, 34, a professional from Venezuela's impoverished middle class, told IPS.
According to marketing studies, nearly 90% of Venezuela's 23 million inhabitants use jeans while studying - jeans form part of the uniform at most schools - working or going out.
Carmen Morillo, a homemaker with sons in the second and seventh grades, buys two or three jeans for each of her boys every six months or so. Locally-produced jeans cost 15 to 32 dollars, compared to an average cost of 18 dollars for imported jeans, "which I prefer because they don't fade as much and have better seams."
Economist Antonio Paiva said that with a CIF cost of five dollars plus other taxes, the average pair of jeans could be offered to the public with a 15-dollar price tag. But with the new measure, the retail price will rise to more than 45 dollars, he pointed out. "This is the gate through which our industry's anti-exporting bias is stimulated," he maintained.
But Luis Ball, the president of the association of industrialists, argued that Resolution 4,069 "prevents unfair competition associated with under-invoicing: importers were asking their providers in Indonesia or China to bill them for half or less than half of the real price, in order to save taxes."
"The low prices of Asian textiles are partly a consequence of the crisis in that region, with companies in need of liquidity at any cost," said Ball. But, he warned, "that situation can turn around, and when the products become expensive, our textile industry will have disappeared."
The industrialist wondered whether it was up to "Venezuela to save an industry in Indonesia, for example, from bankruptcy," by allowing the local market to be flooded with cheap products, and permitting unemployment to climb, "which means there will be less people capable of buying" imported goods in the first place.
In the latest trade war, importers have enjoyed international backing. The Minister of Foreign Trade in neighbouring Colombia, Marta Lucia Ramirez, warned that "the minimum official prices" would cause terrible damages. "We must not be confused. If we begin a protectionist war, we will end up losing more than what would be gained by protecting a few specific sectors," Ramirez declared.
Colombia and Venezuela are each other's main market for non-traditional exports. The two countries form the engine of the Andean Community trade bloc, and have set a target of three billion dollars in trade this year, 10 times the bilateral turnover in trade posted a decade ago.
But Ramirez warned on a visit to Caracas this week that the recessive crisis hitting both countries would make it impossible to meet that target.
Minister of Industry and Commerce Hector Maldonado said a new measure to be adopted in the next few days would modify resolution 4,069.
The retailers association's Antonio Fernandez predicted a compromise solution - a base price of 10 to 12 dollars per kilo of imported jeans. But, he warned, reference prices could be set for a broad range of clothing items, tires, home appliances and toys. "We are returning to protectionism," Fernandez complained.