NOVEMBER 01, 2004
If you've never been to Nicaragua, and if you're an American of a certain age, it's difficult not to think about Contras and Sandinistas when you think of this country. But once you've been here, any preconceived notions are likely to be accompanied by new reflections on Nicaragua's sparkling lakes and spectacular volcanoes, colonial towns and humming factories.

Still, there is plenty of poverty and struggle. Nicaragua has the second-highest poverty rate in the Western Hemisphere (behind Haiti), particularly in the northern regions where coffee growers have seen their livelihoods dry up because of plummeting coffee prices worldwide. The political situation, while stable and democratic under the leadership of President Enrique BolaCB1os, still stands on new legs. Many of Nicaragua's young professionals were school-age children when the Sandinistas overthrew the Somoza regime in 1979, and during the subsequent leftist takeover and Contra insurgency, and have only recently returned to their homeland after spending their teen-age and young adult years in the United States.

One reason that Nicaragua is finally coming into its own somewhat later than its neighbors, which also suffered years of civil war and violence, is that in Nicaragua's case, "the communists actually took control" and held power for many years, says Bernardo Callejas, an advisor for investment promotion agency PRONicaragua, and one of those youngsters who left with his family during the upheaval.

Natural disasters also have contributed to Nicaragua's woes, including Hurricane Mitch in 1998, which caused massive mudslides and thousands of deaths, and prompted many countries to forgive Nicaragua's foreign debts. Much earlier, the earthquake of 1972 devastated the capital, Managua, and its effects are still visible throughout much of the city.

The lay of the land

But Nicaragua's infrastructure is finally receiving a shot in the arm. Multiple construction projects are underway to build highways and roads between and within major cities, and the airport is undergoing a $20 million expansion and renovation. Most apparel companies ship their products through Honduras' Puerto Cortes, but modernization of Nicaragua's two biggest ports, Corinto on the Pacific and El Rama on the Atlantic, is in progress, says PRONicaragua director Juan Carlos Pereira.

Nicaragua's free trade zone exports have grown from $150 million in 1998 to $400 million in 2003, and last year the country had $250 million in foreign investment, the second-highest level in Central America, behind Costa Rica.

Mario Arana, Nicaragua's minister of economy, says that Nicaragua is developing a "clear vision of how to survive 2005," and that selling points such as its disciplined work force and low-cost labor will contribute to its ability to compete. Its new-kid-on-the-block status has pluses, too. Without old, entrenched systems in place, Nicaragua is free to adopt state-of-the-art technology, as with its fiber optic cable telecommunications infrastructure, which is privatized and reportedly one of the best in the region.

But much work remains, especially in its energy and logistics sectors. Legislation is underway to create hydro-energy resources, which Arana says are necessary to "bring textile companies to the country."

Like the rest of Central America, Nicaragua is worried about the 2005 phaseout of quotas, and is waiting hopefully for the passage of CAFTA. The terms of CAFTA for Nicaragua are particularly auspicious, including 100 million SME in exclusive trade preference levels (TPLs). (TPLs allow clothing to be formed from non-qualifying fabric, such as fabric from the Far East, and still receive the duty-free privileges.) Nicaragua plans to use the TPLs as a tool for development, allotting them to experienced exporters as well as start-ups.

Interest in Nicaragua is coming from many quarters. My tour, organized in July by PRONicaragua, included individuals from a diverse group of U.S., Korean and Nicaraguan companies, such as underwear behemoth Jockey International, Georgia-based vintage T-shirt firm Alternative Apparel and Los Angeles-based California Rain, which was scouting for potential contractors to make blank T-shirts.

Inside Nicaragua's apparel industry

Nicaragua's apparel and textile industry is fledgling but growing, with 45 apparel firms manufacturing products for companies such as Target, JCPenney, VF Corp., Li & Fung, Tropical Sportswear International, Talbots, Polo Ralph Lauren, Dillard's, Williamson-Dickie, Fishman and Tobin, Wal-Mart, Kohl's, Kmart and Mervyns. In contrast to its neighbors, Nicaragua's production is weighted slightly toward woven production, with 24 woven goods manufacturers and 21 knits manufacturers.

According to 2002 figures reported by ANITEC, Nicaragua's apparel and textile association, approximately 72 percent of apparel produced in Nicaragua is made of fabric from countries such as Taiwan, China and Vietnam, while approximately 28 percent of goods are made of fabric from Central America and North America.

U.S.-owned Cupid, a $65-million foundation garment manufacturer, uses U.S. raw materials. The firm, which services customers such as Wal-Mart, Target and Lane Bryant, employs a quick response manufacturing model, including a TSS-based modular manufacturing system with 180 modules. Cupid offers two-week turnaround from order to delivery on 120 styles of ladies' undergarments that it produces at a rate of 24,000 dozen per week.

The company cuts on Monday and Tuesday for garments that will be sewn and shipped on Wednesday, and cuts on Wednesday and Thursday for Friday shipments, maintaining no work in process (WIP), says Carlos Sandino, development director. Each manufacturing module performs its own quality checks, and with accuracy topping 99 percent, the company is moving toward elimination of its final quality audit.

The option to use regionally produced fabrics under CAFTA C"b,b and still receive duty-free benefits C"b,bwould ratchet Cupid's production cycle up another notch, notes Sandino.

Another stop along the way, Industrias Santa Maria is owned by the Argus Group, an international sourcing company with facilities in Miami, El Salvador and Nicaragua. Santa Maria manufactures medical scrubs for customers including Standard Textile, and workwear for customers including Landau Uniforms and Williamson-Dickie. This WRAP-certified company cuts the fabric for its workwear at a sister plant in El Salvador and receives the pieces one and a half days later for sewing, says Octavio Rojas, plant manager. The company is also certified by Wal-Mart and KMart.

While its workwear fabric comes from the United States, fabric for the scrubs is imported from China and cut in Alabama. Rojas notes that the scrubs would be an ideal candidate for TPL treatment under CAFTA. The company typically maintains a few weeks' worth of fabric inventory, says Rojas. Labels come from Paxar and Avery Dennison, and thread from American & Efird and Coats, which both have facilities in Nicaragua.

One thousand employees comprising four progressive bundle sewing lines produce 80,000 scrubs and 80,000 work shirts weekly, with a two-day turnaround time from receipt of cut goods to the time garments leave the factory, says Rojas. Santa Maria is constructing a second plant in Masaya, Nicaragua.

The largest apparel operation in Nicaragua is Korean-owned Han Sae, which produced $194 million in apparel exports last year at plants in Nicaragua, Saipan and Vietnam. (The company is building a plant in China.) Exports from its Nicaraguan facilities totaled $86 million in 2003, representing 2.4 million pieces per month from 55 lines.

The company produces knit tops and bottoms for customers including Mervyn's, Kohl's, Wal-Mart, Kmart and Target, and offers services from embroidery to dyeing and finishing, with production runs as small as approximately 5,000 pieces. The company imports most, if not all, of its fabrics and trims from Asia.