Nearly 90% of companies in the textile industry have experienced economic losses due to the closure of the Palín Escuintla Highway, according to the results of a survey conducted on July 26.
The study called “Impact of the collapse of km 44 of the Palín-Escuintla Highway on the clothing and textile industry”, gathers information from companies that have an area of influence on the stretch of road for their production processes, and which has been interrupted since June due to damage caused by the onset of winter.
The sample prepared by the Clothing and Textile Commission (Vestex) attached to the Guatemalan Association of Exporters (Agexport) included 32% of the factories operating in the municipality of Guatemala; 16% from Villa Nueva; 10% and 5% from Palín.
Main results
The research confirms the average loss per company of up to US$500 thousand, equivalent to approximately Q3.8 million, and provides a breakdown of the impacts.
Furthermore, out of every 100 associated companies, only 65 are operating normally and 35 are doing so partially.
Key findings include:
- 65% of companies confirmed the increase in operating costs
- 59% indicated that there are non-compliances in the delivery of their products which implies the loss of business
- 47% said there are problems with the supply of inputs and raw materials.
The impact is not only on businesses, but fatigue was also evident among the group of workers who participate in the production chain in the industry. Thus, it was possible to determine:
- Decrease in production
- Problems at work level
- Workers and operations have not been able to report to work
Increase in logistics costs
As had been warned about the implications of the damage to the section, 90% of the companies confirmed that logistics costs increased by 10 to 20% during the emergency.
In this regard, the survey determines the following data:
- 71% due to the saturation and poor condition of alternative routes, as well as the increase in freight costs
- 24% due to time restrictions imposed by municipalities and the shortage of transporters willing to cover the Palín-Escuintla route.
Interpretation
Alejandro Ceballos, vice president of Vestex, gave a position to Prensa Libre on the results of the survey, for which he made the following interpretation of the results:
Mixco
100% of the companies operating in Mixco reported experiencing economic losses. On average, companies have lost US$255,000 with amounts reaching up to US$500,000. In this municipality, 50% of the companies are operating normally and indicate that the main impact is seen in the non-compliance with deliveries to their international clients, the decrease in their production and the increase in operating costs.
60% of companies in Mixco have experienced an increase in their logistics costs ranging from 10% to 20% extra, and indicate that the time restrictions imposed by the municipalities are what is having the greatest impact on them.
New Villa
100% of the companies operating in Villa Nueva reported experiencing economic losses. On average, companies have lost US$27,500, with amounts reaching up to US$50,000. And only 33% of the companies are operating normally and indicate that the main impact is the failure to deliver to their international clients, the loss of business and the increase in operating costs.
100% of companies in Villa Nueva have experienced an increase in their logistics costs ranging from 10% to 20% extra, and indicate that their main challenges are the time restrictions imposed by the municipalities, followed by the fact that transporters no longer want to cover the Palín-Escuintla route.
Wormwood
100% of the companies operating in Palín reported experiencing financial losses. The companies did not provide approximate data on the estimated losses.
100% of companies indicate that they are operating partially, since the main impact of this situation has been that their workers have had problems showing up to work, along with the difficulty of their supply of raw materials and inputs, the increase in operating costs, the failure to deliver to their international clients and the loss of business.
100% of companies in Palín have experienced an increase in their logistics costs ranging from 20% to 30% extra, and indicate that their main challenge is the saturation and poor condition of alternative routes.
Contingent measures
The production system of factories, mass and retail distribution centers, fiscal warehouses or free trade zones, service companies, and port and border connections have been affected by the damage to the Palín Escuintla Highway, so they have adjusted their logistics chain.
Just to be able to make a transit to the South Coast and vice versa, it has meant trips of up to eight hours for heavy transport, due to the congestion and poor condition of the enabled alternate routes, which are RN 14 and the old highway from Palín to Escuintla, while the repair work progresses.
According to official calculations and planning carried out by companies and representatives of business chambers, they have been forced to adopt contingency measures.
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