COVER STORYThe citizen with limited resources knows it very well. He need not conduct an extensive market research study to find the best option of who will be his clothes provider. He must only look over his monthly budget and compare the possibilities of reducing fixed costs, to choose the pacas.
However, not everyone is optimistic about the used clothes business, which really took off in 1995. Customs authorities argue that these products should not be allowed to enter the country, for they distort the market and are a disloyal competitor to the textile sector. The guatemalan textile guilds and the guatemalan Chamber of Commerce state that in 1994, the pacas business evaded Q145 million in taxes. Nevertheless, according to Banguat, in 1995 the business paid tariffs of US$1,783,421.
Furthermore, the various guilds say this business is responsible for the shut-down of 54 companies, affecting more than 55 million people that depend, directly or indirectly, on this industry.
As a result of the caos creaated by the 1976 earthquake, the country urgently needed clothing, so various countries sent donations of used clothes to Guatemala. These good-will shipments continued coming into the country, and were eventually sold for profit.
Twenty years after containers of used clothes started coming to Guatemala, it is estimated that at least one million people are in some way involved in this business. Authorities do not have records but, according to other sources, there are about 44 thousand sales sites all over the country. "El Guarda" is one of the biggest "markets" of used clothes and pacas. Other markets include "La Florida", the "Mercado La Terminal", various areas of zone 18, and places around the 18 calle in zone 1.
The pacas weigh 100, 1000, and 1200 pounds, and their price ranges from Q850, Q5000, to Q6000. Generally, those weighing 100 pounds contain about 250 quality garments, and the more expensive ones about 2000 garments of variable quality. The product can be priced at Q5, if it is sold individually to the public. This means that an investment of Q850 can result in profits of 59% (Q500), relative to the amount invested.
There are presently about 50 importers that buy pacas; they generally get six containers a week. Each container can hold 38 pacas that weigh up to 2000 pounds. According to unofficial sources, the shipments come from Los Angeles, New York, Houston, Chicago, and Miami.
Salespeople say that the sales strategy is very simple: whatever the client wants. Buying volumes are determined by the market.
The director of guatemalan Customs, Luis Pedro Toledo, has a strong opinion about the pacas: "They are today's bread, and tomorrow's hunger". Toledo explains that this business, in addition to evading taxes, will cause the end of the textile industry, which also generates jobs. He adds that used clothes are also a source of contamination, because of the filthy conditions in which they come from the United States. However, according to official data, customs tax evation in 1994 eas less than US$200K.
In order to import pacas, one must obtain a custom-house permit, a United States fumigation registry, shipment records, and the corresponding invoice. For each kilogram of used clothes, one must pay to the state treasury: 30% customs tax (SAC) over an estimated minimum price of US$.80 per kilogram, and value added tax (IVA). That is, the importer pays a minimum of US$1.14 per kilogram of paca. In 1994, the Bank of Guatemala reported that the state treasury received US$1.3 million in customs rights, of a total of 6.2 million kilograms of used clothes, scraps, and waste products that entered the country.
Sixteen years later, the growth of this activity continues its course. But, in spite of this virtual avalanche of used clothes, authorities show concern and the textile guilds face a disloyal competitor that, despite being obvious, goes unnoticed.
Write to us at agg@guate.net