The glove is off: Guante closes its San Miguel plant

SANTIAGO – After a 90-year run, iconic Chilean brand Guante has stopped making shoes. Its last plant closed Monday. Its retail stores march on, but the shoes will all be imports.

On Monday, rumor became reality when Guante management notified employees that the company was closing its plant in the San Miguel district and focusing on imports, primarily from Asia, daily La Tercera reports.

The closure means the dismissal of 283 workers. It also means that hundreds of thousands of shoes will no longer be made in Chile. Although local production has stopped, the company’s brand and its 43 stores in Chile, Argentina, and Peru will continue.

According to Guante, the decision to close the plant was due to “the enormous difficulty of manufacturing in Chile,” which, as La Tercera notes, is an allusion to cheaper costs in other countries, such as China. Guante claims, “The company for years did everything possible to continue manufacturing in Chile; however, the situation became untenable.”

In a similar report to BioBioChile news site, Guante asserts that the situation “has forced the company to stop making footwear in Chile.” In short, “reality left no alternatives.” The report also attempts to assure Guante’s customers that the company will continue its commitment to quality, albeit with products manufactured abroad.

The plant closure was inevitable

The closure is undoubtedly sad news for the plant’s employees and the brand’s Chilean devotees, but it was also inevitable. As T13 broadcaster reports, in recent years, “Guante had begun to reduce its production in Chile, which went from 95% to 20%, before the closure of the facility.”

The Guante plant closing reflects the “bad moment” of the country’s footwear industry, reports Economía y Negocios. The last few years have seen several liquidations and closures. As recently as last November, “Albano announced the closure of its footwear production plant in Concepción, after 43 years of operation, mentioning that the impact of competition from Asian shoes in the national industry made it impossible to continue manufacturing.” Just last month, “the traditional shoe store chain Calzados Beba closed its stores due to the forced liquidation of the company … after 47 years in the national market.”

Also read:

Why Asian Business Appetite for Chile Continues To Grow

How much cheaper abroad?

Trade industry publications often get right to the point. And so it is with one from APLF, which serves the global leather and fashion industries. One of its news posts highlights “a report presented by Peter Mangione, one of the leading experts on the global footwear industry.”

Although Mangione’s report presents figures from 2014, there is no reason to expect the ratios have changed much since then. The report explains, in U.S. dollars and cents, why footwear manufacturing ends up abroad, primarily in Asia and Ethiopia (the latter with Chinese financing).

Hourly wage of a footwear worker in 2014, in US dollars

  • Ethiopia $0.36
  • Bangladesh $0.71
  • Cambodia $0.85
  • India $0.85
  • Vietnam $1.14
  • Nicaragua $1.27
  • Thailand $1.34
  • Indonesia $1.60
  • Dom. Repub. $1.88
  • China $2.09
  • El Salvador $3.09
  • Italy $18.68
  • Japan $25.66

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Just a “matter of fact” or a more significant “symptom”?

Chile’s Minister of Economy, José Ramón Valente, both lamented and downplayed the plant closure, as La Tercera reports in a second article. In his opinion, the closure was more a “matter of fact” than a “symptom” of the Chilean economy.

To support his position, the minister asserted that 2018 and the start of 2019 set records for the creation of companies in Chile. “January was the year with the most business creation since we have had registrations and February repeated again to be the month of greatest business creation.”

The minister highlighted Chile’s Cornershop, that quickly became a US $250 million company, and NotCo, another Chilean startup that received US $30 million from investors, including Amazon’s Jeff Bezos.

As BioBioChile reports in another article, the minister also indicated that through training, such as programming and technology, there will be many more jobs created than lost in Chile.

Whether the Guante plant closure was just “a matter of fact” and not a more significant “symptom” of the Chilean economy is debatable, but there is no denying that it is consistent with the erosion of manufacturing in other developed and developing countries outside of Asia.

It also remains to be seen whether a tech “revolution” in Chile will create more jobs that actually raise the standard of living for the average Chilean or, instead, only more wealth for a relatively few at the top, as happened elsewhere.

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