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Until recently Peru's cotton production satisfied local demand and supported exports of 100,000 to 150,000 bales. Estimated production for MY 1997/98 at 300,000 bales is about sixty percent of what it was ten years ago. Peru started importing small amounts of cotton in the early 1990's and by 1992/93 imports became the rule rather than the exception. In 1994/95 imports accounted for nearly 20 percent of domestic consumption as Peru's textile industry expanded. As the industry grew, value-added and labor intensive apparel operations took on a larger role in the national economy. Peru's import needs are estimated for 1997/98 to be 80,000 bales, however, this is a number which presupposes a national crop of about 300,000 bales. Import tariffs for raw cotton stand at 12 percent.
The expectation of adverse weather effects of El Niņo has caused cotton producers to change planting decisions. An unusually warm winter decreased local demand for apparel, causing a slump in the textile sector. This sector is a priority in the Peruvian government's assessment of possible areas of intervention in case of a major El Niņo impact. According to Peruvian government figures the textile and apparel sector presently generates 12 percent of the nation's manufacturing contribution to GDP. Thus far no special incentives have been enacted to revive or protect the industry.
Meanwhile, cotton producers are waiting to see what weather comes to the coastal valleys in the critical month of November. No one can accurately predict if devastating torrential rains or mild beneficial rains will fall on the central valley Tanguis crop, largely used in the domestic textile industry. The Pima crop, grown in the North, has a different planting season and is largely exported. This year's Pima crop is harvested and down 75 percent from last season due to both lower area and yield. There is no official government policy to support cotton production in Peru. A key factor for all producers in Peru is the availability of credit. Fearing an adverse El Niņo effect on agriculture, banks have cut back on lending, particularly affecting many of the smaller cotton producers. Tanguis cotton, the variety which is preferred by the national textile industry and grown in the central valley, usually constitutes 75 percent of all Peruvian cotton production, both for domestic use and apparel exports. This year's Tanguis cotton crop is tentatively estimated at 225,000 bales, depending on how El Niņo affects production.
For more information contact Ann Murphy at 202-690-2895.
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