Weak Footwear Sector Shuts 30 Mexican Companies in 2023

In 2023, Mexico's footwear industry experienced significant setbacks, with around 30 companies shutting down primarily due to increased smuggling and anti-competitive practices by importers, according to the National Chamber of the Transformation Industry (CANACINTRA). This downturn resulted in the loss of approximately 12,000 jobs nationwide.

“Consumers are looking at the cost, not the quality. Many products come at prices below their real cost, which should concern us as they are not always of good quality,” said Esperanza Ortega Azar, President, CANACINTRA, to El Sol de México.

The surge of low-cost imports, particularly from Asia, has put immense pressure on local producers. For instance, Flexi closed one of its three plants in Guanajuato, citing competition from Asian products. This influx of imported goods has also adversely affected the textile and electronics industries, with losses exceeding MX$10 billion due to smuggling. “We estimate smuggling to be valued at over MX$10 billion. We are not against international trade, but when products enter illegally, it creates unfair competition that harms our industry and can force businesses to close,” Ortega Azar stated.

In addition to economic pressures, the industry faces significant security challenges. In 2023, there were 9,181 reported robberies of transporters, marking a 3.9% annual increase, according to the Executive Secretariat of the National Public Security System (SESNSP). Extortion, particularly through “protection fees,” also plagues the industry, with 70% of cases involving phone calls.

Guanajuato, a key hub for the footwear industry, has been particularly affected. From February 2023 to February 2024, the industry in Guanajuato lost 6,558 jobs, according to the Mexican Social Security Institute (IMSS). The industry's struggle with unfair competition from Chinese imports and labor shortages is a growing issue, according to Mauricio Battaglia Velázquez, President of the Footwear Industry Chamber in Guanajuato (CICEG). In 2023, 120 million pairs of footwear were imported into Mexico, half of which came from China. This surge continued into 2024, with a 45% increase in imports in the first quarter.

One significant closure was Flexi's plant in San Luis de la Paz, which had operated for 18 years. The closure was partly due to reduced orders from Timberland, which faced a 13% drop in global sales over the past year. Flexi had to relocate two production lines to San Diego de la Unión. This situation highlights the broader issue of dumping, where products are sold below normal prices to eliminate competition, severely impacting Mexican producers.

Despite these challenges, local governments are taking steps to support the industry. In 2024, Guanajuato allocated approximately MX$86 million to aid the footwear sector. This includes the “Plan for Competitiveness and Productivity of the Footwear Sector”, which provides MX$40 million to support around 100 footwear companies, safeguarding approximately 11,000 jobs. Additionally, Leon's municipal government dedicated MX$6 million to help 50 small and medium-sized enterprises retain about 12,500 jobs.