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Nicaragua is set to begin manufacturing fabrics and textiles for apparel companies in the country’s free zone sector this year. U.S.-capital textiles firm Millknit Industries is set to start operations any time soon in the Las Mercedes industrial park at the Nicaraguan capital of Managua. An initial investment of $25 million has been allocated for the initiative, which is expected to generate an estimated 270 jobs once the manufacturing operations are in full throttle.

Nicaragua, has registered a record-breaking $2.7 billion in total exports in 2012, reports the country’s export authority, Cetrex. The figure shows an 18% growth compared to 2011, boosted primarily by an increase in international prices on goods such as tobacco, cheese, and gold. The United States is the top exporter of goods from the Central American nation, with total exports accounting for $768 million. It is followed by Venezuela, Canada, and El Salvador.

The country, touted as a “rising star” in footwear and apparel exports, is making an aggressive bid to develop apparel manufacturing and become a viable and low-cost alternative sourcing destination. Until Millknit, Nicaragua had only one garment-producing company, Cone Denim, which was closed down in March 2009, after operating for less than a year. The lack of a garment producer has left a weak spot in the country’s export sector. Importing raw materials to produce goods proved to be too costly. (La Prensa)

The latest development is also part of a government strategy to create a minimum of 100,000 jobs every year. Aside from low labor and operations costs, transportation of goods from Managua to countries like the U.S. will be far quicker as compared to importing from Asian countries like China. Government officials also established that it only takes a two-month window to establish a corporation in Nicaragua.

Millknit Industries in Nicaragua will be devoted to producing knit fabric, not for direct export, but to support manufacturers of T-shirts and casual business shirts in the free zone sector. Production was projected to begin sometime in the first quarter of 2012.

In 2011, consulting firm O’Rourke Group Partners assessed Nicaragua in its study “Benchmarking the Competitiveness of Nicaragua’s Apparel Industry, and found it to be the “single most competitive option for sourcing numerous apparel products, not just in this hemisphere, but in some cases also compared to China, Vietnam, and Bangladesh.”

In August last year, Nicaragua participated for the second time at textile and clothing trade show Sourcing at MAGIC in Las Vegas, which is the largest event in the apparel industry in North America. The Nicaraguan delegation reported that several potential buyers expressed interest learning more about Nicaragua in their search for alternative sourcing options outside of Asia.

PRONicaragua, the official investment and promotion agency of Nicaragua, said the country’s main competitive advantages include generous tax incentives, competitive and cost-efficient production costs, market-speed to profit, and high levels of productivity.