Evidence and Enterprise Define Guatemala’s Real Circular Fashion Story

Scale matters in Guatemala’s SHC economy because it reveals the mechanics of reuse in action. Megapaca, with its more than 80 stores nationwide, is the most visible face of that scale. Each year, the company handles 9 million–18 million kg of imported garments, positioning itself as the anchor of Guatemala’s reuse system. The scale of operations demonstrates how circularity functions not as theory but as daily commercial practice.

Mario Peña, General Manager of Megapaca, describes the company’s retail model as distinctive. “We do have a mixed retail model, with an online store that we launched five years ago and which has really picked up in the past two years, but the majority of stores are physical stores where we offer multiple discounts. We have some premium physical stores as well. We offer flexibility for different types of customers through a model that we developed after years of trying different types of commerce and comparing numbers. The current model allows us to serve different types of customers, those that are willing to pay a little more for premium items and the bargain hunters who are keen to dig deeper for the ‘treasure item’.”

But the true hallmark of this economy is redistribution. Items that do not sell during initial display cycles are progressively marked down, moved to clearance sales, and eventually channelled into saldos markets. According to the Guatemala Report, 25.1% of stock is ultimately sold this way, largely through smaller vendors and rural resellers. This cascade ensures that garments flow outward rather than stagnating, extending their use and multiplying the number of households who gain value.

The wider national picture mirrors this practice. Surveys of four major markets found that 87.8% of imported garments are reused, with waste fractions as mentioned earlier between 9.2 and 11.8%. Where imports are pre-sorted, outcomes improve further: waste drops to 8.4%, and 70.2% of clothing is classed as good quality. These numbers compare favourably with textile disposal rates in high-income countries, where greater recycling infrastructure exists on paper but actual reuse and diversion from landfill is often lower.

Lisa Jepsen, Chief Executive Officer of Garson & Shaw, highlights the importance of such evidence. “We commissioned this report because we felt it was important to gain a clearer understanding of this relatively little-researched area of the Central American SHC trade. What the research clearly shows is that SHC imports into Guatemala result overwhelmingly in reuse. Our study shows that actual textile waste is minimal, ranging at 9.2–11.8% of total imported SHC, and significantly lower at just 5% when clothing arrives sorted. It clearly indicates that focusing on textile waste in imports is misleading. These findings reinforce that SHC exports contribute significantly to textile circularity and provide significant environmental and economic benefits, rather than shifting burdens elsewhere.” Her point underlines the necessity of shifting debates from perception to verifiable outcomes.

What emerges is a layered economy where garments rarely exit circulation prematurely. From urban retail outlets to rural markets, and from primary sales to secondary redistribution, clothing is worked and reworked into extended life. Waste, while present, is a minority outcome compared with the overwhelming volume of reuse. For Guatemala, this pattern challenges global narratives and reinforces the case for recognising reuse as an already operating form of circularity.

In practice, the system demonstrates how scale and redistribution create a resilient, if fragile, economy. Megapaca’s treasure-hunt retail model and the downstream saldos markets together illustrate that garments considered discarded abroad are in fact the raw material for employment, household income, and proven waste reduction. Reuse here is not aspirational; it is the daily operating principle of Guatemala’s SHC trade.

Even in Guatemala’s highly efficient SHC economy, not every garment can be resold. A portion remains after markdown cycles, saldos redistribution, and repeated attempts at resale. Historically, this residue was regarded as unavoidable waste, either absorbed into landfill or repurposed informally. In 2016, Megapaca decided to intervene more systematically by launching NovaFiber, a subsidiary dedicated to transforming pre-sorting waste from Megapaca’s sorting operations and pre-consumer industrial offcuts into new industrial materials. The project illustrates how private actors are attempting to close the loop where public systems have failed.

Mario Peña, General Manager of Megapaca, describes both the ambition and the constraint. “Converting textile waste into household goods is definitely a rare example of open-loop circularity, but after a thorough analysis, we decided to invest in it, and that’s how Novafiber was created. We believe that this will work long into the future. We know the products created have a market, and there aren’t many technical constraints for this model to succeed. The main challenge is financial – the model needs long-term investment, so attracting finance can be difficult.”

The Guatemala Report provides evidence of NovaFiber’s impact. Between its founding and 2023, the company diverted an estimated 45.7 million kg of textiles that would otherwise have been discarded. The fibres are repurposed into lower-value but necessary products, including mattress padding, household insulation and cleaning materials. These outcomes matter because they prevent accumulation in waste streams while demonstrating that recycling can complement, rather than compete with, reuse. NovaFiber captures the residual fraction that resale cycles cannot absorb.

This distinction underscores a critical argument in global debates. Fibre-to-fibre recycling, widely promoted in policy discussions, remains technically promising but commercially limited. By contrast, NovaFiber represents open-loop recycling: it does not restore textiles to their original use but still extends their life in other forms. For now, this is more feasible in a country like Guatemala, where waste management infrastructure is weak and informal reuse already achieves high diversion rates. NovaFiber demonstrates that recycling can succeed if it adapts to context rather than chasing global blueprints.

The financial challenge is significant. Unlike resale, which generates immediate revenue, textile recycling requires heavy machinery, reliable energy inputs and consistent feedstock volumes. Without subsidies or inclusion in Extended Producer Responsibility frameworks, margins remain slim. The Guatemala Report warns that unless financing mechanisms are developed, projects like NovaFiber risk stalling despite their proven benefits. The case highlights the uneven playing field: countries in the Global South can innovate, but without international co-responsibility, they shoulder costs that exporters and policymakers abroad rarely recognise.

NovaFiber also shifts how circularity is understood within Guatemala. While reuse remains the dominant pathway, recycling provides an additional safety net, capturing garments that would otherwise slip through. It broadens the definition of circular outcomes beyond resale, adding a layer of industrial recovery that strengthens the credibility of the sector. For policymakers abroad, this matters: it demonstrates that circularity is not absent in importing countries but actively evolving through private initiative.

Ultimately, NovaFiber is both an achievement and a warning. It shows how companies like Megapaca can pioneer solutions where state systems are weak, but it also reveals the fragility of relying on business alone to build infrastructure. Without broader recognition and financial support, the promise of open-loop recycling may remain vulnerable. Yet as evidence of what is possible, NovaFiber has already changed the terms of debate — proving that even garments deemed unsellable can find another life.

Guatemala’s SHC sector demonstrates that circularity can function even in the absence of strong state systems. But as international pressure mounts, credibility now depends not only on garments resold, but on the evidence proving it. Advocacy and transparency have become central pillars of the industry, shaping how the trade is perceived abroad and defended in policy forums.

Mario Peña, General Manager of Megapaca, argues that private actors must go beyond retail to shift mindsets. “Through our brand, we also advocate for reuse, encouraging political and behavioural changes that encourage reusing items rather than throwing them away, which is better for us, for our finances and for the environment.” His words highlight that circularity is not simply operational practice but also a narrative contest, one that must be actively shaped.

How this works came out through the study. For researchers at Full Cycle Resource, credibility was delivered through rigorous methodology. Co-founder Richard Wang explains that in the survey, several questions were repeated in different formats to enable cross-verification. For instance, retailers were asked to indicate the total number of clothing pieces in a bale, followed by a breakdown of the sub-categories within that bale. The sum of the sub-categories was then checked against the overall figure to ensure consistency. Waste stream evaluation was carried out by comparing the number of pieces respondents identified as waste with their separate estimate of waste volume, also expressed in number of pieces. "The survey was deliberately designed with built-in redundancy, cross-references, and verification checks. This approach ensured data reliability but also meant that each interview required, on average, about 20 minutes to complete."

This methodological transparency was critical because Extended Producer Responsibility schemes increasingly hinge on traceability. Exporting countries demand evidence of what happens to discarded clothing. Without robust data, Guatemala’s trade risks being labelled dumping. With it, the industry can point to quantifiable outcomes: 87.8% reuse rates, waste fractions consistently below 12%, and even stronger results for pre-sorted consignments. These figures move the discussion away from perception and toward measurable outcomes, establishing the sector as a credible form of circularity.

The Guatemala Report also notes that accountability cannot rest solely with local government. Municipal waste systems remain weak, enforcement is limited, and textile separation is rarely mandated. In this vacuum, private actors have stepped in, filling roles normally reserved for the public sector. Companies such as Megapaca consolidate imports, track redistribution, and even invest in recycling capacity through NovaFiber. While effective in the short term, this reliance on private initiative highlights systemic fragility: circularity is being achieved, but without public policy support or financing from the Global North, it remains vulnerable.

The stakes extend beyond Guatemala. Internationally, definitions of circularity often privilege fibre-to-fibre recycling, a pathway still commercially limited. Guatemala’s experience shows that functional reuse, supported by credible evidence and advocacy, can deliver immediate and measurable outcomes. To be sustainable, however, the system needs recognition and shared responsibility. Without support, even strong evidence risks being sidelined by frameworks that do not account for local realities. With it, Guatemala’s model could serve as a template for how the Global South contributes to global circularity on its own terms.