Milei Effect: Eighteen Thousand Jobs Later, Argentina's Textile Crisis Has No Floor

Alal's management did not cite a single cause when it announced the shutdown. The statement that accompanied the closure pointed to smuggling, an indiscriminate opening of imports, high labour costs, expensive energy, heavy taxation, and an exchange-rate structure that made locally produced yarns and fabrics more expensive than imported equivalents. None of these pressures was new to Argentine textile manufacturers. But arriving simultaneously, and within a compressed timeframe, they produced a cost-revenue gap the company could no longer bridge.

The most immediate of these was structural cost rigidity. Alal's fixed costs — wages, energy tariffs, taxes, and local services — were denominated in pesos and rising. Financing working capital in an environment of high domestic interest rates added a further drag, particularly for a firm carrying spinning and weaving infrastructure that required continuous investment to remain operational. When production fell below viable thresholds, fixed costs did not fall with it. The firm reported heavy unsold inventories of yarns and fabrics in the period immediately before closure — a direct consequence of running capacity against a shrinking market while financing costs continued to accumulate.

Compounding this was a collapse in domestic demand. Argentina's stabilisation programme and accompanying fiscal adjustment produced a steep decline in real household incomes. Domestic purchases of locally manufactured clothing and home textiles fell accordingly, leaving mid-market producers like Alal exposed on both the volume and pricing fronts. Consumers who had not switched to cheaper imports were buying less. The combination of lower unit sales and compressed selling prices made it progressively harder to recover fixed costs through normal trading activity.

The third front was import and irregular trade competition. The tariff reductions introduced in 2025 made legally imported goods significantly more price-competitive against domestic equivalents. Beyond the formal tariff channel, Alal's closure statement explicitly blamed smuggling and under-invoiced imports across the full range of textile goods for making continued operation untenable. Informal competitors and unregistered imports faced none of the labour, tax or regulatory costs that compliant manufacturers carried, creating a structural asymmetry that tariff policy alone did not create but demonstrably worsened.

What made Alal's position untenable was not any single pressure but the way all three arrived together. A demand contraction alone might have been absorbed through temporary suspensions or reduced shifts. Import competition alone might have been managed through product repositioning. But the simultaneous arrival of all three — cost rigidity, demand collapse, and intensified competition from both legal and irregular imports — left the firm without an adjustment path that preserved solvency. The closure reflects a systemic squeeze, not a failure of management or strategy.

For decades, Argentina's textile sector operated inside a policy architecture designed to keep foreign competition at a manageable distance. Tariffs on clothing and footwear sat at 35%, duties on yarns and fabrics ran at roughly 26%, and a system of non-tariff import controls added further insulation. The arrangement sustained domestic producers, but it also produced a sector characterised by ageing equipment, limited productivity growth, and a structural dependence on protection that widened the gap with Asian manufacturers over successive decades. Prices for Argentine consumers were correspondingly higher than global averages — a fact the Milei government would later invoke explicitly to justify dismantling the regime.

The policy turn that followed Milei's election in December 2023 was abrupt. The government framed trade liberalisation as both an anti-inflation instrument and a corrective to what officials described as decades of artificial pricing in the domestic market. In 2025, tariffs on clothing and footwear were cut from 35% to 20%, duties on many textile inputs moved from roughly 26% to 18%, and yarn tariffs were reduced to the 12–16% range. Import barriers for parcel-type e-commerce were relaxed in parallel, opening a channel that benefited platforms such as Shein and Temu, whose low-priced apparel had already begun penetrating the Argentine market.

The government was unapologetic: domestic clothing had been overpriced — officials went as far as stating publicly that it had been a rip-off — and import competition would now correct that distortion in favour of consumers. Industry bodies read the same measures very differently. The Argentine Industrial Union and the Argentine Chamber of Clothing Industry warned that tariff cuts of this magnitude, applied without any parallel programme to reduce the structural costs bearing on domestic producers, would accelerate closures and destroy thousands of formal jobs. Their objection was not to openness in principle but to the speed and sequencing of the shift — a liberalisation imposed on a sector that had not been given the conditions to compete.

The problem the warnings identified was not complicated. Years of protection had allowed Argentine manufacturers to defer modernisation; productivity gaps with lower-cost producers in Asia had consequently widened. When the tariff floor was lowered sharply, those gaps became immediately legible in price competition. Firms like Alal, carrying old equipment, high fixed costs in pesos, and expensive financing, had no short-term mechanism for closing the gap. Cheaper credit, energy subsidies, or tax relief — measures that might have cushioned the transition — were not part of the liberalisation package.

The distributive consequences of this asymmetry were uneven. Consumers in Argentine cities gained access to cheaper imported clothing, a tangible and immediate benefit in a country where real incomes had been compressed by inflation for years. Formal textile workers in Chaco, Corrientes and comparable industrial zones absorbed the corresponding cost. The policy trade-off was not hidden; it was, in effect, a deliberate recalibration of who bore the burden of Argentina's long-running cost problem — and the answer, in the textile belt, was the workforce.

Alal SAFICI was not simply a manufacturer. Before its closure, the firm functioned as an anchor in the regional production ecosystem of Chaco and Corrientes, linking cotton farmers to the first stages of industrial processing and supplying yarns and fabrics to downstream converters, footwear manufacturers, saddlery producers and small apparel workshops. The scale of that ecosystem matters: Argentina's full textile-clothing chain employs more than 500,000 people across cotton farming, spinning, weaving, finishing, garment making, logistics and retail — making the current wave of closures a threat not to a marginal sector but to one of the country's largest employment structures.

Its plants in Goya and Villa Ángela used locally grown cotton, regional logistics networks and long-standing client relationships built over generations. When both plants stopped, those connections did not simply pause — they broke.

The immediate labour impact fell on 260 formal workers in two smaller cities where industrial alternatives are limited. Former employees reported that the firm initially offered only partial severance, triggering protests and forcing local authorities to intervene with emergency food assistance. The dispute over full payment of legally owed severance — accumulated across many years of service — became the central short-term conflict, reflecting how abruptly the closure severed what had been stable, long-term employment in communities with few equivalent opportunities.

The ripple effects extended well beyond the factory gates. Textile production in Argentina sustains a dense chain of upstream and downstream dependencies: cotton growers supplying raw fibre, transport and logistics firms moving inputs and finished goods, equipment maintenance workshops, chemical and auxiliary input suppliers, and the network of smaller manufacturers that relied on Alal's output as an intermediate good. Each of these relationships was weakened or severed by the shutdown. The loss of an anchor buyer for small cotton farmers in the region was particularly consequential, given that Chaco and Corrientes emerged as Argentina's core cotton zones from the early twentieth century and have organised their agricultural economies around that crop ever since.

The longer-term structural risk is informalisation. Formal industrial jobs in smaller Argentine cities tend to be better paid and more stable than the informal alternatives available in the same labour markets. When they disappear at scale, the documented patterns are migration to larger urban centres, expansion of informal survival activities, and the gradual erosion of industrial skills accumulated across generations of workers. In regions where textile and cotton processing have historically been the primary route into formal employment, that erosion is not easily reversed.

The Alal closure did not occur in isolation. Since 2023, at least 333 textile companies have shut down across Argentina, with roughly 14,000 jobs lost in that wave alone. By October 2025, textile activity had fallen approximately 24% year-on-year — a contraction more than eight times steeper than the broader manufacturing decline over the same period. Alal is emblematic of that wider collapse rather than exceptional within it. What the firm's century of history adds is scale of symbolic weight: if an operation this deeply embedded in regional agriculture and industry cannot survive the current policy environment, the question of what can is one the textile belt has not yet answered.

Two Outcomes, No Clean Answer

The tension embedded in Alal's closure has no clean resolution. Cheaper imported clothing is a real gain for Argentine consumers facing years of compressed incomes. The formal industrial jobs displaced in Goya and Villa Ángela are a real and less recoverable loss for communities with few alternatives. What the source material makes clear is that without coordinated action to curb smuggling, reduce structural costs, and support technological upgrading, the question facing Argentina's textile belt is not whether further contraction is coming — but how much of a century-old industrial ecosystem will remain when it arrives.