Bangladeshโs ready-made garment (RMG) sector is increasingly looking toward South Americaโs Mercosur bloc as a long-term growth opportunity, with industry leaders warning that export diversification is becoming a necessity rather than a choice as the country prepares for the loss of preferential trade benefits after graduating from the Least Developed Country (LDC) category.
Despite a population of around 270 million and growing consumer demand, Mercosur remains one of the least explored markets for Bangladeshi apparel. Industry experts argue that the region offers significant potential, although high tariffs and limited trade engagement have kept exports far below their possible levels.
Bangladesh imports more than $2 billion worth of goods from Brazil every year, primarily cotton, soybean products and sugar, while exports to the South American nation stand at only around $150-190 million, mostly in apparel. According to industry leaders, the imbalance reflects barriers to market access rather than a lack of demand.
โThe math is simple: a market this size, sitting this open in places, should not stay this untapped,โ said Mohiuddin Rubel, Managing Director of Bangladesh Apparel Exchange and former director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
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One of the biggest hurdles lies in Mercosurโs Common External Tariff system. Brazil and Argentina, the blocโs largest economies, impose a 35% tariff on imported apparel, making Bangladeshi garments significantly less competitive. In Brazil, additional internal taxes further increase the cost of imported clothing, pricing many products out of the market before they can effectively compete.
However, opportunities exist beyond the blocโs core members. Mercosurโs associate countries maintain independent tariff structures, creating openings for exporters.
Chile, in particular, has emerged as a promising destination. The country operates a low, near-uniform tariff regime of around 6% and maintains an extensive network of free trade agreements. As a result, Bangladeshi apparel can compete in the Chilean market without the need for a new trade agreement. Peru is also considered a workable market, while Colombia, despite being an associate member, maintains strong protections for its domestic garment industry, limiting opportunities for foreign suppliers.
Trade experts point to Indiaโs experience with Mercosur as evidence that the South American bloc is willing to engage with Asian economies. India signed a Preferential Trade Agreement (PTA) with Mercosur in 2009 and is currently expanding the agreement from approximately 450 product lines to nearly 3,000. Although finished garments remain one of the most protected sectors within the bloc, the agreement demonstrates that negotiations with South Asian exporters are possible.
Industry stakeholders believe Bangladesh should adopt a phased approach. In the short term, exporters should prioritize Chile, build relationships with buyers and obtain accurate product-level tariff information before committing substantial resources. Over the medium term, stronger commercial diplomacy with Brazil and broader engagement with Mercosur as a bloc could pave the way for deeper trade ties.
In the longer run, Bangladesh may seek reciprocal trade arrangements and pursue dedicated concessions for garments and textile products. Analysts stress that such efforts should complement, rather than replace, ongoing negotiations aimed at securing favorable market access to the European Union under Economic Partnership Agreement (EPA) and GSP+ frameworks.
With apparel accounting for more than 80% of Bangladeshโs export earnings, diversification has become increasingly urgent. As traditional advantages begin to erode following LDC graduation, industry leaders believe South America could emerge as an important pillar of future export growth.
While gaining a meaningful foothold in Mercosur will require sustained diplomatic and commercial efforts over several years, stakeholders argue that a market of this scale can no longer remain on the sidelines of Bangladeshโs export strategy.
โDiversification isnโt optional โ itโs survival,โ Rubel said, emphasizing the need for Bangladesh to begin laying the groundwork for a stronger presence in the South American market.