CUENCA, Ecuador (Reuters) - Ecuadoreans have mostly swallowed their chagrin and accepted that their most famous export will for evermore be known as the "Panama hat".
The Ecuadorean hats used to be shipped east from Panama and were worn by laborers hewing out the canal across the isthmus there, opened in 1914. Since then, they have been misleadingly known as Panama hats.
There are now more serious concerns than the misnomer. Cheap Chinese copies are devouring the market and only a few nimble-fingered villagers still know the art of weaving the iconic white hat with a black silk band.
"Obviously we would like to change the name to 'Ecuador hat' or 'Cuenca hat,' but the brand name has been established over such a long time," said Graciela Paredes, deputy-manager of a milliner in the stately Andean city of Cuenca.
"The problem is the next generation. It is just not attractive for them," she added. Low wages in grueling rural jobs have played a key role in the mass emigration of Ecuadoreans to Spain and the United States.
Over the years her firm Rafael Paredes and Sons, its boxes stamped with a trademark toad, has supplied venerable hat-maker Christy's of London and British retailer Marks & Spencer.
Cuenca, perched up at about 8,200 feet and renowned for its roast guinea pigs rolled in herbs, is the capital of the Panama hat industry.
Bright-skirted indigenous women selling cherries in Cuenca's ornate colonial squares sport hats similar to those that high-society Westerners don for horse races, summer fetes and Tuscan holidays.
Palms hacked down by machete in the Manabi region of Ecuador's Pacific coast are treated and taken to Azuay province around Cuenca to be woven into dapper headwear.
Middlemen buy from the weavers and sell on to factories, a business that sparks charges of exploitation and profiteering.
"People say that we buy hats for $5 and sell them on for $100, it just does not work like that," said Gladys Ortega, company lawyer for Homero Ortega and Sons, supplier to royals and Hollywood stars such as Jeff Goldblum and Peter Falk.
She picked up a tightly woven Cuenca hat that would fetch $500, saying it was bought in its rough form from the intermediary for about $400. It was then trimmed and processed in her workshops. Such hats take up to four months to weave.
Average Panama hats cost $25 to $50 but fetch more than three times that price in the West.
"But now there are these Chinese Panama hats costing $8. That is a vicious level of competition," she complained.
Hatmakers in Cuenca agreed the industry was in sharp decline.
In fierce competition with each other, the workshops preferred not to have their output figures published but agreed they produce about 20 percent of what they did 15 to 20 years ago as hat-wearing falls out of fashion.
For that reason, the cavernous store-rooms show some imaginative diversification into brightly colored ladies' hats and handbags. Some bags for French luxury goods firm Hermes International are woven around Cuenca.
"We have to keep up the fight," said Ortega, discussing with her sister Alicia the switch to Internet sales (www.genuinepanamahat.com) and the idea of putting patent protection on the name.
"But my father said one day all this would disappear," she continued, referring to Homero Ortega's work in the Pacific coast towns of Montecristi and Jipijapa, where the finest type of Panama hat, the superfino, is made.
The superfino can fetch thousands of dollars: one of the specimens in the Ortega workshops was so finely woven its fabric looked as smooth as a cotton sheet.
The story goes you can fill a superfino with water and not a drop will pass through. Rolled up, it should pass through a wedding ring.
"But they say there are only six or seven people who still know how to make the real superfinos," she said.
Up in the mountains of Biblian north of Cuenca, a shy 81-year-old called Rosa was working on a simple hat, moistening it with a maize cob as she worked on it.
"There was a woman round here who could make the superfinos but she is dead now," she said.
"The young people do not want to go into this kind of work. The girls have more opportunity for schooling and university."
Asked whether new President Rafael Correa, a leftist who has shown a great interest in protecting traditions and the rural poor, could lend a hand to Panama hatmakers, Gladys Ortega remained upbeat.
"Let's hope so," she said.