Mexico: Mexico Enters The Fashion Limelight

Last Updated: 28 November 2014
Article by David Kerr

Long over looked by fashion rival Brazil, Mexico has emerged as a new fashionista in Latin America.

With the Brazil fashion market getting more and more crowded, smaller giant, Mexico, is on the up and up.

Brazil has long been known as the fashion capital of Latin America, but with a saturated market investors are looking further afield and Mexico has tickled their fancy.

After several decades in the slow lane this country of 120 million people is becoming increasingly economically dynamic and is becoming a serious contender for fashion investors looking in to Latin America.

"Much like TMF Group has seen in the past decade in China and more recently in the Brazil and South-East Asian markets, the catalyst for this appetite in Mexico, with the enthusiasm and concrete investment in retail comes from the same underlying macroeconomic influences," TMF Group Director David Kerr says. 

"The demand is stimulated by an emergence and growth of a middle-class with a sustainable flow of disposable income. This is supported by a continued focus on public infrastructure improvements alongside private real estate investment into large-scale hypermarkets and malls."

In the past year alone Dolce & Gabbana have rolled out three stores and two Prada boutiques opened within the same week. Yves Saint Laurent is also believed to be opening a flagship store in Mexico next year; these examples are only the tip of the iceberg. 

It's not only luxury brands that are delving in to Mexico – high street retailers are becoming strong investors. Retail giant H & M opened their first store in Mexico in 2012 and opened a further eight outlets within the next couple of years. 

Mexico is Latin America's second largest economy and the second most populated country. Now, after stepping out of the shadows of the US and Brazil, the opportunities in Mexico are rearing their head.

Why the shift now?

Since Mexican president Enrique Peña Nieto took office in 2012 the economy has really started to pick up.

Over the past few years Enrique Peña Nieto has brought in a raft of economic reforms that should put Mexico in good stead for future investors.

Mexico is well positioned for business, with 10 free trade agreements with 45 countries. Add in modified tax rates with certain regions and Mexico is starting to steal the Latin American thunder.

Mexico has also been targeted as an exciting group of emerging market economies named MINT (Mexico, Indonesia, Nigeria and Turkey). Mexico, along with the others, is being watched closely by leading economic analysts.

Growth this year in Mexico is expected to be around 4% - twice that of neighbour the United States.

What's the catch?

Despite all the promises, Mexico is still an emerging economy and unfortunately still has a number of problems to address.

One of the biggest problems facing Mexico is drug related crime and Mexico's crime rates are among the worst in the western hemisphere. Mexico relies heavily on foreign tourism, but if the current level of violence is maintained the overall economy will struggle to grow.

Mexico has taken some corrective steps in recent years and levels of violence in notorious hotspots are declining and are plateauing nationally. But the process of fundamentally transforming Mexico's law enforcement and justice systems is still an ongoing battle. 

Looking to the future

If Mexico addresses these challenges, it will almost certainly emerge as a powerful player on the international stage. A safe Mexico would attract billions of dollars in foreign investment and propel the country into the world's top economic ranks.

At present Brazil is still the single most important and developed market in Latin America for most global fashion brands. However, Mexico is starting to nip at the heels of Brazil and it is estimated by Euromonitor that in just four years the Mexican market will increase by another $10bn.

"In conjunction with a government supporting continued improvement on regulations to facilitate the flow of imports and exports, evidenced by the 45 plus free trade agreements, we expect to see a continuation of this steady flow of retailers expanding into Mexico well into 2016," David says.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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