Latin America: A Passion for Luxury

The luxury market is booming in Latin America with the arrival of the most exclusive international brands in major cities.

text Andrea De Felice
illustrations Coca Ruiz

Fifth Avenue, New York. The Champs-Elysées and Rue Saint-Honoré, Paris. These spots are the heart of pure luxury, where you can find the world’s most glamorous and expensive boutiques. Today, this premium shopping also has its Latin American counterparts. Just stroll down Avenida Alvear in Buenos Aires, Presidente Masaryk in Mexico City or Alonso de Córdova in Santiago, Chile, and you will find a concentration of internationally renowned brands. It’s not unusual to find stores like Hermès, Louis Vuitton, Salvatore Ferragamo, Armani, Zegna, Cartier, Valentino, Rochas, Escada, Kenzo, Dior, Chanel, Montblanc, Tiffany, Maserati, Ferrari, Jaguar, Porsche or Audi, as well as décor shops with pieces by internationally famed designers, art galleries, antique galleries, wine stores and other boutiques showcasing collectors items that fill the dreams of Latin American consumers.
The region’s economic stability, a progressive increase in high-end tourism and impressive local buying power has attracted multi-million-dollar investments. As Anabella Weber, in charge of marketing and PR for Ermenegildo Zegna in South America, puts it, “Asia and Latin America are the big challenges for the group.” No wonder the Italian men’s fashion house has opened stores in Argentina, Brazil, Chile, Colombia and Uruguay and has franchises in Peru, Ecuador and Panama. As Weber explains, “some of the factors behind this arrival have to do with rising economies, emerging countries with strong potential and tourism.”

The figures confirm this trend. According to the 2007 World Wealth report produced by Merrill Lynch and Capgemini, the number of rich people (those with net assets in excess of one million dollars) throughout the world as risen to 9.5 million individuals. Latin America has seen the highest growth rate in recent years, with an increase of 23.2 percent (compared to North America and Europe, with respective rates of just 10.3 and 7.8 percent).
According to the report, there are about 400,000 millionaires in the region, with the greatest increases occurring in Mexico, Brazil, Argentina, Chile, Colombia, Peru and Venezuela. This perhaps explains why sales in Latin America – including luxury cars, yachts, helicopters and jets – reached 32 billion dollars in 2007.

With these numbers, it doesn’t seem strange that the luxury industry would find new commercial opportunities in Latin America. “The two principal markets – by size and potential – are Mexico, because of its proximity to the U.S., and Brazil, for its strong economy and growing middle class, an important element in luxury activity,” says Carlos Ferreirinha, president of MCF Consultoría & Conocimiento, a São Paulo-based firm specializing in the luxury market (see table). Unlike other countries in the region, Brazil is home to brands and stores not just in São Paulo but in other cities as well: Rio de Janeiro, Belo Horizonte, Porto Alegre and Curitiba. »

Buenos Aires, with a deeply rooted taste for luxury and a bastion of fashion in Latin America, like Brazil, has also seen the return of brands like Zegna, Kenzo and Diesel, in step with the country’s economic recovery.

Chile has recently become a player as well, thanks to its stable economy, low tariffs and flexible tax policies with regard to international investments. “While Chile is a small market and doesn’t stand out in terms of volume, it is the most solid of them all. Chile has two main positives: stability and many free-trade treaties and thus a greater openness to the exterior, making it a good window,” says Gabriela Guerschanik, General Manager of the Chilean Luxury Brand Association. According to the British firm Verdict Consulting, in 2007, sales in the Chilean luxury market – products ranging from fashion to cars, yachts and helicopters – rose by nearly 15 percent. For example, the year saw record-breaking sales for high-end automobiles, with 270 units over 100,000 dollars sold, according to the Chilean National Automotive Association. The increase has been such that, in Santiago, the Luxury Committee was created. This organization brings together 25 diverse brands, both Chilean and foreign. Under a philosophy similar to that of the Comité Colbert in France and Alta Gama in Italy, the committee seeks to professionalize the luxury economy and elevate the competitiveness of the associated companies. In Argentina, a similar initiative – the Chamber of Excellent Brands – is taking shape and will officially begin activity at the end of the year.

Lima is also seeing a boom in the premium sector. Although figures aren’t available, a walk through the capital’s most exclusive neighborhoods speaks volumes. “The examples are the fashion stores, luxury cars, skyrocketing real-estate prices, beach houses and apartments selling for over a million dollars,” says Carlos Heeren, Managing Partner of the APOYO business consulting firm. This prosperous consumerism is linked to the continual growth of the Peruvian economy in recent years and a greater purchasing power among the middle and upper classes. “I would say that Lima is in an early stage and will see more of these alternatives for separating oneself from the rest, differentiating yourself through luxury,” adds Heeren. »

The Heart of Luxury

Carlos Heeren’s words really map out the heart of the luxury business. It is the search for something unique and exclusive, something that sets us apart from the rest. “Today, the trend among brands is towards premium products. Here, the details make the difference. The consumption of premium brands implies having a certain knowledge,” explains Marisa Koifman, president of MK Comunicación Estratégica in Buenos Aires. This linkage between luxury, pleasure and knowledge is a significant factor in the world of premium wine, for example. “An individual looking for a top-shelf wine is looking for the history behind it. Therefore, advising and personalized attention are key,” says Nicolás Levy, wine importer and Director of Grand Cru, a select wine retailer with locations in Buenos Aires, São Paulo, Punta del Este and Mexico City that offers exclusive wines from Argentina and the rest of the world.

While high-income sectors always have had access to this status, a new sector – the so-called “up-and-coming” class, the middle class and young people with elevated purchasing power – are also getting into luxury consumption and have become the dynamic factor in the business. In Argentina, the wealthiest five percent of the country has been joined by this new segment, which represents 15 percent of the population (equivalent to 1.5 million families), according to a report by the CCR consulting firm. »

In pursuing this new demographic, luxury brands have “democratized” some products to make them more accessible. Gabriela Guerschanik, General Manager of the Chilean Luxury Brand Association, explains: “You have the curiosity of those who perceive in this market a chance to set themselves apart, and they encourage more open consumption. This is a great help to luxury brands and creates new markets.” Armani and Versace offer accessible luxury products, although Guerchanik maintains that, “Louis Vuitton is the most ‘up-and-coming’ brand on Earth.”

Premium brands also strive to foster loyalty among their clients and to offer them a comprehensive experience. For example, take the Ferrari automotive company. “Our presence in Latin America is based on our decision to satisfy the needs of those who can make their dreams come true by purchasing different models in their country of residence, with the advantages of official technical service and the availability of original replacement parts,” explains Julio de Marco, President of Ferrari and Maserati in Argentina.