Posted by: Manuel Puig
Head of Retail Jones Lang LaSalle Brazil
The last two days at Mapic were extremely busy. I had back to back meetings with developers, investors and retailers, so I was left with no time to go around the trade floor area.
It’s amazing how Brazil raises the interest on this side of the Atlantic. I plan to be back at Mapic next year and hope to organize a cocktail at our booth to invite companies that are interested in Brazil. Most likely my colleagues Pankaj, from India, and Maxim Karbasnikoff, from Russia, will also join the initiative. Therefore, we will have a good team representing the BRICS.
This is my 13th consecutive MAPIC. The last 12 years I participated as a European representative of Jones Lang LaSalle Portugal. I couldn’t imagine being this busy representing a market so different from what I was used to, nevertheless very prosperous and exciting.
Brazil is on the radar for many reasons, such as:
▪ it has 200 million inhabitants and a considerable share of the population (40%) belongs to the emerging middle class.
▪ it is a political stable democracy.
▪ it has shown an average growth of 6% of GDP in recent years.
▪ its inflation rate is controlled.
▪ it is a major producer of commodities.
▪ it has a un-leveraged financial system.
▪ its currency is strong but undervalued.
▪ shopping center supply per capita is three times lower than the average of most developed countries.
▪ its shopping centre portfolio vacancy rate is 2.5%.
▪ low mortgage debt ratio per capita.
All of these factors have translated into a very favourable market condition for the development of shopping centers of all formats. These factors also encourage and enable retailers to satisfy the appetite for consumption of the emerging society.
However, the lower percentage of international retailers in the Brazilian market still concerns me.
Today, discussing with a fashion retailer, we came to the conclusion that taxation is extremely high and it has discouraged many retailers from expanding into Brazil. However, the potential of the market is enormous which should encourage companies to persist despite having retail prices higher than elsewhere in the world.
The climate difference between LATAM and Europe is also another big entrance barrier for European fashion retailers to expand across the Atlantic. We must take account of climatic differences and focus on manufacturing collections specifically for the LATAM market.
Establishing a relationship with local suppliers and reaching a number of 15 to 20 stores to justify the implementation of a local factory unit could be the solution for lower taxes and better retail prices. However, what to do until we get there?