Latin America trembles: politics and riots dull the eternal future promise for fashion

Is one of the largest fashion markets in the world and one of the few that’s still growing. But instability and uncertainty have shaken, once again, what was supposed to be the greatest promise for the fashion business: Latin America.

Riots and demonstrations, sometimes violently repressed, have spread throughout the region, from Bolivia, to Chile, Ecuador, Peru, Honduras, Venezuela and Colombia, where the Army has taken the streets.

The fashion market in Latin America is estimated at 160 billion dollars, more than the Middle East, but its greatest opportunity relies in its growth potential. While the developed countries are stagnant, fashion keeps growing double-digit in Latin America. According to the latest Euromonitor outlook, the apparel market will grow 11.8% in Mexico until 2020, while in Colombia they’ll increase by 4.9%.

For the United States, this is its natural expansion territory. The country holds several free-trade agreements with countries like Mexico, one of its biggest exports destinations, and American brands are valued more than anywhere in all the region. The region also holds big retailers, preferent partners for American brands, like Falabella, Cencosud, Grupo Axo or El Palacio de Hierro, that have suffered the crisis lately.

The International Monetary Fund expects South America’s GDP to shrink by 0.2% this year. Almost every single economy in the region will slow down this year: Mexico will go from rising 2% in 2018 to 0.4% this year; Chile will go from 4% to 2.5% and Peru will slowdown from 4% in 2018 to 2.6% in 2019. Ecuador, Puerto Rico, Argentina and Venezuela’s economies will shrink this year.

In Colombia, the social protests reached its highest point last November 21 with a national strike. Although the economy remains strong, the consumer’s confidence index fell 14.4% in October.

In Chile, fashion sales have shrinked nearly 50% in the last twelve months, according to the Cámara de Comercio de Santiago (CCS). The giant department store group Falabella has stated that it has “financial strength” to deal with the social crisis, although it has kept part of its store network shut down due to the riots. Closed stores represent about 4% of retail sales in Chile.

In Mexico, the first year of president Andrés Manuel López Obrador hasn’t been easy either. The Government has raised uncertainties for foreign investments and, although he promised the country will grow during his tenure, it entered a recession in the second quarter.

Argentine doesn’t seem to see the late either. The president elect Albert Fernández has inherited a very weaken economy, burdened by its debt with the International Monetary Fund. The organism estimates that the economy will shrink further this year, with a fall of 3.1%, and recover with a fall of 1.3% in 2020.