Everybody knows that historically, Latin America has always been considered a risky zone for international investment. When it comes to business relationships, the region has always been put on the back burner in terms of global fashion influence. This year, when the annual report by The Business Of Fashion and McKinsey&Company called ‘The State of Fashion’ came out, it was quite interesting to read that “for the first time, more than half of the apparel and footwear sales will originate outside of Europe and North America, and the beneficiaries will be emerging market countries across not only Asia-Pacific but also Latin America and other regions.” Starting from this point, this week I found it relevant to discuss some of the opportunities and challenges that come from investing in Latin America as an international fashion brand.

First of all, the big opportunity arises from the fact that Latin American fashion has been under a lot of international watch lately. Fashion Weeks held in countries like Colombia, Brazil, and Mexico have been grabbing the attention of relevant international magazines such as Vogue or Elle. More importantly, Latin America is now considered a region that has a pool of emerging fashion designers that have been internationally celebrated by both critics and the public. Moreover, it’s also important to remember for every fashion connoisseur how some of the most famous designers originated from Latin America, such as Oscar de la Renta, Carolina Herrera or Carlos Miele, just to name a few. It makes sense to say that just like Asia, Latin America is one of the regions responsible for the portrayal of diverse cultures into famous runways in the world; it’s just the general public that has always treated Latin America as an afterthought.

Talking about exponential growth, a recent research made by BMI Research has shown that Latin America’s growth trajectory has been in line with that of Asia’s, the only difference is that China especially has been the one leading the headlines, which makes sense considering that now most international fashion brands (even luxury brands) depend a lot more on that country. Truth is, when it comes to fashion, Latin America is different from how Asia works in the sense that it pays a lot more of attention to local brands that portray Latin American culture and traditions. There’s a deep respect for local cultures to the point where local brands have to be specially supported even on advertisements featured in magazines such as Vogue Mexico and Latin America. The reason for this is due to the lack of investment coming from western international fashion brands in the region, which has caused the development of local brands that, with time, have gained an important exposure in their own markets. Entering the Latin American market means understanding that there are already local Latin American fashion retailers that have already gained exposure by paying more attention to their quality standards, and therefore understanding those standards and how Latin Americans interpret trends will mean an innovative opportunity for international luxury brands.

Second of all, the challenges that international luxury brands can face by investing in Latin America are only three that can be taken into account. The first one is related to the fact that Latin America is considered the region with the highest level of inequality in the world. Although this is a feature of every country in the region, it has been stated that the middle class has been growing at a fast pace in the past decade, and as a result, there has been an ongoing growth in fashion retail. It’s no wonder that retail giants such as Forever 21 or H&M have already invested in Latin America to compete with other large Latin American retailers in the industry such as Ripley or Falabella, both coming from Chile.

The second challenge has to do with bureaucracy issues, taxes on imports highly depend on the country because each Latin American country works completely different and they all have diverse structures. A lot of international brands have backed away from investing in countries like Mexico, for example, making it hard to grab opportunities even for e-commerce due to protectionist policies. The big problem under restrictions for fashion trade, which connects everything leads us to the main third challenge, which is the general political instability of the region. It’s difficult to assess an investment in Latin America as a whole because each country works extremely different and it’s baffling how each country is detached from each other. The political instability issue has already been witnessed in Brazil, for example, which holds the highest percentage of luxury consumption in Latin America, and when the country went into an economic recession, international brands were directly affected and withdrawal of investments was considered. There is no doubt that for overcoming this main challenge, Latin American countries will have to be the ones who work as a whole to restore investor confidence.

So, what are the actions that international fashion brands can take in Latin America?  First and foremost, it’s time that international brands understand that Latin America has been underestimated long enough. In addition, it’s time that they understand the Latin American consumer as one that consumes fashion intellectually. This means that thanks to social media, fashion is now accessible to everyone, and it’s not that Latin Americans don’t consider western fashion trends, it’s just that they interpret them differently and that could mean a way for innovation, especially for luxury brands. Second of all, reaching the Latin American consumer will have to be done through a digital strategy. This can be done by a higher investment in local marketing but mostly invest in local influencers, since they have proved to be the drivers for advertisement and give back a higher return on investment. Third of all, and as mentioned before, it will be crucial to invest in Latin American brands that already have a local exposure. This, in fact, has already been done for example by the LVMH group who invested in Rapsodia, a competitive womenswear retail brand in Argentina.

Finally, it all comes down to diving in completely. Success comes from real execution, and so a real return cannot be expected for international brands if they only invest half-heartedly.

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