[slideshow_deploy id=’1871′] Mexico retail market is only second to Brazil. Mexico’s 112 million population (Inegi) make it Latin America’s second most populated country and the second largest retail market in the region. GDP growth for 2012 is forecast at 4%, according to estimates by ECLAC and Banco de Mexico. Mexico is undergoing important institutional changes at the fiscal, financial, and monetary fronts. The results have translated into price stability and wealth accumulation. Despite a U.S push towards stimulus spending among the G-20, Mexico has avoided the temptation of running fiscal deficits in recent years, keeping them at just over 2%, one of the lowest for the OECD countries. It is clear that policy makers have learned from the hard lessons of the past, such as the 1995 peso crisis. Along with economic stability has come the growth of the middle class, which by some experts estimates now represents the majority of Mexicans. Mexico has also reinvented its manufacturing capacity and competes better against China.
Investment in manufacturing is steadily returning to pre-crisis levels. Mexico lost some its U.S manufacturing competitive advantage and appeal to China, but the increasingly rising costs of Chinese labor added to the shorter shipping distance between Mexico and the U.S have turned the tables in Mexico’s favor. The nation’s manufacturing has evolved from simple assembly operations into complex manufacturing With a large pool of highly educated and skilled engineers and 25 percent lower costs than in the U.S. Mexico offers a competitive advantage to U.S manufacturing of higher value end products and just-in-time components such as computers, televisions, automobiles, industrial and personal products. Mexico may receive as much as $20 billion in foreign direct investment in 2011, which is 11 percent more than a prior forecast. Honda Motor Co. said on Aug. 12 it plans to build an $800 million factory in the central Mexican city of Celaya
Despite the global economic slowdown, Mexico’s retail industry is steadily growing thanks to higher formal job creation and increased levels of access to credit. Formal retail penetration is low relative to mature markets and stands at 15%-25% according to some estimates. The 20 year old shopping center industry is dominated by a small number of groups who together control 80% of business. Mexico’s shopping center industry underwent a development boom in 2006-2008, almost doubling its inventory, and today boasts over 870 shopping centers greater than 10,000 sf in GLA. Of those, 75% have 30 shops or more and are anchored by a grocer, and 53% by a cinema. Due to its proximity to the United States, Mexico has naturally attracted American and other international retailers. International retailer presence Mexico has increased by several fold in recent years and includes: Walmart, Sam’s, Costco, Best Buy, Home Depot, Lowe’s, Office Depot, Porsche, Mercedes Benz, Audi, BMW, Rolex, Louis Vuitton, Hermes, McDonald’s, Burger King, Subway, PF Chang, Starbucks, and many other apparel, accesories, and QSR brands. Walmart’s 2010 sales soared to $24 billion, twice the country’s tourism revenues.
Mexicans are notable for several consumption records. They rank number one in Latin America for their propensity to purchase luxury goods and are fourth in the world. The country boasts two Sacks Fifth Avenue stores, the largest number of Starbucks in Latin America, and is the world’s third biggest home for Zara stores. Mexico is the world’s top egg consumer, Latin Americas’ largest beer consumer (60 liters per year), the world’s second for tequila consumption, soft drinks and bottled water, and the number one video-game destination in Latin America (third in world).
The current security issue in Mexico may have slowed down the entry of some cautious international brands but is far from stopping development. Mexico has 43 cities with over 500,000 people and 187 with over 100,000 thus it offers sizable opportunities. The Mexico consumer market made of sectors A/B (8.4 million), High C (15.4 million), Medium C (19 million), Low C (58.1 million), and D (11.2 million), is driving strong retail growth. Walmart, which operates over 2,800 in its different formats has slowed down its one store per day expansion plans but continues to grow. Home Depot is building 9 stores per year. Locals Liverpool, Palacio del Hierro, Soriana, and Chedraui are doing the same. American Eagle recently announced plans to enter Mexico directly. This level of activity makes Mexico an attractive destination for international retailers who understand the unique potential the country has to offer.
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