After more than doubling its growth rates between 2008 and 2012, Brazil is the darling of Latin America's luxury apparel and goods market. Last year, the market for designer clothing and footwear grew 7.3% to $2.6bn, while sales of luxury accessories increased 4.5% to 1.2bn.

Meanwhile Mexico, the region's second-biggest market, saw a 4.7% jump to $685m in designer clothing and footwear while the luxury accessories category saw sales increase 3.5% to $294.3m, according to Euromonitor data.

Currently, Brazil's luxury goods market is worth $7bn while Mexico's stands at $1.5bn, according to the research firm.

Observers say the two markets are poised to grow sharply in coming years amid burgeoning consumption rates and a string of planned store openings by luxury houses, mainly in Brazil and Mexico but also in Argentina, Chile and Colombia.

"We are seeing a lot of spending in Brazil, Mexico and Argentina," says Fflur Roberts, head of luxury goods at Euromonitor. "Both countries, though especially Brazil, have a rising number of middle and upper-class consumers interested in premium apparel."

Roberts says Buenos Aires has slowly become a major Latin American fashion capital where many Brazilians are shopping due to the real's increasing strength against the peso. Currently, a stroll down Buenos Aires' Avenida Alvear is a testament of how attractive the Argentinean capital has become for luxury brands. Hermes, Louis Vuitton, Salvatore Ferragamo, Dior and Escada are just a few of the dozen luxury shops present there.

Brazil's big ticket
Nevertheless, the big ticket remains Brazil. With a $2.5 trillion economy that's set to grow 5% annually until 2014 (and hosting the 2012 Football Cup and 2016 Olympics), the country is in an enviable position.

Brazil boasts Latin America's fastest-growing number of HNWI citizens (those having US$1m or more in investable assets) and is generating 19 millionaires a day, according to Bain consultancy and wealth management banks.

In a recent research report, Bain said Brazil has 5,000 people with over $30m in their personal account. The country is home to 40% of Latin America's HNWIs.

This phenomenon means big money for luxury purveyors, who usually arrive in Brazil before venturing into other Latin American countries. The same is true for smaller, niche labels.

"Tory Burch might be in Brazil but not in Colombia or Uruguay," says Milton Pedraza, CEO and owner of New York-based luxury consultancy the Luxury Institute. He adds that Brazil's sheer market size and number of wealthy shoppers makes it an ideal testing ground for any premium brand seeking fortunes in Latin America.

And fortunes there are. Brazil is the 11th country with the largest number of millionaires in the world. It also has a fast-growing population of so-called DINK (double income no kids) consumers who are expected to drive future luxury good sales.

These consumers, Bain says, have "a high spending capacity, a strong propensity to purchase and seek satisfaction in material goods and more leisure time."

In Brazil, unlike any other emerging market, female consumption accounts for 75%of total luxury apparel and good sales, making the market very peculiar in that sense, Bain said.

Amid this backdrop, retail developers are rushing to build as many ritzy shopping centres as possible. The new super-luxury JK Iguatemi mall is an example of such a strategy and observers expect many more such malls will swing open in coming years.  

Regarding shopping trends, observers say Brazilians of all ages love colourful apparel and are very loyal to their favourite brands. They usually wear casual clothes and are very formal when going to work or attending special occasions.

Roberts says brands' strong marketing campaigns, coupled with Brazilians' rising disposable income and low savings rates, have helped and will boost future demand for premium apparel.

Mexican youngsters fuel market
The luxury apparel and goods market is also poised to grow 15% in Mexico this year, according to industry executives who expect 10-15% annual growth in the near to medium future.

Mexico's rising number of wealthy shoppers, emboldened by strong economic growth (less affected by the US downturn than many predicted) continue to buy upmarket labels, says Carlota de la Vega, director of Fashion Group International in Mexico City.

However, unlike Brazil, most of this shopping takes place in high-end department stores like El Palacio de Hierro, which is expanding across Mexico, as well as in upmarket shopping malls, the most recent of which (Interlomas) opened in the Mexican capital last autumn.

De la Vega notes Mexico has yet to attract the huge number of standalone shops operating in Brazil. However, she expects brands' growing interest in the country to drive such a strategy in the future.

"Luxury consumption is very strong in Mexico where brands like Hugo Boss, Gucci and Cartier have been present for two decades," de la Vega says. She notes Porsche recently inaugurated a store in Mexico City, showing there is also a growing appetite for more niche luxury labels.

She adds Tiffany is about to open a store in Mexico City while several new malls catering to designer boutiques are also poised to arrive.

Like Brazil, a thriving class of young and high-earning professionals is fuelling luxury apparel and goods sales. This emerging class is quite different from the one that bought luxury in the past.

"They are more informed about fashion, trends and all the different brands," de la Vega says. More notably, they are much younger.

"Today we see 15-year-old girls carrying Gucci or Louis Vuitton handbags. With males, we see them wearing upmarket polos such as Lacoste or very trendy and expensive watches," adds de la Vega. This compares with two decades ago, when most consumers would buy luxury when they were about 30 years old.

"If you were in high school, these things were a lot less accessible," she notes.

Salvatore Ferragamo, Gucci and Louis Vuitton are the best-selling luxury brands in Mexico, de la Vega says.

In common with Brazil, the advent of the Internet (the world's richest man, Mexican Carlos Slim, has been promoting its free usage as he owns leading cell-phone network America Movil), and social networking sites, have also helped Mexico's youngsters learn about all the global brands and trends, boosting luxury sales, de la Vega says.

Click on the links below to read other articles in this management briefing.

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