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About 140 new centers are under way in Latin America

By María Bird Picó

Growing economies, rising incomes and greater access to credit are fueling a mall-building boom across Latin America. That much was evident at the Third International Congress of Shopping Centers held in October in Buenos Aires, Argentina, the first in 10 years. The attendees came from every country in Latin America. Organized jointly by the Cámara Argentina de Shopping Centers and ICSC, the convention presented an optimistic picture now that most countries in the region have overcome major fiscal crises.

Today about 140 shopping centers are under construction in the region, most of which will cater to Latin America’s surging middle-class spending power, delegates said. In Mexico alone some 70 centers are going up, with 10 more in the planning stages.

Argentina is emblematic of what is happening throughout the region, said Santiago Blaksley, president of the Cámara Argentina de Shopping Centers. Argentina now boasts 57 shopping centers, half of them built during the past decade. Roughly 270 million shoppers visited the country’s malls last year, ringing up $4 billion in sales. And that could hit $5 billion this year, sources say. Twenty-four new mall projects have been announced there, which would push up the total number to 84 by 2008, said Blaksley. “We are now in an expansion stage, with many projects in the pipeline and others in different stages of gestation throughout the country,” said Blaksley. “[There are] new structures, expansions, new business possibilities, not only in our country but in the region. The sector is experiencing real growth.”

Brazil, which built its first mall in 1966, now boasts 304, with 11 others under construction. The number of malls in Brazil more than doubled between 1993 and 2006 — from 135 to 304 — and these directly and indirectly generate 3 percent of the country’s jobs, said Paulo de Tarso Bianchi Alves, president of Office Shopping Merchandising, a São Paulo, Brazil-based mall marketing firm.

Peru’s 12 shopping centers have generated $1.1 billion in sales this year, up 10 percent from last year. And 17 new shopping centers are under construction in Venezuela, which currently has 90.

Even in those countries with no malls under construction, existing ones are being expanded. That is true of Uruguay. The four malls in the capital city of Montevideo, which has a population of 1.5 million, are all being expanded. Those malls combined get about 4 million visitors each month. After a retail sales plunge of as much as 40 percent between 2000 and 2003, the industry in Uruguay has rebounded and is close to pre-1999 sales levels, said Carlos Lecueder, president of Estudio Luis E. Lecueder, an Uruguay-based mall operating and consulting firm.

The industry is also evolving as it grows. While many of the projects going up are conventional neighborhood shopping centers catering to new housing developments, the region is also seeing the construction of lifestyle, mixed-use and indoor-outdoor hybrid centers every bit as modern as those in the U.S.

El Salvador, for instance, one of Latin America’s smaller countries, is home to one of the first lifestyle centers in the region, La Gran Vía, which has a gross leasable area of 40,590 square meters (436,800 square feet). Located in San Salvador, La Gran Vía is part of a mixed-use project that calls for a six-story office building and a 131-room Courtyard Marriot Hotel. To its credit, this lifestyle center has done away with the long-held idea that open retail spaces have no place in rainy countries, said Coralia Guerra, general manager of La Gran Vía. “We have 90 rainy days in a year, but we conducted a study that revealed our visitors did not have a problem with the rain,” said Guerra. “It turns out that our clients spend more money during rainy days.”

Developers in the past focused mainly on building malls for high-earning consumers. But as the purchasing power of the middle- and low-income classes grow, retailers and landlords are scrambling to meet their needs. “Seventy percent of the shoppers at Brazil’s shopping centers belong to the [upper-earning] social classes,” said Luiz Marinho, president of the Brazilian branch of BrandWorks, an advertising and marketing agency. “The low- and middle-income classes have the desire to shop but do not think malls are appropriate for them.”

These countries could take a cue from Colombia and Venezuela, where the majority of the malls cater to middle and lower incomes, said Oscar Piccardo, president of 1POR1 (that is, Luno por uno, Spanish for “one by one”), an Argentina-based retail consulting firm.

Colombia has experienced a major mall boom, with 41 built during the past 30 months. Roughly a dozen new centers are currently under construction throughout the country. “We have had a new mall every 23 days, and retail sales are growing at a 12 percent rate,” said Rafael España González, director of economic affairs for the Federación Nacional de Comerciantes, a Bogotá, Colombia-based retail and mall trade group.

The disposable income of lower earners is boosted by the fact that many young people continue living with their parents rather than leaving the nest at 18 or so, and this, of course, helps cuts housing expenses for the entire household. Subsidized government services help too, said Ciro Aurelio Plata, president of the Cali-based AceColombia, one of the country’s shopping center trade groups. “These clients also often pay in cash, which means retailers don’t lose out a percentage of the sale to credit cards,” said Plata.

Malls engender loyalty and a sense of belonging among lower-income people, observers said. “Lower-income earners find at the mall comforts that they lack at home such as air conditioning, security and a place to see and be seen,” said Arnold Moreno, president of the Cámara Venezolana de Centros Comerciales, Comerciantes y Afines. “Our surveys show that 92 percent of our population visits shopping centers.”

Easy credit, for both consumers and developers, is priming mall industry growth considerably. Cencosud executives, for instance, announced at the conference that in Argentina next year they will roll out store credit cards for their Easy home improvement stores, their Jumbo hypermarkets and supermarkets and their París department store. Chile-based Cencosud is one of Latin America’s main mall operators and retailers, doing business not just in Chile but also in Argentina, Colombia and Peru. Other Chilean retailers, such as Falabella, are similarly using their own credit cards to penetrate neighboring countries’ markets.

The escalating volume of remittances sent back home by Latin Americans overseas is another sales booster, noted Laura Schettini de Wright, general manager of Mall El Jardín, in Quito, Ecuador. This activity amounted to $55 billion across Latin America last year.

International borders are also posing less of a barrier, as investors, developers and retailers increasingly invest outside their home countries. Horst Paulmann, founder and president of Cencosud, confirmed that his company is buying a 25 percent stake in Almacenes Exito, one of Colombia’s major supermarket chains. And Brazil and Mexico are benefiting from aggressive U.S. and Canadian investment in the retail real estate markets.