THE STRUGGLE OF BRAZIL’S FASHION INDUSTRY 1
Abstract
The purpose of this paper is to present the problems faced by emerging fashion designers in Brazil and the changes that should be implemented in order to grow their businesses and become a global competitor. Brazil’s economy is booming and a strong designer movement is showcased in the two fashion weeks, which are gaining worldwide recognition. But, outdated trade policies, tax systems, and labor costs are keeping Brazilian fashion designers from expanding their businesses.
Brazil’s Momentum
Brazil is located in Eastern South America, bordering the Atlantic Ocean. It is just slightly smaller than the United States, and the largest country in South America. The climate is tropical, and temperate in the south. This country became independent of Portugal in 1822 and pursued industrial and agricultural growth ever since. Today, it is South America’s leading economic and political leader (Kunz & Garner, 2011, p. 335). In 2011 Brazil overtook the United Kingdom as the world’s seventh largest economy in terms of GDP. Unemployment rates are at historic lows and income inequality has also declined. Textiles, shoes, chemicals, and motor vehicles are among Brazil’s top producing industries (“The world factbook,” 2013). Brazil’s economy is booming and has been steadily expanding for years because of a stable political and social climate. Right now, it is one of the world’s fastest-emerging economies with a GDP annual growth rate of 5 percent (Jennings, 2012). They sold $63 billion of fashion goods in 2012. Textiles and fashion is the second largest employer in the country and the fourth largest exporter of finished goods in the world (fifth largest producer of textiles). Brazil produces 9.5 million garments every year (Pasquinelli, 2012). Everything you need to produce garments, from fiber to production, is all readily available in this country. But, emerging designers, and even well developed designers face a lot of challenges in growing their businesses abroad. High taxes and outdated labor laws make it very hard to export Brazilian made goods at a reasonable price. Also they face intense competition from well-known luxury brands that want to reach the growing number of middle and upper class markets.
Fashion Imports and Exports
The fashion industry in Brazil is evolving along with the incredible economic growth of the country. Sao Paulo Fashion Week and Fashion Rio are becoming very popular in the world’s various fashion weeks. They have even adjusted the weeks they show to align with the international agenda (Brasileiro, 2012). The directors of these fashion weeks purposefully did this in order to make the shows more relevant, globally, and to start lowering costs to the final buyers. Lowering costs is something the fashion industry here is doing to grow businesses and gain market share. The nation imports way more clothing than it exports. Data from Brazil’s Trade Ministry shows that exports fell 8.9 percent to $373.6 million in 2012 from $410.3 million in 2011. Imports are rising. Apparel imports amounted to $2.09 billion in 2012, 26.7 percent more than $1.63 billion in 2011 (Brasileiro, 2012). About 60% of imported garments come from China, this number has been rising steadily every year (Pasquinelli, 2012). This high increase in imports is probably because the distribution of wealth is changing. Large percentages of the population have joined the middle and upper-middle classes, and have begun moving to the major cities. About 30 million people climbed the social ladder to the middle class between 1999 and 2009 (Pasquinelli, 2012). A popular Brazilian fashion culture along with a growing middle class means global fashion brands are seeing the opportunities of investment. Women’s Wear Daily identified Brazil as the top-ranked nation for retail expansion because of the booming economy and the high level of fashion consciousness compared with other emerging markets (Kunz & Garner, 2011, p. 336). “Just this year, Diane von Furstenberg, Missoni, Chanel, Gucci, Louis Vuitton and Burberry have made, or are making, large investments here, opening stores in major urban centres, mostly in Sao Paulo” (Anaya, 2010). Gucci told the Business of Fashion that their Sao Paulo boutique was one of the top performing stores worldwide in 2009. This proves that the fashion luxury market is very much there in Brazil.
High Price of Made in Brazil
Brazil has the design and creative industry as shown in Sao Paulo Fashion Week and Fashion Rio. It has the consumer markets of fashion goods and it also has everything one would need to produce garments. Fiber and garment production are available. But exporting is low for the country and designers are struggling to compete globally. Only five percent of clothes made in Brazil are exported, the other 95 percent are produced for a domestic market (“Brazil fashion industry,” 2012). The cost of exporting is very high because labor is high and the business taxes are very high. So the products made in Brazil are about the same price as the international brands such as Prada and Chloe (“Brazil fashion industry,” 2012). There are Brazilians who shop for domestic designer goods, but some say that if the prices are the same, the consumer is going to want to buy the Prada instead. This makes it very hard for emerging designers to compete. Another reason why locally made products are expensive is because the Brazilian Real is strong against the other major currencies (Brasileiro, 2012). Brazilians are also buying more foreign brands abroad too because they can afford to travel more often.
Need for International Appeal
Others disagree that high costs are holding Brazilian designers back. Some believe that the country just is not mature enough and still has a lot of growing to do in order to become a global fashion player. Clothing manufacturer, Oskar Metsavah, owns the company Osklen, which has gained popularity in overseas markets said, “In my opinion, it’s because of the lack of originality and the lack of quality in the vast majority of them” (“Brazil fashion industry,” 2012). He went on to say that not many designers have figured out how to create design with an international appeal. Another Brazilian menswear designer, Joao Pimenta said, “Brazilian fashion is still very afraid to experiment. But, I think it’s the most important thing happening in Brazilian fashion industry, allowing us to find our place in the world.” (“Brazil fashion industry,” 2012). This viewpoint believes that as time goes by and Brazil finds its creative ‘voice’ that the industry will flourish. It is a young industry and it needs to discover its personality in order to become a worldwide exporter of garments.
Call for Action
Waiting for Brazil to create innovative design and find their voice in the fashion world is not enough for this country to start exporting and growing its fashion industry. The talent is there; the industry just needs governmental help. Mercosur is the only international economic and political agreement that Brazil is a part of that facilitates trade. It stands for the Southern Cone Common Market. Argentina, Brazil, Paraguay, Uruguay and Venezuela are full members included in Mercosur. There are also five associate members and two observers, which include Mexico and New Zealand. These countries account for 70 percent of South America’s total economy (Kunz & Garner, 2011, p. 336). The purpose is to promote free trade and the movement of goods, people, and currency. Manufactured goods in Brazil still suffer from the ‘Brazil surcharge.’ This includes high taxes, poor transportation infrastructure and outdated labor laws (“Brazil fashion industry,” 2012). These high costs make it very hard to export product at a reasonable price. The action that should be taken to lower these costs is to reduce barriers to credit, lower overpriced labor, and lower taxes that businesses have to pay. “Industry officials have urged the government of Dilma Rousseff to cut taxes—a move that already provided a shot in the arm for the country’s automobile industry” (“Brazil fashion industry,” 2012). The fact is, is that Brazil’s tax structure is outdated. By making these changes, the huge domestic market of Brazilian garments can turn into a global one.
Conclusion
Brazil wants to be a major player in the global fashion industry. It is the world’s fastest-emerging economies and unemployment rates are at historic lows. A large majority of the population has been climbing the social ladder into higher income brackets. It also has two fashion weeks in two different cities showcasing Brazilian design and a distinct style. All of these are ingredients for international success, except only a handful of Brazilian designers are exporting their garments. Brazil imports way more than they export and this is because the country needs a more favorable trade environment with the rest of the world, they need to lower taxes for the apparel industry, and they need to lower overpriced labor. Another side of this issue believes that Brazil has not figured out how to design for an international market. They believe that originality and quality are lacking. This may be the case for some brands, but the real setback is the exorbitant costs of exporting. Cutting taxes for the automobile industry has already seen positive growth in Brazil, which could have the same affect on the apparel industry. When the Brazilian government takes action on these issues, it will enable the further development of the creative and design industries.
References
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