More luxury brands to exit Argentina
Following the closure of the Ralph Lauren boutique earlier this year, a step being considered by other international luxury fashion and accessories brands, it is now the turn of the luxury watch sector to take into consideration leaving the once very promissing market of Argentina, the second largest in South America.
“Over the past ten years, watchmaking has benefited from Argentina’s economic growth, as the upper and middle classes have been able to afford sophisticated products. This year, however, the country has adopted measures that will curb imports, mainly because certain agreements are coming to an end in 2012. I think this will be a temporary measure. Indications are that trade will be back to normal by the end of the year,” predicts Diego Kolankowsky, Director of horasminutosysegundos.com.
Despite such reassurances, the luxury market has witnessed several worrying developments over recent months. In April, the country’s largest daily newspaper, Clarín, reported that Polo Ralph Lauren, present in Argentina since 1999, had made public its intention to leave the country because of import restrictions. Calvin Klein and Ermenegildo Zegna have already made similar announcements, and Armani and Mango are rumoured to be set to follow suit. Hermès is also said to be considering pulling out of the market. Nor is fashion an exception as the government recently announced a new tax on luxury cars.
Companies seeking the government green light must manufacture their products in Argentina, which few are inclined to do… a constraint made worse by inflation. “Argentina suffers from high inflation, slowing economic growth, ballooning subsidies, price controls, capital flight, decaying infrastructure and a less than welcoming environment for foreign investors,” Moisés Naím wrote in the Financial Times in April. This came as the European Union challenged Argentina at the World Trade Organization after it seized Spanish oil company Repsol YPF.
A majority of Argentineans support government policy, although some raised their voice in protest when measures were introduced to limit dollar transactions so as to promote the peso. None of this has dampened spirits in the watch segment. In June, Hublot unveiled the new King Power Maradona at Simonetta Orsini’s in Buenos Aires, a launch attended by the football legend himself. Breitling cut the ribbon at its store on Avenida Alvear in January. Jaeger-LeCoultre continues to sponsor an Argentinean polo squad, as does Piaget which also has a high profile in the game.
“The state of the luxury market is very much linked to the state of the economy overall. Argentina is in a period of exceptional growth, thanks to natural resources and industrial production, and should remain so for some considerable time. On an international level, Argentina trades primarily with solid economies such as China, India and Brazil rather than with the ailing European economies,” adds Diego Kolankowsky. “The most prosperous brands are those which invest in projects with a high public profile. Piaget and Jaeger-LeCoultre are associated with polo. Other watchmakers have chosen football, such as Audemars Piguet with Lionel Messi, and Hublot with Diego Maradona. Some, such as IWC, prefer to organise seminars or sponsor original events such as Chopard’s classic car rallies. All these initiatives show that there is far more to watchmaking than simply making watches, and this is what makes it so attractive to the public.”
adapted from HH Journal (hautehorologerie.org)