Why Latin America is a magnet for Canadian businesses – Tavia Grant (Globe and Mail Editorial – December 5, 2012)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

If there is one word that signifies the march of millions of Brazilians out of poverty and into the middle class, it is this: perfume.

Brazil is now the world’s largest fragrance market, and third in the $300-billion-plus global beauty market. Its consumer class, the biggest in the continent, also has a voracious appetite for cellphones, flat-screen TVs and tablet computers.

It’s not just Brazil. A sea change is rippling through Latin America, a region once better known for hyper-inflation, political instability and high poverty rates. In the past decade, 50 million people have joined the middle class, a World Bank study showed last month. The massive shift means the middle class and the poor now account for about the same share of region’s population, at about 30 per cent.

With rising fortunes come shifts in consumption patterns, from needs to wants, from low-priced goods to middle and high-end products such as fridges and cars. It explains why companies are so keen on the region, where Dorel Industries is selling more car seats, Lush Fresh Handmade Cosmetics more soap, Research In Motion more BlackBerrys and Bank of Nova Scotia more mortgages. It’s also where Canada’s biggest public pension manager is pouring investments – into Brazilian shopping malls and Chilean toll roads – a long-term bet this trend will only gather steam.

Lush, which makes fragrant $9 bars of soap and $5 bath bombs, has opened stores in Mexico, Panama and Chile in the past three years.
It now has its sights set on Brazil, where it plans to open a manufacturing plant and retail outlets in the Sao Paulo area within the next year or so.

“There’s a growing middle class, with growing buying power … and there’s a lovely desire to trade up and try new things,” says Karl Bygrave, director of Lush Ltd., which is based in the U.K. but has a Canadian CEO and makes all of its North American products in Canada.

A string of factors explains the shift, from calmer inflation to more stable, democratic governments and strong economic growth that has come alongside targeted social policies to support the poor. The World Bank also cites higher levels of education among workers, growing employment in the formal sector, more women in the work force and smaller families.

Scotiabank is boosting its bets on the shift. Its Mexican unit closed a deal to buy Credito Familiar this week – a purchase that gives the bank 145,000 customers who are just entering the work force and buying their first television or car.

For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/international-business/latin-american-business/the-new-latin-america-a-magnet-for-canadian-businesses/article5972636/