Due to slashed import tariffs, new opportunities in Mexican retail

08.12.2012 By: Transfer consultancy based on economist.com

On November the Swedish fashion retailer H&M opened its first Latin American Store in Mexico City. A fortnight earlier Forever 21, an American chain, celebrated its debut in the country. That followed the first opening of a Mexican store by Gap, another American clothing giant, in September. The new entrants promise high fashion at low prices.

When China joined the World Trade Organisation (WTO) in 2001, Mexico imposed duties of up to 1,000% on Chinese goods to protect domestic clothes makers. So the fashion is mostly home-grown. Only two foreign firms have broken through: Levi´s because the brand has its production in Mexico, so the 501 jeans are available cheaply, and the Spanish chain Zara. Many of its products are made in or near Europe, which means that Mexico’s China tax has not hit it too hard. Since the NAFTA agreement was signed in 2003 the tarrifs of European textile have gradually been reduced.

Tariffs have been fallen slowly in recent years, but were slashed in December 2011 to around 20%. The lower tariffs have opened the door to retailers such as H&M, the suppliers of which are 80% Asian.

For Mexican manufacturers it is going to be hard to keep up with the fast-fashion model used by the likes of H&M. But as Chinese wages rise, foreign brands including Zara and Nike have sought suppliers in Mexico. “The Mexican firms are fighting back by focusing on quality.” says Ysmael López García, head of the Footwear Chamber in Guanajuato.

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