What is unique about the watch market in Latin America? In terms of tastes and trends, there is as much variety as there is in the region’s watch industry itself. This may seem self-evident, but that’s the way it is, and we shall see why.

A tradition of difference

First of all, the Latin American market is not homogeneous, except perhaps for a number of common regional features. These include a preference for large-face watches and extremely complex movements, and an inclination towards “bling” or ostentatious luxury that the region shares with Latin countries in the Mediterranean. Within that framework, however, the tastes and trends change from country to country. For example, in the 1920s, which were years of plenty for Latin America, when immense fortunes were made in rubber and sugar, prestigious companies that have since become legendary, such as Patek Philippe, made goods to order for Gondolo & Labouriau, a watch seller and jeweller in Rio de Janeiro, Brazil’s financial capital for around 30 years from the end of the 19th century. Patek Philippe produced an exclusive collection for Gondolo that included a series of wristwatches with cases in unusual shapes - square, rectangular, tonneau and cushion - giving birth to a model that has become a classic for the Geneva manufacture. (Readers may like to look at “The return of a legend: the Chronometro Gondolo” by our Editor-in-Chief, Pierre Maillard – Europa Star Magazine April-May 2007.) At the same time, and also from the end of the 19th century, Cuervo y Sobrinos distributed Swiss watches from “La Casa” on the elegant 5th Avenue in Havana, Cuba. Major Swiss companies were happy to stamp the mark of the Havana jeweller and watchmaker on their own creations, to their mutual benefit and prestige. These two examples are relatively anecdotal but they shed light on two important extremes: first, that the Latin American market has been a distinct entity since the end of the 19th century, and second, and far more importantly, that the watchmaking industry, and the Swiss watchmaking industry in particular, has been responding to this for more than 100 years.

The tariff merry-go-round
Although the region is gradually and successfully consolidating and harmonising its internal market, the same cannot be said for its fiscal and trade policies. The Latin American market continues to be unbalanced in terms of import duties and tariffs, and watchmaking companies are not slow to point this out.

To illustrate, let us take an extreme example. A major market, emblematic of the region, and one with huge potential: Brazil. In recent years a number of industrial and commercial free-trade zones have been set up to attract manufacturing industry, something that the country as a whole lacks. This enables Brazil to use its own manpower to produce goods and equipment that are then consumed within the country, at reasonable prices, without upsetting the balance of trade. Alternatively, they can be exported through the Amazon heartland to other neighbouring countries. A prime example is the Manaus Industrial Sector within the Manaus Free Trade Zone (ZFM), located in the capital of the Brazilian state of the same name. It includes a watchmaking centre with a dozen or so watchmaking factories, some belonging to well-known firms such as Orient and Timex. They basically assemble watches (although they do manufacture some components) for the Brazilian market and other countries in the region. Paradoxically, the undisputed success of this policy has had unwanted and undesirable consequences. The Manaus Free Trade Zone covers an area of 10,000 square kilometres and reaches more than 50 per cent of the state’s population (1.5 million), making it a virtual state within a state. It has attracted a multitude of so-called “maquilas”, more or less illegal factories that assemble poor-quality movements, mainly from Asia, and then flood the whole of South America with crude fakes. This effect, although bad enough in itself, is magnified by the fact that imported luxury watches are subject to tariffs of up to 100 per cent of the value of the goods. The impact of this unhealthy combination can be seen on figures for online demand for replica luxury watches, which stand at 0.80 per cent for Mexico, but shoot up to 5.59 per cent for Brazil (World Watch Report 2012 – Digital Luxury Group). Even taking into account the difference in population (112 million in Mexico compared with 193 million in Brazil), this is still a huge discrepancy.

Another example of the bizarre merry-go-round of import duties – or via crucis, as it is described by the CEO of a mid-range Swiss watch brand with interests in the region, who prefers to remain nameless – is Argentina’s outlandish barter system, under which imports of certain luxury items must be balanced by exports of other merchandise of an equivalent value, even if it is in a completely different category of goods.

Miami: the umbilical cord
This kind of fiscal distortion, and other factors as diverse as the geography of Latin America itself, have forced some brand strategists to opt to run their distribution networks from Miami – Latin America’s unofficial offshore capital as far as luxury goods are concerned – rather than basing them in the field, where they are at the mercy of the ever-spinning merry-go-round of tariffs and duties.

See the other articles in our focus on Latin America:

• Focus on Latin America: Introduction
• Focus on Latin America: Interview with Carlos Alonso

Source: Europa Star October - November 2012 Magazine Issue