“Poor Mexico, so far from God, so close to the United States.” This famous phrase, uttered almost a century ago by Porfirio Díaz, the country’s dictator president for close to 40 years, captures the complex history of this LatAm country which has it all, both good and bad. On paper, Mexico has everything it could possibly need: energy resources, an impressive demographic dividend and an enviable geographic position, all essential factors for solid economic growth. Yet recent years suggest that the Latin-American dragon has lost its roar. And, by extension, the luxury market is holding its breath.
The road to reform
Does the solution lie in the reforms implemented by the current President of the Republic, Enrique Peña Nieto? Never before has a politician broken so many taboos in order to enact the Mexico he wants to see. The day after his swearing-in, two years ago, he convened all the country’s political forces to sign the Pacto por México. Since then, the country has embarked on reforms in every key sector: education, telecommunications (dominated by Telmex, property of billionaire Carlos Slim, which has a monopoly control of the market), politics (coalition governments were not allowed), public finances and energy (the market has been opened up and should attract a wave of foreign private investment). In the meantime though, the Mexican economy doesn’t appear to be changing as quickly as hoped, and the luxury market is feeling the consequences.
Avenida Presidente Masaryk, in the affluent centre of Mexico City, is the perfect metaphor for luxury in the country: the city’s ritziest thoroughfare is under construction. Workmen and machines have taken over the sidewalk outside Cartier, Omega, Jaeger-LeCoultre, Bulgari and Louis Vuitton, not to mention the capital’s finest restaurants where the menu now includes dust, pneumatic drills and road blocks. The entire avenue has descended into “mayhem”, say the regulars who are deserting their favourite stores. Retailers are unanimous in demanding the end of work and a return to business as usual, although none of them deny that something had to be done about the potholes and cracked pavements. “The new tax laws have put a brake on the economy as customers have less to spend,” say luxury insiders. “However, with current investments, Mexico could well become a driving force for the global economy, which would have an impact on consumption. We still have six to twelve tough months to go.”
Crisis, what crisis?
Peña Nieto’s government is urging the country to be patient, in exchange for a promised 3.7% rise in GDP by the end of the year, versus 1.1% in 2013. Not far from Avenida Masaryk, Cédric Doffey, originally from Neuchâtel in Switzerland, is a distributor for brands including Corum, Girard-Perregaux, JeanRichard and Romain Jérôme. He doesn’t quite share this enthusiasm: “Like everywhere else in the world, we have observed a slowdown in sales,” he explains. “Certain indicators even suggest that Mexico will soon enter recession. But compared with other Latin American countries, Mexico is still a major importer of Swiss watches.” Just minutes from Cédric Doffey’s store, Carlos Alonso, director of Salón Internacional de Alta Relojería (SIAR – International Fine Watch Fair), confirms these impressions: “End 2013 and early 2014, here in Mexico we experienced the worst crisis the watch sector had seen in the past fifteen years. Except no-one dares pronounce the word crisis.” Figures published by the Federation of the Swiss Watch Industry show that Swiss watch sales in Mexico dropped by 7% between January and August 2014.
The need to adapt, radical but necessary measures, and a lot of work: Mexico is putting its house in order. The country nonetheless faces some considerable challenges, not least to reduce its poverty rate, which has barely shifted in the past decade, and eradicate corruption. For Peña Nieto, the “reformer president”, what matters most is to take action, in every domain. The fruits of this labour will come later. By which time Mexico might be closer to God and equal with the United States. It might also be home to an influx of luxury watches, produced as special editions to celebrate this “new” market.