By  on December 28, 2011

RIO DE JANEIRO — Brazilians are getting richer and will continue to drive growth in the luxury market, boosting sales of everything from Louis Vuitton’s Speedy bags to Chanel’s Particulière nail polish, and luring new brands such as Prada and Fendi to local shopping malls next year.

At least 30 new entrants are expected to set up shop in Brazil in 2012, when investment will reach a peak that will be at least 25 percent higher than the $2.6 billion invested in 2011, said Carlos Ferreirinha, president of MCF Consultoria & Conhecimento, a retail and luxury consulting company in São Paulo. The amount includes everything from store openings to marketing expenses. The European debt crisis, which is slowing consumer demand even in fast-growing emerging economies, is encouraging luxury brands to start operating in Brazil, and is unlikely to affect wealthy shoppers.

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“The crisis hasn’t diminished their commitment to Brazil, and won’t cool demand from luxury consumers,” Ferreirinha said. “Next year they will plant the seeds to make 2013 what may be a record year in luxury goods sales in Brazil.”

Luxury industry sales will probably grow faster in 2012 than this year, he added. Bain & Co. estimates that sales probably rose 20 percent in 2011 from the previous year, while GfK Brasil, the local unit of German market research firm GfK SE, sees 33 percent growth to 20.9 billion reais, or $11 billion at current exchange, this year compared with sales of 15.7 billion reais, or $9.02 billion at average exchange, in 2010.

LVMH Moët Hennessy Louis Vuitton’s Fendi and PPR’s Bottega Veneta and Yves St Laurent Group are some of the companies starting operations in Brazil in 2012. Prada decided not to wait: Its 5,380-square-foot store at São Paulo’s Cidade Jardim luxury mall was opened last week. Though the Italian brand is keeping mum about expansion plans, local press reports say Prada will open at least one more unit in Rio de Janeiro early next year.

Other top-tier brands are planning to expand in the second-largest emerging market after China. Louis Vuitton, which has posted double-digit sales growth in Brazil in the past two years, will open three new stores in Brazil next year, and is turning its Cidade Jardim unit into a global flagship with 10,370 square feet offering more jewelry and accessories. It’s also planning to offer its Mon Monogram personalization service by 2013. Already, the house’s Neverfull bag is such a hit in Brazil that there are waiting lists for the product.

Tiffany & Co., which opened its first South American unit in Sao Paulo in 2001, saw strong demand for diamonds from consumers in Brazil’s northeastern city of Recife. Apart from that new store, the jeweler plans to add two more to the three it already has in Brazil: its first stores in Rio and in the southern city of Curitiba.

Brazil’s economy, fueled by a credit surge and rising employment, expanded 7.5 percent in 2010, the fastest in two decades, and will probably grow 3 percent this year and 3.5 percent next year. Growth in the past few years has boosted the value of assets including real estate, stocks, bonds and commodities. That trend has helped Brazil create 19 new millionaires every day in the country of 190 million people.

While growth has slowed due to a combination of the European debt crisis, interest rate increases in Brazil earlier this year and some companies running down inventories, consumer demand hasn’t cooled significantly.

Since August, President Dilma Rousseff’s administration has cut the benchmark interest rate three times to 11 percent, slashed taxes on consumer goods from pasta to refrigerators and eased curbs on credit. Those measures, along with a strong labor market, will sustain demand across the consumer market. Unemployment is near record lows at 5.8 percent and some Brazilian cities are experiencing full employment.

“Brazil is basking in an eight-year boom that pulled 24.5 million people out of poverty,’’ said Marcelo Neri, a development economist at the Getulio Vargas Foundation business school in Rio de Janeiro.

And the rich are getting richer.

The number of Brazilian billionaires jumped to 30 in 2010 from 18 in the previous year, according to Forbes magazine. In 2003, just four Brazilians made the list.

Brazilians top the super-rich rankings in Latin America with a collective worth of $890 billion, or almost 39 percent of the region’s total, according to a report from Wealth-X, a Singapore-based research firm.

To be sure, Brazil’s rising cost of living is a factor that could discourage expansion by luxury companies.

“Luxury brands are panicking over labor costs and in general how expensive life is in Brazil,” Ferreirinha said. The average monthly salary in the luxury sector in Brazil jumped 48 percent to 4,080 reais, or $2,346, in 2010, compared with 2,762 reais, or $1,179, in 2009, according to GfK. Rio and Sao Paulo are among the highest climbers in a list of the world’s most expensive cities to live in. Sao Paulo jumped to 10th place in the list of 214 cities, from 21st last year, while Rio de Janeiro surged to 12th from 29th, according to a report from consulting firm Mercer published in July. Annual inflation, as measured by the IPCA index, will end the year at 6.55 percent, according to central bank estimates.

As wealth is more widely distributed in Brazil, in part due to a surge in commodity prices that has made hundreds of farmers very rich in past years, luxury clients are no longer found only in the country’s two main cities. Moves such as Tiffany’s new store in Recife and Louis Vuitton’s in Curitiba will help support sales growth and redefine Brazil’s luxury industry map. The two cities will get their first luxury shopping malls next year — another factor that will fuel sales growth.

Brazil’s emerging middle class will also help increase the 2.5 percent of the country’s population that consumes luxury products and boost sales in the long term, Ferreirinha said. Though these consumers buy mostly small-ticket items such as perfume, they are starting to spend more on accessories, especially if the brand offers payment in installments — a necessary service in Brazil to capture clients who have traditionally paid bills over several months.

LVMH moved in the direction of Brazil’s so-called C class last year. It bought 70 percent of online fragrances and cosmetics retailer Sack’s to take its Sephora beauty chain into Brazil. Sack’s, based in Rio de Janeiro, offers 270 brands and serves more than 830,000 customers. The 10-year-old online retailer gets more than 4 million individual Web visits each month, making the e-commerce site one of the top three most frequently accessed in Brazil. Brazil will get at least five Sephora stores next year.

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