Brazil's President-elect Jair Bolsonaro watches a aerial performance by the private pilots' group "Esquadrilha do Ceu" or "Sky Squadron", at Barra beach in Rio de Janeiro, Brazil, . Bolsonaro appeared in public Tuesday for the first time as president-elect. He visited a church led by ultraconservative pastor Silas Malafaia and spoke briefly to the faithful on stage. "I am sure that I am not the most capable, but God capacitates the chosen ones," he saidBolsonaro, Rio de Janeiro, Brazil - 31 Oct 2018

MEXICO CITY Designers and retail analysts have offered mixed reactions to Jair Bolsonaro’s controversial win of Brazil’s presidency — a victory that could revive the beleaguered economy but, some observers contend, also jeopardize democracy and minority rights.

Investors welcomed Bolsonaro’s landslide win late last month, lifting stocks and the slumping Brazilian currency, the real, because many see him as the best candidate to help lift Latin America’s largest economy from a devastating, four-year recession.

The far-right leader intends to pursue a raft of structural reforms, cut corporate and individual taxes and privatize ailing state enterprises that have been plagued with corruption. Analysts said his plans to lower taxes could be a boon for retailers, which are eking out a slow recovery after the worst recession on record forced them to close 40,000 stores amid huge losses.

Bolsonaro, who some call “Brazil’s Trump” because he has insulted women and minorities, has also promised to cut the country’s huge import barriers and expand its free trade agreements.

“It all depends on what he ends up doing,” said Giovana Scottini, an analyst who covers leading fashion retailers Lojas Riachuelo, Lojas Renner and footwear chain Arezzo. “If he can pursue the reforms and improve the economy and reduce unemployment, which is still very high and will take some time, then this will boost consumer confidence.”

Echoing others, Scottini said any actions by the new president, who takes over on Jan. 1, will show more clearly in 2019.

“We are seeing better prospects for next year, especially if he can cut taxes because retailers will be one of the first sectors that will benefit from that,” added Scottini. “But we still don’t know exactly what he will be able to do or how fast he will cut taxes. His first priority is to fix the pension system.”

Scottini said retailers are bouncing back from a difficult first half when a major truckers strike hurt business. However, she noted the sector managed to open as many as 20 stores as the economic malaise made it easier to spot promising locations at bargain prices.

Overall, she expects fashion retail sales will grow 5 percent on a nominal basis in 2018, down from 10 percent in 2017. Next year, sales for clothing and footwear merchants could jump 11 percent, depending on how much Bolsonaro is able to do for the economy.

“We could see an acceleration of the expansion and more investment in collections and inventory next year, as well as more spending in technology because more consumers are looking to buy online and retailers are focusing more on omnichannel,” Scottini added.

Brazilian brokerage Itau BBA was not as sanguine.

“There will be some acceleration, but I think it will be modest in real terms, perhaps less than 1 percent,” said an analyst at the firm, referring to next year’s prospects.

She added that Bolsonaro’s tax agenda remains unclear and while he may cut corporate levies, he may increase dividend taxes, offsetting any benefits.

“He has talked about simplifying taxes more than cutting them,” added the analyst, who said that a reduction in import duties also remains unclear while any such move would hurt domestic players. This is because most Brazilian brands manufacture apparel at home and source local feedstocks.

“In the apparel segment, this tax cut won’t have an impact and it could actually help foreign competitors like Inditex or Zara,” which could import merchandise more cheaply, added the analyst.

Emerging fashion designer Mario Francisco, who runs the brand Der Metropol, said Bolsonaro’s ultra-conservative mentality and “lack of political experience” will spell trouble for the fashion and creative arts sector.

Bolsonaro has said investments to develop the arts, culture and fashion will be a low priority, Francisco claimed.

“The fashion industry is in a crisis because people have been focusing on meeting their basic necessities like food, etc. Bolsonaro is not going to support emerging, creative talents. He is expected to reduce the budget to support emerging designers because clearly, he doesn’t understand the importance of culture and creativity.”

Brazil’s luxury industry may benefit from a more stable political and economic environment, however.

Sales dropped 8 percent to $7 billion last year on the back of sagging consumption as the recession dampened consumer optimism, even for Brazil’s wealthiest, according to Euromonitor, which added the country lost its place as Latin America’s largest luxury market to Mexico.

As Bolsonaro brings calm after the storm, Francisco López, director of MIT Sloan University’s luxury program, said the sector stands to benefit.

“After two and a half years of sales declines and a new political scenario that will seemingly enhance the economy, we can expect to see positive growth rates in luxury goods,” he said, adding that hard-hit, super-luxury brands will likely get a boost while premium labels could see “exponential growth.”

But don’t expect a major bounceback.

“For the next five years, Euromonitor expects sales will grow 2 percent annually on average, a marked difference from the high single-and-double-digit growth rates witnessed before the economy began to weaken in 2014,” the researchers said.

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