A view of Buenos Aires.

With a rapidly expanding economy, increasingly wealthy Argentines have a growing taste for fashion and luxury. And major brands are beginning to take notice.

BUENOS AIRES — With a rapidly expanding economy, increasingly wealthy Argentines have a growing taste for fashion and luxury. And major brands are beginning to take notice.

While still small in the global scheme of things, more and more major brands are opening here to tap into the demand. Although only an estimated 5 percent of Argentina’s population of 40.3 million can afford luxury goods, the democratization of fashion has reached the middle class and people are willing to go into debt to afford a more luxurious lifestyle.

An example of this trend is the car market where, out of 440,000 units sold in 2006, 5,000 belonged to the highest end. Last year, total car sales reached 500,000, of which 7,000 were in the premium market, and the growth is expected to continue this year. One of the brands that increased sales is Porsche, which went from 100 units in 2006 to 140 last year.

Argentina’s luxury market grew by an estimated 38 percent between 2002 and 2005, and 9 percent in 2006. In 2007, the increase stabilized and, according to estimates, it will grow by about 6 percent a year until 2010.

Of course, the wealthy still dominate the market for fashion and luxury, accounting for about 70 percent of the business. “We are talking about 1,000 to 1,500 families whose fortunes are stable and they do not move along with the economic ups and downs that Argentina might suffer,” said Gabriela Guerschanik, an Argentine analyst of the sector who is based in Chile.

But the aspirational market is growing fast — and many of these consumers live outside the major cities. They’re finding themselves increasingly wealthy as a result of the country’s booming commodity and agricultural exports, particularly soy.

“New millionaires connected with the countryside powered the sector,” said Guerschanik, who described these top consumers as being “the same buyers who also boosted the square meter value [of apartments] to almost $4,000 in Puerto Madero [in Buenos Aires] and the sales boom of luxury cars.”

The rising incomes of Argentines can be seen in their favored luxury goods. A recent survey found that consumers prefer to spend money on, in order: luxury cars, jewelry, technology, hotels and clothing. Among brands, those perceived to rank the highest in luxury are Ralph Lauren, Armani, Swarovski, Hermès, Ermenegildo Zegna, Salvatore Ferragamo, Christian Lacroix, Audi, Volvo and Bang & Olufsen.

This story first appeared in the March 27, 2008 issue of WWD. Subscribe Today.

And, while most of Argentina’s luxury and fashion boom has been fueled by domestic consumption, growing tourism has helped. Stores in the Patio Bullrich Shopping Mall or along Alvear Avenue here are aimed at those customers.

International fashion brands view Argentina as in third place in the South American rankings, after Brazil and Chile. But in their quest to seek growth wherever they can find it, companies are setting their sights on the country, either to expand their existing presences or to make up for lost ground after they withdrew in the midst of Argentina’s myriad financial and political crises of the past, particularly the economic meltdown in 2001.

Valentino, Kenzo and Rochas all decided to open their first stores in Latin America here, joining the likes of Louis Vuitton, Hermès, Ralph Lauren and Fendi, which were already established in the country and the continent. However, many of these firms preferred to enter the market along with a local group. Kenzo, which had a store in here until 1999, re-entered the country through the Bendow group and coincided with a brand relaunch overseen by its new creative director, the Italian designer Antonio Marras. After the store here, the brand, which is owned by LVMH Moët Hennessy Louis Vuitton, hopes to expand to Punta del Este, Uruguay, and Brazil.

Armani also has become more aggressive about expanding in Argentina, recently opening three A|X Armani Exchange stores in three shopping malls here. Even though Armani already had a four-story flagship on Alvear Avenue, which carries most of its collections as well as the Armani Casa line, the idea was, as the designer himself explained, “deeply influenced by and self-consciously modeled upon its European heritage. Buenos Aires is an energetic and seductive city that is perfect for the young customers that appreciate A|X Armani Exchange.”

Diesel, the Italian denim brand, recently decided to re-enter Argentina. It closed down before the last financial crisis seven years ago due to differences with its Argentine licensees. Less than a year ago, the company opened its first flagship in the Palermo neighborhood here, which is considered the SoHo of Buenos Aires. Now the brand is opening another store in Patio Bullrich to tap into the tourists staying at first-class hotels in the area.

“Diesel’s strategy is to win the Argentinian customer’s loyalty and to go on receiving the usual buyer of our jeans while he is sightseeing in Buenos Aires,” explained Marco Manini, the company’s representative in the region who has worked for Diesel for more than 20 years.

Ermenegildo Zegna also has multiplied its bet on Argentina. Although the brand never left the market, from 2002 there has been a change in its strategy toward the region. “The company tried to repeat its successful strategy in the Far East, to penetrate the market without intermediaries so to become number one within the male clothing sector,” explained Anabella Weber, Zegna’s public relations and marketing specialist. For the Italian company, Latin America represents 3 percent of global sales. However, it expects that percentage will increase steadily in the next few years.

“While the U.S. is the group’s main market, up 13 percent in 2007, followed by Italy, up 4 percent; Japan, up 13 percent, and China, up 36 percent, there also has been significant growth in major Latin American countries such as Argentina, up 32 percent; Mexico, up 24 percent; Brazil, up 10 percent, and in the Middle East, up 68 percent,” said Weber, who about a year ago helped with the opening of the brand’s new flagship on Alvear Avenue.

The growth in fashion and luxury is such that an Argentine Luxury Chamber is being created by Guerschanik, who led the formation of a similar committee in Chile. “The purpose is to join forces in order to develop databases, market research and thus improve the possibilities of luxury in the country,” explained Guerschanik, an entrepreneur in charge of several initiatives within the sector (such as Bora men’s magazine, from Chile).