3 Ways to Profit From Economic Growth in Latin America

PVH, Gap, and Wal-Mart all stand to benefit from economic growth throughout Latin America. However, one of them should offer more growth potential than the other two.

Jan 30, 2014 at 2:13PM

Latin America is one of the fastest-growing regions in the world from an economic standpoint. For instance, according to Cegid -- a retail software-solutions company that offers detailed reports on stock, sales, customers, and employees -- retail spending in Brazil is expected to increase 11% this year. The 2014 World Cup will play a big role. Momentum is likely to continue thanks to the 2016 Olympics also being held in Brazil.

Cegid estimates that luxury malls and airport stores will be the biggest beneficiaries, and that Tiffany might benefit in a big way. But Tiffany isn't the focal point here. There are other companies that stand to benefit more, and on a broader scale, from increased consumer spending in Latin America. 

Investing in style
Based on the same report, disposable income in Chile increased 10% over the past year. A lot of this money is being spent at malls and hypermarkets. Thanks to PVH's (NYSE:PVH) purchase of Warnaco Group, which was completed in early 2013, the company has established a strong presence in Latin America.

PVH Chairman and CEO Emanuel Chirico stated: "This combination reunites The House of Calvin Klein and enables us to leverage Warnaco's established operations in Asia and Latin America along with our strong operations in North America and Europe to fuel our growth strategies for the Calvin Klein brand."

It also doesn't hurt that Chile's Santiago Mall -- the largest mall in South America -- is expected to grow. South American consumers are mostly interested in Tommy Hilfiger, but PVH also offers Calvin Klein, Van Heusen, IZOD, and Arrow as well as other licensed brands. Consider this to be similar to the early stages of popularity for these brands in the United States. While the growth isn't likely to be as strong as what transpired in the United States, it's significant growth potential, nonetheless. 

Targeting a broad range of consumers
Gap (NYSE:GPS) is known for offering quality at affordable prices. This, in turn, is what attracts many consumers to its stores. Gap doesn't just have its namesake brand, but Banana Republic, Old Navy, Piperlime, and Athleta, which leads to targeting an even broader range of consumers.

Gap opened its first store in Sao Paulo, Brazil, last year. Brazil isn't just the largest economy in Latin America but also the sixth-most-populated country in the world. The rising middle class in Brazil is fashion-conscious. Additionally, 62% of Brazil's population is younger than 29 years of age, and younger consumers tend to be more interested in fashion. China might have more economic growth potential than Brazil given its massive population, but Brazilian consumers are much more interested in apparel than Chinese consumers.

Gap has 17 namesake stores and eight Banana Republic stores throughout South America, and it's focused on expanding in Colombia, Uruguay, and Peru. Consumer spending is up in Uruguay, and this trend is likely to continue as the company gains more independence from Brazil and Argentina. Panama is seeing infrastructure growth and rising tourism, and according to Cegid, it's one of the fastest-growing economies in the world.

Gap is also now situated in Mexico, where interest rates are low, per capita spending is up, the population is growing, and the job market is strengthening. Needless to say, Gap has significant growth potential throughout Latin America. And speaking of Mexico...

Consistent and significant growth
Wal-Mart Stores (NYSE:WMT) opened its first store -- a Sam's Club -- in Mexico back in 1991. Six years later, it acquired Cifra. Three years after that, it changed its name to Walmart de Mexico. In 2006, it received a license to operate a bank. One year later, Banco de Walmart had 16 branches in five Mexican states. It doesn't end there. In 2009, Walmart de Mexico acquired Walmart Centroamerica, expanding to six countries and becoming Walmart de Mexico y Centroamerica.

Currently, Wal-Mart has a strong presence in Mexico (2,498 stores) as well as Brazil (553 stores), Argentina (103 stores), Chile (346 stores), Honduras (75 stores), Costa Rica (214 stores), Nicaragua (80 stores), El Salvador (84 stores), and Guatemala (209 stores).

If Latin America is seeing economic growth, then Wal-Mart is certainly well positioned to benefit from that growth. No surprise there.

The bottom line
The majority of Latin America is seeing increased consumer spending. PVH, Gap, and Wal-Mart are three American companies that are likely to benefit from this growth. Wal-Mart offers the broadest exposure, but Gap likely has the most growth potential in Latin America since its presence is still small. Please conduct your own research prior to making any investment decisions. 

Investments you can stash away for the long haul....
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love. 

 

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers