Thanks to impressive demographics, the unrealized spending power of residents, and a dearth of new offerings, Latin America and the Caribbean have caught the attention of shopping center developers and retailers throughout the world.

"There's an enormous interest in Latin America and the Caribbean from a retail and development point of view," says Stanley Eichelbaum, president of Marketing Developments Inc., a Cincinnati-based firm that has been involved in feasibility, research and development planning for a number of retail, entertainment and mixed-use projects throughout Latin America and the world.

The reason for this interest is simple. Latin America's annual percentage growth of private consumption is 3.9%, compared to a mere 2.3% in the United States and 2.7% in Canada, experts say. Not only that, but Latin America has the largest segment of 15- to 19-year-olds - 52.1 million. That's more than Western Europe, Canada and the United States combined.

Latin America has a population of 526.4 million compared to the United States' and Canada's combined population of slightly more than 300 million, continues Eichelbaum. More importantly, Latin America touts an economically active population of 268.9 million individuals compared to the United States' and Canada's economically active population of 178.8 million.

"Latin America represents a larger economically active population than not only the United States and Canada but also Western and Eastern Europe and other regions of the world," says Eichelbaum. "Latin America has seven mega-markets of more than 5 million people vs. the United States only having three such markets. We all know retailers' desire for a network of transportation and servicing of major markets in a constant geographical flow."

Reginald Barnes, director of corporate relations with Rio de Janeiro-based Grupo Multiplan, one of the leading retail and commercial real estate developers in Latin America, notes that Brazil, the fifth-largest country in the world, has a population growth rate of 1.93% a year. More importantly, Brazil boasts 11 cities with populations of more than 1 million.

"The retail trends here with globalization are changing rapidly, very rapidly, with many new retailers coming to the area," Barnes says. "U.S. businesses and entrepreneurs must now go overseas because competition in the United States is hard, margins of profit are low, and the rate of return is long, sometimes 15 to 20 years," he says. "Brazil is an attractive country for foreign investment because the potential here is enormous, competition is not as intense, and margins are much higher."

Because the development rate of return in Brazil is around 20% a year, he adds, "a developer's return on investment is basically five or six years, a shorter-term return than elsewhere. As a result, I think the climate is good for development."

After years of high inflation, high unemployment and much political turmoil, Latin America seems to be on the road to recovery, say observers. "Latin America is expected to show positive growth as a whole, with Chile expected to lead growth rates and Argentina expected to lag somewhat, but to still be in positive territory," says Mike Burkard, editor of the Santiago, Chile-based Andean Retail Report, which follows the industry.

But Latin America isn't the only economic engine in the region. The Caribbean is also attracting retailers and developers, points out James de Winter, director of retail services for Latin America and the Caribbean at Los Angeles-based CB Richard Ellis.

"With a resident population of more than 28 million and with 27 million tourist visitors a year, the Caribbean region has established itself as an attractive market for retailers," he says. "Retailers and name-brand merchandise have become more global in recognition, which creates the demand and the opportunity for international expansion."

In fact, the Caribbean in general is underserved in the retail sector, says de Winter. "American brands are well known in the Caribbean," he says. "When these products become available locally, still based on price, customers buy them because they know the name and because the other retail selections may be limited."

Stability bringing confidence Elsewhere in the vast region, developers and retailers are telling additional retail success stories. Alberto Poma is marketing and sales manager at San Salvador, El Salvador-based Roble International, which develops, owns and operates shopping centers throughout Central America. "Purchasing power in the region is increasing. Growth is around 3.5% to 4%," Poma adds. "Inflation in the area varies from 2% to 12%. Exchange rates are very stable compared to the last five years. Democracy throughout the region is consolidating."

Poma says brands such as DKNY, Nine West, Outback Steakhouse, Ruby Tuesdays and Imaginarium of Spain are interested in opening stores in Central America. The area already has retailers such as Blockbuster Video, Calvin Klein, Cinemark International, Bally, France Telecom, and Radio Shack, among others.

"Our overall occupancy average of our 10 properties in the region last year was 99.7%," says Poma. "Many of the stores are interested in entering the region with strategic local partners. Most of the properties that are under development are regional malls, neighborhood malls and/or community malls."

Roble International plans to increase its retail space through the expansion of existing malls and the development of new neighborhood and community centers. "We believe that the individual purchasing power will keep increasing, due to globalization. Many other foreign multinational companies will be interested in entering the region and every year we see more interest in the entertainment and entertainment-shopping areas. We plan on developing properties or expanding existing properties throughout the region to satisfy this demand."

Already, industry observers say, Latin America and the Caribbean represent emerging world-class chains, strong local retailing, aggressive new centers, concept entertainment, innovative quality renovations, and aggressive marketing.

According to Eichelbaum, quality projects in the region include MetroCentro in San Juan, Costa Rica; Plaza Del Sol's food court in San Juan, Puerto Rico; a new entertainment concept, Show Center, in Buenos Aires; the renovated Plaza Rio Hondo in San Juan, Puerto Rico; and Arrowstreet's recent renovation of the long-abandoned Abasto Marketplace in Buenos Aires, now featuring a state-of-the-art Hoyt Cinema.

"In addition, there is exceptional retail space at MetroCentro in San Salvador and retailing concept progressions such as the highly successful Nova America outlet center in Rio de Janeiro," says Eichelbaum. "Stateside and global retailers are finding great success throughout the region including Wal-Mart, Carrefour and Zara."

Regional retailers now talking about their own globalization programs, he says, include Liverpool Department Stores from Mexico, Musimondo Mega Stores from Buenos Aires, and Freddo Ice Cream and Chocolate, both from Buenos Aires.

Income and operating costs of shopping centers in Latin America and the Caribbean compared with those of the United States and Canada is striking. According to Eichelbaum, averaging sales from the nine portfolios of leading developers in the region showed them performing at 60% over the U.S. superregional center performance. The centers of Latin America and the Caribbean average $4,174 per square meter compared to the reported $2,528 in the United States.

Examples of the activity in the region include the multi-use Crystal Shopping Center in Porto Alegro, Brazil, and DDG's renovation of Unicentro El Marques shopping center in Caracas, Venezuela, and its San Marino shopping center at Guayaquil, Ecuador, Eichelbaum says. Entertainment centers include New York City Center by Grupo Multiplan, opening soon in Rio de Janeiro, and the RTKL-created shopping presentation planned for Jockey Plaza in Sao Paulo.

Apparel stores under-represented At the same time, there are still unmet retail needs in the Latin America/Caribbean region. A recent survey showed a 31% to 60% space shortfall or under-representation of women's apparel stores within the tenant mixes in Latin America, says Eichelbaum.

In family apparel, two recent studies showed a 38% and 50% shortfall of family apparel selling space, he says. But a third study showed a 26% excess of space, highlighting again a need for accurate demand studies in the region's shopping center feasibility and tenant mix planning.

What does the future hold for Latin America and the Caribbean? Increased competition, say observers, as more and more U.S. retailers head south.

"Competition among the home centers will be fierce in the next two years," Burkard adds. "The principal players - Home Depot, Easy and Homecenter - will all have accelerated store openings, especially in Argentina. Hypermarkets will continue to squeeze traditional grocery store formats in Santiago. Cinema development appears to have slowed.

"Drug store formats will start to increase in size as pharmacies learn lessons from the successes of Walgreens, CVS and Eckerd Drugs in the United States," he says.

No wonder shopping center developers and retailers see a shining El Dorado in Latin America and the Caribbean's extraordinary potential.