Thanks to impressive demographics, the unrealized spending power of residents, and a dearth of new offering, Latin America and the Caribbean areas 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, Ohio 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 percent, compared to a mere 2.3 percent in the U. S. and Canada and 2.7 percent, experts say. Not only that, but Latin America has the largest segment of 15 - 19 year olds, 52.1 million, - more than Western Europe, Canada and the U. S. combined.

Latin America has a population of 526.4 million versus the United States and Canada combined population of just over 300 million, continues Eichelbaum. More importantly, Latin America has an economically active population of 268.9 million individuals versus the United States and Canada with an economically active population of only 178.8 million.

"Latin America represents a higher 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 over 5 million people versus 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 A. 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, agrees about the dynamic Latin American retail market. He notes that Brazil, the fifth largest country in world, has a population growth rate of 1.93 percent a year. More importantly, Brazil boasts 11 cities with over a million population.

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

Because the development rate of return in Brazil is around 20 percent a year, he adds, "a developer's ROI (return on investment) is basically, five or six years, a short term return than elsewhere, so 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 still be in positive territory," says Mike Burkard, editor of the Santiago, Chile-based Andrean 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, Latin America & the Caribbean at Los Angeles-based CB Richard Ellis. "With a resident population of over 28 million and with 27 million tourist visitors a year the Caribbean region has established itself as an attractive market for retailers, he adds. "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 under served in the retail sector, says de Winter. "American brands are well known (just as many brand names are today global brands) in the Caribbean region," 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 selection may be limited.

Elsewhere in the vast region, developers and retailers are telling additional retail success stories. Alberto Poma, marketing and sales manager at Roble International based in San Salvador, El Salvador, which has offices and projects throughout Central America and develops, owns and operates shopping centers throughout the region, notes that the economic and political situation in Central America has become extremely stable in contrast to the past, and that is returning confidence to the retail real estate market.

"Purchasing power in the region is increasing. Growth is around 3.5 - 4 percent," he adds. "Inflation in the area varies from 2 to 12 percent. Exchange rates are very stable compared to the last five years. Democracy through the region is consolidating."

Poma adds that a variety of brands such as DKNY, Nine West, Outback Steak House, Ruby Tuesdays and Imaginarium of Spain are interested in opening stores in the Central America region. 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 percent," says Poma. "We are seeing a variety of different stores interested in entering the regional. 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 malls in the region. "We believe that the individual purchasing power will keep increasing, due to globalization. Many other foreign multinational companies will be interested in entering the regional and that every year we see more interest in the entertainment, entertainment-shopping areas. We plan on developing properties or expanding existing properties throughout the region to satisfy this demand."

Already the Latin American and Caribbean region represents emerging world class chains, strong local retailing representation, aggressive new centers, concept entertainment, innovation quality renovations and aggressive marketing, those in the industry say. According to Eichelbaum, the 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, Arrowstreet's recent renovation of the long deserted 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, Carrofour and Zara. And there are great retailers emerging from the region who are now talking about their own globalization programs such as Liverpool Department Stores from Mexico, Musimondo Mega Stores from Buenos Aires and Freddo Ice Cream from Buenos Aires and Chocolate from the same region. Substantial marketing efforts in the region are exemplified by the exceptional Christmas initiative at Barra Shopping in Rio de Janeiro, this extraordinary advertising campaign by Montevideo Shopping in Uruguay or this type of value promotion by centers throughout the region."

Such activity is translating into impressive results. 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, in the area of sales, the averaging of the nine portfolios from leading developers showed them performing at 60% over the United States super regional center performance. The centers of Latin America and the Caribbean average $4,174 per sq. meter versus the reported $2,528 per sq. meter in the United States.

"A project we have been fortunate enough to handle the planning of exemplifies the future quality of development - the multi-use, very dramatic Crystal Shopping in Porto Alegro, Brazil and DDG's currently active renovation of Unicentro El Marques shopping center in Caracas, Venezuela which will make it into a state-of-the-art entertainment shopping place as well as DDG's effort at Guayaquil, Ecuador with San Marino shopping center," he continues. "Exemplifying the great entertainment efforts is New York City Center by Grupo Multiplan opening soon in Rio de Janeiro and the dramatic RTKL created shopping presentation intended at Jockey Plaza in Sao Paulo."

At the same time, there are still unmet retail needs in the Latin America/Caribbean region. A recent survey showed a 31-60% space shortfall or under representation of women's apparel stores within the tenant mixes in Latin America, says Eichelbaum. In the area of family apparel, two recent studies showed a 38% and 50% shortfall of family apparel selling space but a third study showed a 26% excess of space highlighting again a need for exacting demand studies in the feasibility and tenant mix planning within shopping centers within the region.

Such statistics will surely catch the attention of developers and retailers in the United States and elsewhere.

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 accelerate store openings, especially in Argentina. Hypermarkets will continue to squeeze traditional grocery store formats in Santiago, with Santa Isabel (Royal Ahold) and Unimarc receiving being hurt the most. Cinema development appears to have slowed. I expect the next year will show more of a selective approach to development.

"Drug store formats will start to increase in size as pharmacies learn lessons from the successes of Walgreen's, CVS and Eckerd in the U. S. They will introduce more convenience food products and higher margin impulse purchases. Grocery delivery will become an area of focus for the largest chains, especially in heavily urban areas such as Buenos Aires, Santiago, Sao Paolo and Rio de Janiero."

In other words, Latin America and the Caribbean will be seen as the Land of Opportunity for international and national retail real estate developers and retailers for some time to come, as firms seek to further tap the huge potential of the market in the years ahead.