A giant photo of a model in tiny underwear is in danger of causing car-crashes on a busy intersection in Mexico City. The billboard announces the arrival of H&M, a Swedish fashion retailer, which opened its first Latin American store in Mexico City on Nov. 1.
Two weeks earlier, Forever 21, an American chain, celebrated its debut in the country. That followed the first opening of a Mexican store by Gap, another American clothing giant, in September. The new entrants promise high fashion at low prices.
Affordable foreign fashion has been a long time coming to Mexico. Though it has more free-trade deals than any other country, it has kept high tariffs on clothes and shoes. When China joined the World Trade Organization (WTO) in 2001, Mexico imposed duties of up to 1,000 percent on Chinese goods to protect domestic clothes makers. The result is that high-street fashion is still mostly home-grown.
The leading clothing brand is a 78-year-old firm called Milano (which hails from Mexico City rather than Milan). The top shoemaker is Andrea, a 39-year-old company based in Guanajuato. Tellingly, malls in American border towns heave with middle-class Mexicans on clothes-shopping sprees.
Only a few foreign firms have broken through. Levi's is the second-biggest clothing brand in Mexico, partly because its 501 jeans are made locally and are available cheaply. Zara, a Spanish chain, entered Mexico in 1992. Many of its products are made in or near Europe, which means that Mexico's China tax has not hit it too hard.
Now duties are coming down, and the market is opening up. Having fallen slowly in recent years, they were slashed in December 2011, to around 20 percent. The lower tariffs have opened the door to retailers such as H&M, the suppliers of which are 80 percent Asian. H&M's three-story Mexican megastore stocks boots, dresses, sweaters and handbags made in China. The weekend lines at its tills are deep.
For Mexican manufacturers it is going to be hard to keep up with the fast-fashion model used by the likes of H&M, says Isabel Cavill of Planet Retail, a consultancy. Retailers such as Wal-Mart are already threatening "give us a better price, or we go to China," says Ysmael Lopez García, head of the Footwear Chamber in Guanajuato, where most of Mexico's 150,000 cobbling jobs are located. Imports of Chinese shoes have trebled this year, he says. His members' profits are about a quarter lower than they were three years ago.
Mexican firms are fighting back by focusing on quality, where Lopez believes they can still beat China. Mexico's shoe exports, most of which go to America, have edged up. As Chinese wages rise, foreign brands including Zara and Nike have sought suppliers in Mexico. Meanwhile, Mexico has complained to the WTO that China is illegally subsidizing its clothes industry. It claims that America, the European Union and others are interested in joining the complaint, which may proceed to a dispute panel this month.
For years, Mexicans were forced to pick between two extremes. The poor shopped at informal street-markets. The rich shopped at costly chains such as El Palacio de Hierro ("The Iron Palace"), a store founded in 1891 to bring Parisian fashion to the posh ladies of the new world. The middle class had nowhere to go.
Those extremes are still there. The cheap-but-dowdy basics sold at street markets (often imported illegally from China) still account for 60 percent of Mexico's clothes business, according to Euromonitor, a research firm. But now that more and more Mexicans sport the label "middle class," fashionistas are vying to clothe them.