If there is a slowdown in Brazil, Renato Rique is not seeing it.

The chairman and chief executive of Aliansce Shopping Centers, one of the country’s leading mall operators, says that for all the talk about stagnant growth, Brazilians are still spending like never before.

“If malls are a barometer for the nation’s mood, then I’d say the mood is pretty upbeat,” he told beyondbrics in an interview.

“I have been hearing about slowing growth and the middle class being stretched to its limits for the last four years now. But that is just not what we are seeing on the ground.”

Indeed, since the company was founded in 2004, same-store sales, along with revenues and operating profits, have grown steadily year-on-year.

Last year, Aliansce, which now operates 17 malls across the country, including in the pooer northern states, saw net profits jump 40 per cent to R$129.5m ($59.4m) on revenues that rose 31.4 per cent to R$357.2m.

And while like-for-like sales growth for the first six months of this year has been weaker than expected – Rique attributed that mainly to the mass protests that have roiled the country earlier this year.

“We expect Q3 to be better,” he said.

The resilience of household consumption – retail sales rose almost 10 times faster than expected – underscores one of the more peculiar features of the Brazilian economy.

While growth might have slowed to a crawl – from 7.5 per cent in 2010 to a projected 2.5 per cent this year – unemployment, at 5.3 per cent in August, remains close to record lows.

“When people have jobs and are making money, they don’t worry about the future,” said Rique. “That is why they are not afraid to spend.”

The industry’s continued strength can also be attributed to Brazilians’ seemingly innate love of shopping. While shops abound in cities, malls have taken a special place in Brazilian culture, with shopping centres very much a trip out for all the family on Sundays.

“Malls appeal because they are a place where people can escape the chaos of the big cities – the traffic and the crime,” said Rique. “It’s a haven.”

Aliansce has also done its part to draw in traffic. In addition to the standard retail shops and restaurants, the company’s malls also house a range of services, including university classes, leisure activities like cinema and amusement parks and places where people can apply for passports or pay their gas and electric bills.

“It’s a mini city,” says Rique.

Aliansce builds malls to cater to both the upper class and the emerging middle class and derives a third of its revenues from the latter.

But given that much of the consumption boom among the so-called C/D class has been powered by a vast expansion of credit – nearly everything from toilet paper to flat screen TVs can be paid for in parcelas, or installments, in Brazil – surely moves by private banks to curtail lending have got to have some effect on sales?

Not necessarily, said Rique.

“This [the pullback in bank lending] actually benefits mall operators because if people can no longer afford to buy big ticket items then what do they do?” he sks. “They will spend money on smaller ticket items instead. No house, no cars but they will certainly buy a pair of shoes or a suit.”

The Canada Pension Plan Investment Board (CPPIB) is one investor that appears to share Rique’s optimism.

The fund has recently agreed to purchase a 27.6 per cent stake in Aliansce from the company’s long-time US partner General Growth Properties for $480m.

But the wider market still needs some convincing though. Shares in the country’s four largest publicly-listed shopping centre operators have all struggled this year as investors continue to take a dim view of Brazil’s growth prospects. Aliansce is down 14.6 per cent this year; BR Malls is down 25 per cent; Multiplan has lost 9.4 per cent and Iguatemi is down 9.7 per cent.

Related reading:
Brazil: Consumer rhythm, FT
Brazil: let 113 shopping centres bloom, beyondbrics
Brazil’s love affair with shopping malls, beyondbrics

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