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I will add my 2 cents to this whole discussion. If you have not yet heard (under which rock have you been living, by the way?) , Brazilian authorities have found that one of Zara´s clothes suppliers in Brazil has been using slave labor to produce clothing right in the center of São Paulo, our largest and most metropolitan city.

Now, the fact that there is a huge social cost associated with so called fast fashion (cheap, trendy clothing) is already well know but this reality seemed a bit far from the average Brazilian consumer, who have always though that this type of issues belonged only to sweatshops in Asia and Central America, not in their own backyard. And that is what shocked the local public opinion the most.

It is also worth to mention that Brazil has strict labor laws and that the high cost of apparel items here (just for comparison purposes a denim pants that is similar GAP will retail at about U$ 160).  I, for one, have always taken solace on the fact that while I would be paying more for apparel here in Brazil (compared to the US), at least I would be paying for fair (unionized) labor practices. That innocence is now lost.

Brazilian authorities are now prosecuting this supplier while Brazilian consumers are commenting online on how it is Zara´s responsibility to ensure its suppliers are following the law. Many friends of mine down here are vowing not to buy from Zara ever again. We shall see the implications of this scandal in the medium and log terms.

Don’t get me wrong, sales of luxury items are well and kicking in Brazil. What has changed is where Brazilian are buying.

Once upon a time, not that long ago Brazil got (in)famous due to Daslu, a mega luxury store that sold from Gucci dresses to helicopters on a humongos mall that was almost all closed to anyone who was not a customer. Its owner, Ms. Eliana Tranchesi is from a wealthy family from Sao Paulo and her mother used to bring luxury items from her trips aboard and sell them from her living room to her closest friends. Later on, Ms. Tranchesi grew Daslu to its mega store status (we are talking about 60,000 square feet).

Then in 2005, Eliane was indited by the Brazilian government for being part of a scheme that brough all these luxury imported goods without paying its proper taxes (note to readers: Brazil has one of the highest level of these type of taxes in the world and of course the local government takes it very seriously). Ms. Tranchesi and her brother were arrested (and then appealed and were realeased) and Daslu’s debt with the government  is around U$ 300 million.

Daslu has declared banckrupcy while Ms. Tranchesi searches for new investors. The Daslu space now belongs to the Iguatemi group (which is a family enterprise that includes many high end shopping malls throughout Brazil). Daslu will soon move out and anchor the newest Iguatemi mall to be opened later this year (it will have about 15,000 square feet now).

Even though business is not as brisk at it once was, I do not think that this is just due to all the legal problems Daslu has been facing. Many of the international luxury brands it sells are now opening their own stores in São Paulo, therefore serving the same customer. Diane von Furstenberg, Chanel, Gucci, Louis Vuitton and Burberry, among others are investing highly in Brazil this year. Daslu needs to really reinvent itself inside and out so it can be relevant during Brazil’s current fashion boom.