MercoPress. South Atlantic News Agency

International stores target Argentina

Undeterred by double-digit inflation, international retailers are rolling out expansion plans in Argentina, hoping to cash in on a consumer spending boom.

Retailers such as Chile's Cencosud SA, US giant Wal-Mart Stores Inc, France's Carrefour and Mexico's Elektra SA de CV have recently unveiled new investments, lured by a steady rise in sales as Argentines reopen their wallets after recovering from the country's 2001- 2002 economic crisis.

"The recovery is impressive. Until now, there had been an oversupply, but we're beginning to see bottlenecks and that's driving the expansions," said an international retail executive who asked not be named.

Driven by private consumption and buoyant prices for agricultural exports, Argentina's economy has averaged nine percent annual growth over the last three years. Private forecasts expect 2006 growth of around 8 percent.

Supermarket sales, which have grown seven percent so far this year, are widely seen as a barometer of consumer spending in a country were domestic consumption makes up more than 60 percent of gross domestic product.

The increase in sales coincides with a surge in consumer confidence, which hit a high last seen in 2003, according to a report from the Torcuato Di Tella University. That has international retailers looking to invest more.

On Monday, Cencosud, which operates supermarkets, malls and home-improvement stores in Argentina, announced plans to invest more than US$500 million and build 182 new stores by 2009.

Wal-Mart Stores announced last week it too will invest US$150 million over the next two years to open 12 new stores. Carrefour also plans to spend US$150 million to inaugurate 29 new stores by 2008. Mexico's Elektra will also open stores next year.

The companies are moving to expand as supermarket owners have had to contend with inflation concerns after consumer prices rose 12.3 percent last year.

To tame consumer prices, the government has struck accords with manufacturers and retailers to lower and freeze prices on a host of basic goods. Annual inflation through August totaled 10.7 percent.

But that has not restrained consumption, said Enrique Dentice, an analyst at the San Martin University. "Consumption is a correlation with growth. We're seeing very good recovery in salaries, especially among those that had been long suppressed like state workers and retirees," he said.

Partly to stimulate spending, the government has raised public worker salaries and retiree benefits, tapping budget surpluses that widened further after Argentina's mammoth debt restructuring in 2005.

Companies are also looking to bolster their presence in the interior, where a boom in the country's farm exports, construction and public works projects have helped fuel demand.

A recent report by AC Nielsen showed that supermarket sales have grown four percent in Buenos Aires and its surrounding areas, but expanded by nine percent in the rest of the country. Buenos Aires Herald