Walmart To Suffer $1B Loss After Relationship with Socialist Argentina Goes Awry
The world’s largest retailer has decided to sell its operation in Argentina to the South American supermarket chain owner Grupo de Narváez.
According to The Financial, Walmart is selling all 90 of its Argentinian retail locations — the first of which opened in 1995.
Walmart did not disclose the value of the transaction but said it will record an after-tax, non-cash loss of about $1 billion related to the divestiture, Bloomberg reported.
The deal comes as a socialist Argentina struggles with a financial crisis, its national currency on track for potential devaluation.
The loss of Walmart is another sign that Argentina’s retail landscape keeps on getting less competitive & is concentrated in fewer hands.
This makes inflation even harder to tame, reduces choice & weakens innovation. Will online shopping be enough?
— Nicolás Saldías (@NicSaldias) November 6, 2020
“In Argentina you see a phenomenon of firms divesting, and companies changing hands, reflecting a lack of confidence in the direction of the country,” economist Guido Lorenzo said, according to the New York Post.
“Argentina lacks clear rules of the game,” he said.
However, the company still has large operations in Chile and Mexico.
According to the Post, Argentina is on track for a gross domestic product decline of about 12 percent this year amid the coronavirus pandemic. But prolonged national lockdowns are only part of the story.
One of the world’s wealthiest nations at the turn of the 20th century, Argentina entered the 2000s on track for economic free-fall, with the socialist state’s internal price control mechanisms and mass currency inflation resulting in economic stagnation, Forbes reported in September.
As a result, the country was recently forced to restructure an astronomical $100 billion in foreign currency debt connected to local and international creditors.
Walmart is not the only corporation facing difficulties in Argentina. Corporations such as LATAM Airlines Group are also struggling.
“Although the global and local scenario is complex, and despite the myth of an ‘exodus,’ the truth is there are firms continuing to bet on the country and announce investments every week,” the Ministry of Productive Development said in a report released this month, according to the Post.
Walmart is divesting not only from Argentina but also from Brazil, leaving large operations in Chile and Mexico in a potentially uncertain place as well.
In 2018, the company sold a large majority of its units in Brazil.
Its continental competitor, Grupo de Narváez, will soon own 656 stores. These include supermarkets, apparel shops and home appliance outlets in nine countries, including Ecuador and Uruguay.
It is set to employ more than 24,500 workers after the Walmart acquisition.
“We are very proud and excited about this new investment. We share the same values: a customer-centric philosophy, focus on operational excellence and commitment to the communities in which we operate,” Grupo de Narváez CEO Fernando Minuado said in a statement.
“The company’s performance and dedication of its incredible associates through the COVID-19 pandemic have demonstrated the fundamental strength and resilience of the business, and we are thrilled to support the team, drive long-term growth and create new opportunities for associates and suppliers across Argentina.”
Minaudo is confident that Grupo de Narváez will continue its growth.
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