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ECONOMY | 19-09-2020 08:47

Fernández asks firms to trust Argentina amid reports of ‘exodus’

Business decisions by Falabella and Glovo grab the headlines and spark speculation, with the former announcing it will shutter four stores and the latter selling off all its Latin America operations.

President Alberto Fernández has told business leaders and entrepreneurs that Argentina needs them to trust the country “after four years of prostration,” amid reports that many firms are considering departing the country.

Speaking on a call to Brazilian business leaders on Thursday – amid reports a number of companies were considering their future in Argentina and after the introduction of more currency controls – the Peronist leader called for more integration with firms from Argentina’s giant neighbour and said all companies needed to trust in the coming economic recovery, despite a long recession exacerbated by the coronavirus pandemic.

Argentina’s economy is expected to contract by around 12 percent this year, according to private estimates, and though the government forecast 5.5 percent growth in GDP in 2021, the recession is sparking concern that major employers may choose to depart the country.

 

FALABELLA CLOSURES

Stories began circulating on Business decisions by Falabella and Glovo grab the headlines and spark speculation, with the former announcing it will shutter four stores and the latter selling off all its Latin America operations. Monday, when Falabella SA, the region’s largest department store chain by market value, announced it would be closing four of its stores in Buenos Aires.

The Chilean company said it would shutter two from its eponymous retail brand, as well as two more from its DIY and home improvement subsidiary Sodimac. The company has 10 ten stores nationwide and said that “changes in consumer habits” were also behind the decision.

The firm, which has the largest number of employees for its sector in the region, also said in a statement that it is “evaluating profitability options in its subsidiaries in Argentina, which could include the entry of a strategic partner.”

“The pandemic accelerated the process of the digitisation of retail [sales] and has affected results,” said the group.

“To adapt to this new trend and make the operation sustainable in the future, Falabella and Sodimac have determined to close four of their stores in Buenos Aires in the coming months,” the statement said.

As part of the move, Falabella will offer voluntary redundancy packages to staff, as well as roles in other parts of the company.

Local press reports suggested that the wide gap between the country’s official and unofficial exchange rate and restrictions on imports were key factors in Falabella’s decision. The company did not mention those reasons in its statement, however.

 

GLOVO SELLS LATAM OPERATIONS

On Wednesday, Spanish delivery app firm Glovo announced it would be selling its Latin American operations to Delivery Hero, the German owners of PedidosYa.

Glovo, which has been operating in the country since 2018, has around 70 company employees and a further 3,000 delivery workers, who are to be absorbed by the new owners.

A company communiqué said that the decision to sell its Latin American operations to Delivery Hero was “defined by headquarters [in Barcelona] to focus the growth and presence in other markets key to the company.”

“Glovo Argentina understands the local impact of the announcement and extends its deepest thanks to all the value chain in the effort to consolidate locally since arriving in this country in 2018,” said the company.

The Berlin based Delivery Hero holding had already invested 51 million euros into Glovo and is now paying a further 270 milion to buy up the rest of Latin American operations (which include the markets of Peru, Ecuador, Costa Rica, Honduras and Guatemala besides Argentina).

Glovo had already communicated to its staff the decision taken to “close down its operations in Argentina in the next few weeks” and that “all delivery workers will be receiving the totality of payments pending in accordance with our terms and conditions.”

Delivery Hero, via PedidosYa, said that it “assumes the commitment to continue providing the best experience to Glovo users, as well as to the businesses which want to pass to our platform.”

The firm, which is active in more than 40 countries across the globe, also promised delivery workers that they would “propose, if they so desired, that they pass their services over to PedidosYa.”

 

EXODUS?

Despite Glovo’s decision being based on regional concerns, rather than just national ones, multiple outlets – both local and international – this week painted the decision as the latest in an “exodus” of firms who are leaving Argentina.

Things got so frantic by midweek that the WalMart supermarket chain and Mexican company Alsea which operates the Starbucks and Burger King franchises in Argentina were forced to deny reports they were considering selling up.

“Starbucks and Burger King will continue in Argentina,” said Alsea – which did look into a possible sale in May – said in a statement. “Today we are committed more than ever to Argentina.”

A spokesperson for WalMart rejected rumours it was considering a departure, calling the reports a “surprise.”

The biggest departures this year, in terms of companies, come in the aviation sector. Regional giant Latam Airlines closed its Argentine subsidiary in June, while carriers such as Air New Zealand, Qatar Airways and Emirates have suspended routes serving Argentina.

The automobile industry has also been hit, with Honda ending manufacturing operations in Argentina and Ford and Volkswagen suspending plans to produce a vehicle here.

French pharmaceutical firm Pierre Fabre has also announced the sale of its operations to local firm Sidus, while Germany’s Gerresheimer did the same, brokering a deal with IMAP.

 

– TIMES/AFP/AP/BLOOMBERG

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