Wal-Mart Mexico: “We are not saints, we come into this business for volume and profitability”
If you build it, they will come. Wal-Mart doesn’t offer banking in the US, but does to its customers in Mexico, at interest rates as high as 86%. In many cases, Wal-Mart is the only place where the service is available, giving the company a virtual monopoly. Lax regulations in Mexico allow these “industrial loan corporations,” whereas regulators blocked Wal-Mart’s attempt to do the same in the U.S. Wal-Mart’s entry into banking further widens the reach and pervasive influence of the massive retailer. It’s also a very convenient way to make more money off of its employees.
Wal-Mart Banks on the ‘Unbanked’ [BusinessWeek]
Its new Mexican lending arm taps a fresh source of growth
Every day 2.5 million people walk through the doors of a Wal-Mart (WMT) store in Mexico, generating nearly $20 billion in sales last year. Now they are potential customers of Banco Wal-Mart, the chain’s new lending operation. So are the company’s 12,000 Mexican suppliers, as well as its 155,000 employees. “We want to leverage this traffic we have in our stores,” says Julio B. Gómez, Banco Wal-Mart’s chief executive.
As in the U.S., Wal-Mart is Mexico’s largest retail chain. It has 997 locations, including supercenters, food and clothing stores, and restaurants. It has diverted many Mexicans from traditional commerce and stirred occasional opposition from local merchants. But the president of Mexico’s central bank, for one, publicly credits Wal-Mart’s high-volume, budget-conscious retail strategy with helping tame inflation to the low single digits. Mexican regulators say they expect the newly chartered Banco Wal-Mart to spark competition that eventually could lower the cost of consumer borrowing.
For the moment, though, Wal-Mart is taking advantage of a market where annual interest rates often exceed 100%. A supercenter just west of Mexico City offers a side-by-side $1,100 Whirlpool refrigerator for 104 weekly payments of $23, which works out to an annual percentage rate of 86% and more than doubles the cost, to $2,295.
“We are not saints,” Gómez told industry analysts in a Nov. 12 Webcast. “We’ve come into this business for volume and profitability similar to our other businesses, or else we wouldn’t invest.” Asked separately about Wal-Mart’s rates, spokesman Raúl Arguelles says: “We offer very competitive [financial] products that we will be constantly evaluating to make them even more attractive.”
When Wal-Mart sought a banking license in the U.S. two years ago, its path was blocked. Among the obstacles: American banks, unions, grocery store owners, and both Republicans and Democrats in Congress. Even then- Federal Reserve Chairman Alan Greenspan weighed in with worries about lightly regulated “industrial loan corporations” that could hobble the financial system. So the company looked south, where regulators couldn’t have been more pleased to welcome Banco Wal-Mart.
Sixteen Wal-Mart bank branches are already offering installment plans on electronics and household appliances. By the end of next year, Banco Wal-Mart expects to operate in 100 stores, and it projects that it will be profitable within four years. It also intends to offer credit cards and micro-loans for entrepreneurs.
Consumer finance offers a fresh growth opportunity for a company whose huge outlets are maturing in Mexico as in the U.S., says Wayne Hood, a retail analyst at BMO Financial Group (BMO). “Their idea is, you have a core group of loyal customers who are unbanked’ who shop every day. Why not try to provide them banking services?” he says. “It’s easier to do in Mexico because the regulatory environment isn’t as tough.”
Posted by Andrew Yonki on Friday, December 14, 2007
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COMMENTS
WALMART INTERFERENCE IN MEXICAN PRESIDENTIAL ELECTION
From October 2006-
Watch Out Wal-Mart!
Mexican Progressives Target Wal-Mart After Its Involvement in the Presidential Election
by Ruben Garcia and Andrea Buffa
The recent escalation of anti-Wal-Mart activism was caused by Wal-Mart top stockholder Manuel Arango’s financial contributions to a smear campaign against left-wing presidential candidate Andres Manuel Lopez Obrador of the PDR. Under Mexican electoral law, corporations are not supposed to fund campaigns supporting or opposing candidates, but this didn’t stop a number of corporations from doing just that, through their corporate officers and shareholders. Lopez Obrador of the PDR, who ended up losing to Calderon in the hotly contested election, called for a boycott of corporations that illegally supported PAN’s campaign. These included Coca Cola, Pepsi, Kimberly Clark, Televisa, and, of course, Wal-Mart. Wal-Mart is accused of not only giving money to the pro-PAN forces, but also distributing campaign literature to Wal-Mart of Mexico employees.
http://www.commondreams.org/views06/1016-30.htm
From December 2007-
Wal-Mart Protesters Picket Mexico City Store to Demand Union
By Adriana Arai
Dec. 2 (Bloomberg)—Protesters picketed a Wal-Mart store in Mexico City to show support for employees who are trying to form a union at the company, the nation’s largest employer.
The protesters, who included labor activists and union members from other industries, urged shoppers to boycott Wal- Mart for the day. Wal-Mart de Mexico SAB, two-thirds owned by Bentonville, Arkansas-based Wal-Mart Stores Inc., has about 160,000 workers in the country.
http://www.bloomberg.com/apps/news?pid=20601086&sid=akv0z8DYhG_o&refer=latin_america
Bush league Ivy Leaguers and Plan Mérida
October, 30, 2007
Excerpted-
“True or not, I’ve always felt that the very narrow (and statistically improbable) Calderón “victory” was a little too much like some of our “improbable” election results lately (Bush-Gore; Bush-Kerry) to be dismiss U.S. involvement entirely. And — given that I was loudly complaining about Republican Party operatives working for the Calderón campaign, it isn’t just a paranoid fantasy to suggest — as the PRD has maintained — that “they wuz robbed”.”
http://mexfiles.wordpress.com/category/economy-business/walmart/
WalMart- You think we screw people over in the United States, you should see the crap we pull in foreign countries.
SanDiegoView in
Saturday, December 15 at 05:52 AM
SDV in : According to the thread above,” WalMart is taking advantage of a market where annual interest rates often exceed 100%."It goes on to say that the President of Mexico’s central bank,publicly thanks WalMart for helping tame inflation to low single digits. Somehow these two statements seem at odds to me. I wonder,with interest rates having no cap-100% in some instances now, what will be the fallout when W/M gets into the mix-wonder if G.E.Capital will be involved in credit card collections as they are here? If WalMart has been so great for Mexican economies,why do we have so many illegals here-why aren’t they working in Mexican Wal-Marts?Wonder how many jobs WalMart Banco will create?
ddrb in
Saturday, December 15 at 08:16 AM
P.S. : It is noteworthy that many appliances are Hecho in Mexico,which theoretically should make them less costly to the Mexican consumer-yet the selling price quoted above for the refrigerator doesn’t seem like a bargain to me-especially if they’re expected to pay unregulated interest.I will stayed tuned to this one-Caramba!!
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