May 18, 2007

Wal-Mart’s Mexican Empire Steadily Advances

Consumers in Ciudad Juarez and other Mexican cities will now have access to cheaper medicines at the numerous Wal-Mart company retail outlets across the country. The corporate mammoth has started rolling out a line of 250 generic pharmaceutical products that cost less than $4 per item. For instance, a 400-milligram supply of penicillin that costs nearly $3 at other commercial outlets will sell for less than one dollar at Wal-Mart stores. What’s more, Wal-Mart is considering offering low-cost medical consultations to the public.

“We are constantly looking at diverse projects and analyzing the best options of attention to our clients, although there is nothing concrete (concerning medical services) at the moment,” said Raul Arguelles, vice-president of corporate affairs for Wal-Mart.

Wal-Mart’s splashy plunge into Mexico’s generic pharmaceutical market is the company’s latest advance in dominating commercial and financial life south of border.

First entering Mexico in 1991, the Arkansas-born giant controlled an estimated 44.8 percent of the Mexican department store market by 2005. Wal-Mart’s Mexican division, Walmex, operates 411 retail outlets and 285 restaurants.

Now Mexico’s largest private employer, Walmex owns the popular Bodega Aurera, Sam’s Club, Vip’s and Superama stores that stand as landmarks of Mexico’s NAFTA age.

According to company spokesman Arguelles, Wal-Mart will open 14 banking branches under the name of Banco Wal-Mart Adelante by July 30 of this year. In 2007, Walmex is expected to open 70 new stores with a capitalization of $750 million. The new growth will mean that Wal-Mart has averaged a new retail opening almost once a week during the last 16 years.

Wal-Mart’s Mexican retail sales are projected to reach $21 billion this year, a 16 percent increase over last year’s numbers. At a time when Wal-Mart is showing sluggish growth at home, the Wall Street Journal calls Mexico “the crown jewel” of the corporation’s global empire. Wal-Mart’s spectacular Mexican growth is showing the way for its expansion into China, India and other developing nations.

While confronting smart-growth advocates and labor critics in the United States, Wal-Mart has tempered greater potential opposition in Mexico by paying workers slightly higher-than-average salaries and providing employee medical insurance. Scattered attempts by some leftist organizations to boycott Wal-Mart in solidarity with Mexican migrants in the US or to protest alleged fraud in last year’s presidential election have fallen flat.

Unlike other competing department chains that are appealing to higher-income Mexican consumers, Wal-Mart is increasingly eyeing the lower-middle and lower-income economic sectors as the source of its future revenues. In this sense, Wal-Mart is following a sales and credit trend that has companies like Banco Azteca or Nissan increasingly offering services and products to long-underserved, low-income consumer populations.

Wal-Mart’s retail strategy implies wooing Mexicans away from the traditional markets that still exist in the country. While many older consumers are reluctant to part ways with the past, Wal-Mart could achieve plenty of success among younger shoppers. Carlos Ruiz, a business professor at the Pan-American Institute of Business Administration, predicted that “Mexico is going to become more oriented to (big box) stores.” Ultimately, large numbers of market vendors and employees could be displaced by Wal-Mart and other large commercial chains.

Many Wal-Mart store items in Mexico, however, are as expensive as or more expensive than similar products in the United States, and low-income consumers can still locate many better deals on the streets and in the marketplaces.

If Wal-Mart slashes prices for more products than just medicines, the company’s Mexican conquests will likely continue piling up from north to south for the near future.

The entry of the US-owned company into the medical services field could unleash a fierce competition with a well-known Mexican provider of generic pharmaceuticals and medical services: Farmacias Similares, which is owned by the colorful businessman and sometimes presidential candidate Victor Gonzalez Torres, who is better known as “Doctor Simi.” In addition to his Mexican economic and political ventures, Gonzalez is expanding his business presence throughout Latin America. He also has been associated with Guatemalan presidential candidate Rigoberta Menchu.

Reprinted from Frontera NorteSur (FNS): on-line, U.S.-Mexico border news Center for Latin American and Border Studies New Mexico State University Las Cruces, New Mexico.

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