US Retail Giant Invests in Brazil

The world’s largest corporation, US retail giant, Wal-Mart, gave Brazil a massive vote of confidence recently when it unveiled plans to invest more than US$ 1 billion in the country. Wal-Mart is no stranger to Brazil; it opened its first store in the country in 1995, but this latest expansion is its largest investment yet in the country.

Wal-Mart currently has a total of 318 outlets in Brazil, employing around 70,000 people. So far in 2008 they have spent just under US$ 1 billion to open 36 new stores and have generated more than 7,000 new jobs. Their latest announcement followed a recent meeting of Wal-Mart bosses with Brazilian President, Luiz Inacio Lula da Silva, to seal the deal. Craig Herkert, President and CEO of Wal-Mart’s Americas division, said,
“Wal-Mart Brazil plans to invest between US$1 billion to US$1.12 billion and open 80 to 90 new stores. The investment and store openings, scheduled for 2009, are expected to generate 9,000 new jobs.”

James Gonzalez, Market Analyst at Obelisk, says this latest news shows continued confidence in Brazil by a big-name investor. “Wal-Mart is providing basic goods in a rapidly expanding country and their previous investments have more than paid off. They know the potential is there.”

Wal-Mart has become one of Brazil’s largest retailers after acquiring several local chains and over the past four years it has invested more than US$1.9 billion in Brazil. Wal-Mart has seen what many other high profile investors have already noticed; Brazil, Latin America’s largest economy, has made a dramatic economic turnaround in recent years and the Brazilian currency, the real, is performing strongly which is making imports cheaper. In addition, expanding consumer credit, with more affordable mortgages available to Brazilians, has driven a spending boom in the country.

The government’s economic reforms have succeeded in making the country a highly favourable fiscal and political environment for investors. Brazil’s economy grew by 5.4 percent in 2007, there is a strong demand for the country’s commodities and inflation is down to 5.7%. Even better, it is expected to stay that way, according to the Economist Intelligence Unit - an amazing achievement for a country that once suffered from hyperinflation. Standard & Poor, the financial ratings agency, has recently increased Brazil’s credit rating to BBB minus, a further sign of increased confidence in the country and one which supports Goldman Sachs’ 2003 ‘BRIC’ theory that Brazil will become one of the most dominant economies in the world by 2050.

Wal-Mart is just one of many big investors being attracted to the country. Hector Nunez, the company's President in Brazil commented that “Brazil is a highly strategic country for Wal-Mart and we are going to continue growing in the country. This is a country with high growth, with much economic, political and social stability ... and a growing middle-class.”