Tuesday, October 8, 2013

Wal-Mart sales in free fall a good barometer of a Mexican economy on the skids

2013: Declining sales in 7 months out of 9; IMF again lowers Mexico's GDP growth estimate to 1.2%

*Jan. 30, 2014 - Mexico gets its very poor 2013 economic report card*
Guadalajara -
Mexico has been receiving bad business and economic news since the third week of June, and it just won't stop.

Two weeks ago Credit Suisse Group predicted 2013 growth would slightly clear 1%. Yesterday the International Monetary Fund added one tenth of a percent to the prognosis. Hurricanes, a closed government in Washington and the looming Oct. 17 DOOMSDAY - the day when the United States will hit its national debt ceiling (something over $16 trillion, if you're counting), and not be able to pay any more bills unless Congress agrees to raise that ceiling, just as it did at the very last minute in August 2011 - haven't helped matters. Little surprise that last week Venezuelan president Nicolás Maduro called American senators "slackers" who should attend to the U.S.'s impending "bankruptcy." He's always ready to lend an encouraging word to Washington.

Mexico's central bank, Banixco, is the equivalent of the U.S. Fed. It first warned of economic heavy weather on June 21, and on Oct. 1 lowered its official prognosis for 2013 economic expansion another notch, to 1.43%. But some observers say one can put aside both investment house and government agency forecasts, and simply look at Wal-Mart Mexico's 2013 spreadsheets.

In September Wal-Mart sales fell 4.7% from the same month in 2012. That has the company and Mexico's chief tax collector worried, because Wal-Mart is the nation's largest collector of IVA, the Mexican sales tax. Reduced sales tax collection = less government revenue, upon which 31 states and the Republic itself depend.

Wal-Mart has 2,100 stores in 64 Mexican cities. It serves 4 million customers daily, targeting those with the lowest purchasing power, the highest and everyone in between. It's sales figures provide a good economic snapshot of what's going on at any moment in time, and the 2013 album is not pretty.

Wal-Mart sales have fallen for three consecutive months, and five of the last six. Through Sept. 30, the company posted an increase in monthly gross sales only twice. Analysts say management is alarmed by the steady decline, especially considering that in September 2012 gross sales rose 10% (compared to September 2011).

Wal-Mart has no immediate treatment plan in mind, anymore than does Banixco, the tax collector or the PRI administration. Mexico is hostage in part to economic storms blowing far off its own shores, and there is little to be done apart from waiting for better weather. No one knows when it might arrive.

Fortunately for Mexico's central bank, it has some cash put away for a rainy day - or many of them. Peso, dollar remain volatile; Banixco has $169 billion USD banked abroad

Note: Gross domestic product growth in the rest of Latin America (including the Caribbean and all of South America) is estimated to average 2.7% in 2013, almost two and one half times that of Mexico.

Nov. 6 - October brought more bad news for Wal-Mart. Sales were off 4.1% from October 2012.

Nov. 19 - The Paris based Organization for Economic Cooperation and Development today endorsed the IMF assessment. OECD predicted Mexico's economy will grow 1.2% in 2013. It also warned of problems in 2014 if pending energy reforms, which require federal constitutional amendments, are not approved by the congress.

Nov. 26 - Mexico's economic woes take a toll on Yucatán business
Oct. 20 - Baja Santander pronóstico de crecimiento para México
Sept. 27 - Credit Suisse: storms will further reduce Mexican growth
Sept. 18 - Mexico is in full recession, say business executives
Aug. 31 - Bank of America Merrill Lynch: Mexico in huge economic hole; looming "risk of recession"
Aug. 21 - Sluggish Mexican economy worries foreign investment experts
July 29 - Mexican Left lambasts poverty war: "a massive failure"
July 29 - 53.3 million - that's how many Mexicans live in poverty
June 21 - Banixco raises storm flag warning on Mexican economy
June 12 - 59% of Mexicans remain trapped in underclass
June 12 - As peso continues its slide, Peña Nieto puts a trillion of them on the table
Apr. 9 - Yucatán tourism remained flat in first quarter of 2013

Internal revenue chief Luis Videgaray (left) and Banixco chair Agustín Carstens. They make enough to shop at Wal-Mart, but many Mexicans don't.

© MGRR 2013. All rights reserved. This article may be cited or briefly quoted with proper attribution or a hyperlink, but not reproduced without permission.

No comments:

Post a Comment