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Retail in Milei's Argentina: a shock that weakens consumption, but facilitates long-term investment
Monday, June 3, 2024 - 14:30
Fuente: Mercado Libre/Cencosud (fotocomposición)

The recent economic crisis has led to the departure of giants in the sector such as Falabella and Walmart, while Cencosud and Mercado Libre are still betting on million-dollar investments.

Store closures, departures of multinationals and changes in business models are some of the changes that have marked Argentina's retail sector in recent years. The COVID-19 pandemic and the economic failure of the Alberto Fernández government (2019-2023) were the main triggers of a situation that hopes to leave its past behind during the administration of Javier Milei.

In the four years of the Peronist government, the crisis led to the exit from the country of some 30 companies. Furthermore, 24,000 SMEs closed in the first five months of the Fernandez administration, the same figure recorded during the government of Mauricio Macri (2015-2019) as a whole.

During the Fernandez administration, Argentina witnessed the departure of important players in the sector such as Chilean department store chain, Falabella, which closed operations in 2021. This loss was one of the catalysts for the chain to lose 63% of its shares in the last five years, according to Bloomberg .

Similarly, Walmart, the American supermarket chain, also decided to pack bags after 27 years of presence in the country. High inflation, price controls and the company's disinvestment in the South American market were the main reasons behind its exit from Argentinean soil.

Meanwhile, the domestic economy appears to be experiencing a modest rebound under Milei, which may influence the retail sector, although the forecast is cautious.

“Compared to 2023, Argentina's manufacturing industry was in decline during the first four months of 2024. However, it grew by 3.1% last month. We must take into consideration that it is very difficult to stay afloat in a scenario dominated by hyperinflation, the opening of markets to imports and the maintenance of operational costs,” declared Daniel Chicoma, retail expert and professor at the ESAN Graduate School of Business (Peru), for AméricaEconomía .

Other players have remained in Argentina, although resisting and betting on future operations such as Cencosud. The Chilean company increased revenue by 12.4% during the first quarter of 2024, but the Argentine market contributed little to this.

In fact, although total income was 3.94 billion Chilean pesos (US$ 4.34 billion), profits only amounted to 601 million pesos (US$ 662,530), due to the adjustment of figures due to hyperinflation in Argentina. Although the Milei government presumes that monthly inflation has slowed, the annualized data reached 289.4% in April.

However, Cencosud has also increased its participation in the Argentine market and they still trust that the opening of new stores will be productive in the long run --three stores of 7,100 square meters will be opened, belonging to the Jumbo, Easy and Vea chains.

The objective is to boost the company's profitability in a context where Milei's economic reforms hope to bear fruit for private investment. In fact, Rodrigo Larraín, general manager of Cencosud, assured that Argentina would probably see improvements "in the second half of the year, towards the fourth quarter."

For Chicoma, the Chilean consortium's policy is correct. “Cencosud sees the future panorama, not the immediate situation. At this time, investing is ideal, considering that President Milei's plan is the right one. In addition, low property costs are an attractive factor for large conglomerates.”

On the other hand, according to Christian Diez, researcher at the Center for Retail Studies (CERET) of the University of Chile, the adjustment or economic shock has affected Argentines' spending capacity. For example, the OECD has projected a -5.9% drop in private consumption in 2024. But the Chilean specialist qualifies these figures by saying that the situation is “depressed, but expectant.”

“By 2025, growth is projected in private consumption and investment, which means that the retail sector must face the current decline as something temporary and prepare for an expansionary period at the same time. That translates, for example, into not closing stores that could be viable with a better economic situation,” Diez declared for AméricaEconomía .


When tracing the route of the main factors that led to the retail crisis in Argentina, one factor stands out: the “Fair Prices” program. From November 2022 to December 2023, the Fernández government tried to contain the rise in the value of 2,000 essential products.

The strategy involved a pact of voluntary agreements with production and marketing companies. But the attempt failed to contain inflation, which by October 2023, already reached 140% year-on-year. And so, the “fair prices” remained just words and did not reach the shelves.

“They were coercive measures of political power on retail trade to try to artificially contain the rise in prices in the short term. These rise due to the inorganic issuance of money by a Central Bank, which is not eminently technical and independent of political power,” says Diez.

Likewise, the specialist from the University of Chile assures that the price agreements mainly affected supermarkets in the retail sector and were an important factor for the departures of Walmart and Casino. Although there were other companies such as Falabella, Nike, Under Armour, Alicorp, among others, that withdrew, despite not being affected by this program.

Of course, convenience stores have not been immune to the crisis either. “Compared to supermarkets, these types of stores serve a greater proportion of planned minor purchasing occasions, of lower volume and with a greater willingness to pay by time or proximity. I would expect greater drops in sales volumes, but with some protection with better margins,” reflects Diez.

Meanwhile, Chicoma considers that the price agreements are the tip of the iceberg in the crisis, adding that other causes, such as "restrictions on imports and low profitability" also influenced the aforementioned corporate retreat. Today, Milei's administration has introduced other measures to stimulate domestic consumption among Argentines. The “Simple Installment” payment plan can be named, which adds up to 12 interest-free installments for more than 30 economic items, including construction materials.

“This plan has added to the growth in the use of credit cards in Argentina for purchases, which according to First Capital Group, reached US$243 million in April. The cards are easier to handle, since they allow you to pay in dollars,” explains Chicoma.


Recently named as the official sponsor of the 2024 Copa América, Mercado Libre has a lot to celebrate outside its original borders. The Argentine e-commerce platform , which operates in 18 Latin American countries, amassed a 59.2% increase in financial results in Mexico, as well as 56.9% in Brazil.

“More than a phenomenon, we would have to analyze the economic stability and growth of electronic commerce in these countries, with an average of 14% in Mexico and 4% in Brazil, according to NIQ,” notes Chicoma.

In contrast, in his native country, there was a drop of 21.9% during the first quarter of 2024. For Juan Martín De La Serna, CEO of Mercado Libre in Argentina , the scenario is difficult, but he is confident in the positioning of the e-commerce as a sales channel today.

“We are not immune to the decrease in activity in consumption and retail at a general level, and that is why we seek to be very close to both consumers and businesses, to continue being the most convenient option for buying and selling. Even in this challenging scenario, we see that e-commerce continues to consolidate itself as a preferred channel over physical stores thanks to a competitive price offer and a wide variety of products,” said De La Serna for AméricaEconomía .

It should be noted that the organization of the Hot Sale 2024, between May 13 and 15, brought benefits for Mercado Libre and other Argentine e-commerce players. There was an year on year growth of 301% in revenue, in addition to the participation of nearly 1,000 companies, with more than 10 million products purchased (50% up from the previous edition.)

In addition, 5.1 million purchase orders were placed, which is equivalent to an increase of 23.3%, according to figures from the Argentine Chamber of Electronic Commerce (CACE).

From his perspective, De La Serna believes that Mercado Libre's performance was successful. “The recent edition of the Hot Sale was an example of the eagerness of our users to take advantage of the good experience on our platform: more than six million products were sold with more than 15,000 SMEs that participated, along with more than 1,000 stores officials and big brands from the main categories.”

For his part, Christian Diez is not surprised that Mercado Libre's fintech sector has strengthened, because the devaluation of the Argentine peso leads to the use of credit cards, with the already mentioned preference for the dollar. In fact, the CACE assured that the average sales ticket was US$76 per person.

“The fintech sector is invariably tied to e-commerce , and we see this mainly through sales platforms such as Tienda Nube or Empretienda and the use of digital payment markets such as Ualá, GOCuotas or Lyra and even Mercado Libre is testing the “possibility of implementing your Mercado Pago credit card beyond points of sale,” Diez clarifies.


Looking abroad, Mercado Libre seeks to expand its operations through its confidence in the two largest economies in Latin America to overcome the impasse caused by the Argentine crisis.

“In Brazil and Mexico alone we announced investments of US$ 4.7 billion and US$ 2.45 billion, respectively, for this year, aiming to strengthen the areas of technology, logistics, e-commerce and digital banking, as well as marketing and advertising. The projected figure includes the allocation of capital assets and a portion of its strategic operating expenses associated with the development of the company's business priorities for the year,” says De La Serna.

In turn, the CEO projects the recruitment of more than 18,000 employees during 2024 to strengthen the IT and logistics teams. From this conglomerate, some 1,800 will be assigned to strengthen the operations capacity in Argentina. “That said, we do not foresee major losses in the country,” he assures.

On the other hand, Christian Diez does not believe that large retail chains like Falabella will return to Argentina overnight. "It is very unlikely. The decision to leave is very costly and takes into account different scenarios, as well as its long-term projection. Greater economic freedom is not guaranteed; it will depend on the evolution of the approval rate of the current government and whether these measures transcend beyond the presidential term,” he highlights.

While Chicoma agrees with the idea that retail giants would only change their exit plans if they “observe guarantees of economic stability.” This is how the future of an industry, its thousands of jobs and the cost of living of Argentines not only depends on the trust that Milei generates, but also on whether the economic plan survives the controversial president's passage through the Casa Rosada.


Sergio Herrera Deza