The Contrasting Impact Of COVID On The World's Largest Retailers

To compete with LATAM small businesses Amazon expands its logistics centers, riding the e-commerce boom, while Walmart scales down

As Amazon scales up its logistics centers in Brazil and Mexico, Walmart scales down its Argentine stores, demonstrating COVID's contrasting impact on the world’s top retailers. Concurrently, central banks in LATAM are being tested by pandemic-induced inflation. For full details on news stories below and weekly insights delivered to your inbox, subscribe to our newsletter LATAM Weekly.

Amazon Competes With Small Businesses For Shopper Loyalty By Expanding Logistics Centers

Despite ranking as the world’s largest online retailer, Amazon competes with local small businesses for shopper loyalty as it expands operations in Brazil and Mexico.

Brazil: Amazon Makes Its Largest Investment To Expand Brazil Logistics Centers

Amazon opened three more logistics centers in Brazil increasing its logistics centers’ count in Brazil to eight. 

The expansion adds 75,000 square meters (807,000 square feet) of distribution space and is Amazon’s biggest since it began operating in Brazil in 2012 (Reuters). Amazon anticipates that the expansion will create 1,500 jobs directly. Amazon's Chief Executive in Brazil states that the country has the "fastest growth in Amazon Prime subscriptions."

Mexico: Amazon Invests $100 Million For Faster Delivery Services

Amazon also announced an investment of $100 million to open new warehouses in Mexico in order to offer faster delivery in the region. This includes its first shipping centers outside the populous Mexico City area. The new, local warehouses are intended to help small and medium sized businesses ship products faster at lower costs.

Walmart Assumes $1 Billion Loss After Sale of Argentina Business

While the world’s largest e-retailer expands in LATAM, Walmart, the world’s largest retailer, announced that it is selling its retail operations involving more than 90 stores in Argentina. The buyer is South American supermarket chain owner Grupo de Narváez. 

While Walmart did not disclose the size of the deal, it did state it would record about a $1 billion after-tax, non-cash losses related to the divestiture in its fiscal third quarter next year.

News of the sale comes as Argentina, stuck in a national recession since 2018, emerges from a sovereign default and grapples with a currency crisis. The government has been fending off talk that international firms are looking for the exit.

Pandemic-induced inflation: Mexico & Brazil
Inflation Pressures Due To High Food Prices In Mexico & Brazil (graphic via Bloomberg)

Rapid Inflation Tests Central Banks In LATAM’s Largest Economies

The top central banks in Brazil and Mexico, LATAM's largest economies, are being tested by rapid inflation due to the pandemic. The inflation, due to surging food prices,  defy central bank plans to support the pandemic-ravaged economies with low interest rates to help spur growth during the recession. Both countries continue to struggle with weak labor markets and uneven recovery. 

These trends may complicate a final rate cut in Mexico and prompt intensified caution for Brazilian policy makers who are desperate to avoid increases (Bloomberg).  .

Other Latin American countries remain protected from the inflation pain. Notably, Colombia’s consumer prices rose at the slowest pace in over six decades in October after a slump in demand. Ecuador also posted deflation this  month.

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