Chilean retailers are experiencing a substantial surge in earnings due to an influx of Argentine tourists, thanks to favorable economic policies under President Javier Milei. This trend has led to significant revenue increases for major companies, and a strong outlook for continued growth as Argentina’s economy stabilizes.
The recent surge in Argentine tourists has positively impacted retail earnings in Chile, largely attributed to the policies of Argentine President Javier Milei. An overvalued peso has prompted a significant influx of Argentine shoppers into Chile, driving sales at retail giants such as Falabella SA, Cencosud SA, and Latam Airlines Group SA. The increase in cross-border shopping has resulted in notable sales growth for these companies, presenting a favorable outlook for the retail sector.
Milei’s administration has effectively limited the decline in the peso, enhancing Argentines’ purchasing power abroad and leading to a remarkable rise of over 2 million Argentinian visitors to Chile in the past year, a 73% increase from 2023. Notably, over 500,000 Argentinians crossed the border in January 2024 alone, marking a 152% growth compared to the previous year.
Marisol Fernández, chief sustainability officer at Cencosud, indicated that tourism now accounts for 30% of total revenue in shopping centers near the Argentine border. Falabella reported a remarkable 21% increase in same-store sales in the fourth quarter, fueled by the tourism boom, while Cencosud’s Chilean operations witnessed a revenue increase of 5.4% and Latam Airlines experienced a 4.4% revenue enhancement.
As a reflection of their enhanced sales, stocks of Falabella surged 58% over the past year, while Cencosud and Latam Airlines followed suit with increases of 50% and 30%, respectively. Retailer Ripley is expected to report similar revenue trends in their upcoming earnings announcement.
The Argentine peso has depreciated over 20% in the last year against an 84% rise in consumer prices, improving the prospects for Chilean retail. The Milei administration has also lifted restrictions on foreign currency usage, facilitating more outbound spending by Argentinians.
Looking ahead, Francisco Irarrázaval, CEO of Falabella’s retail unit, anticipates continued growth driven by Argentine tourism, especially during the summer peak season. His statements reflect a positive sentiment as the year progresses, despite the approaching end of the Southern Hemisphere summer and the return of vacationers.
As Argentina’s economy gradually improves, it is expected to positively influence local consumer spending. According to Roberto Alvo, the CEO of Latam Airlines, “Argentines love to travel.” Additionally, operations by Cencosud, Falabella, and Embotelladora Andina in Argentina are projected to benefit from the anticipated economic recovery.
Citi analysts, including Carolina Zelaya, noted in a recent report that improved consumer confidence and expectations of an economic rebound in Argentina for 2025, alongside potential capital control relaxations, may significantly enhance prospects for Chilean firms with substantial operations in the country.
The boost in retail earnings for Chilean companies due to increased Argentine tourist spending illustrates the interconnectedness of regional economies. With policies under President Milei leading to motivated consumerism and a favorable exchange rate, companies like Falabella and Cencosud are experiencing pronounced growth. This trend, alongside expectations of economic recovery in Argentina, suggests a sustained improvement in performance for Chilean retailers.
Original Source: www.batimes.com.ar
