The recession is taking a toll, as the wholesale chain Macro, one of the most significant players in the sector in the country, has announced its exit from Argentina, prompting the sale of its 24 branches.
The company, owned by the Dutch group HSV, has granted a sales mandate to an international bank operating in Argentina and begun negotiations with potential buyers, including competitors in the wholesale industry and supermarket chains. The total asset valuation is estimated at around 200 million dollars.
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Makro operates 24 wholesale supermarkets across ten provinces and competes with other national chains such as Maxiconsumo, Diarco, Vital, and Yaguar.
The chain commenced operations in Argentina in 1988, opening its first supermarket in Olivos, in partnership with businessman Francisco de Narváez, who at that time managed the Tía chain.
Previously, Makro had already reduced its footprint in Latin America by exiting markets in Peru, Venezuela, and Brazil.
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Difficult recessionary period
The announcement from the wholesale chain occurs amidst a concerning recession that affects various sectors of the economy, impacting not only consumers but also SMEs (reports estimate that over 10,000 businesses closed during the first eight months of the libertarian administration). This situation is mirrored in other critical areas like industry and construction.
In June, the manufacturing industrial production index (IPI manufacturing) registered a decline of 20.1% compared to the same month in 2023. The cumulative figure for January-June 2024 indicates a 16.1% decrease when compared to the same period in 2023.
SMEs warn of more closures this year
Moreover, the seasonally adjusted series index reveals a negative variation of 1.6% relative to May, while the trend-cycle series index shows a negative variation of 0.9% compared to the previous month.
Meanwhile, the Synthetic Indicator of Construction Activity (ISAC) indicates a 35.2% decline compared to the same month in 2023.
The cumulative total for the first six months of 2024, using the original series index, shows a 32.7% decline compared to the same period in 2023.
Additionally, the seasonally adjusted series index registers a positive variation of 2.7% compared to June, while the trend-cycle series index reports a decrease of 1.5%.
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The Impact of Makro’s Departure on Argentina’s Economy
The recession is taking its toll, as evidenced by the wholesale chain Makro announcing its exit from Argentina, putting its 24 branches up for sale. This significant decision by one of the country’s leading wholesale operators underscores the challenges facing businesses amid a turbulent economic environment.
Owned by the Dutch group HSV, Makro has initiated negotiations for the sale of its Argentine operations, enlisting an international bank to facilitate the process. With an estimated valuation of around 200 million dollars, potential buyers include other wholesale operators and supermarket chains eager to expand their market presence.
Current Economic Landscape in Argentina
Makro’s exit is set against a backdrop of deepening economic challenges in Argentina. The recession, marked by soaring inflation and diminishing consumer confidence, has had broad repercussions across multiple sectors, leading to the closure of over 10,000 SMEs (small and medium enterprises) in the first eight months of the current libertarian administration.
In the wholesale sector, Makro competed with national chains such as Maxiconsumo, Diarco, Vital, and Yaguar. Established in Argentina in 1988 in Olivos, Makro initially joined forces with business mogul Francisco de Narváez, who previously controlled the Tía supermarket chain. However, Makro has steadily decreased its footprint in Latin America, having previously divested its operations in Peru, Venezuela, and Brazil.
Economic Indicators: A Cause for Concern
The prevailing recession is evidenced by alarming statistics from various economic indicators:
- The manufacturing industrial production index (IPI) reported a 20.1% decline in June compared to the same month in the previous year.
- The cumulative index for January to June 2024 shows a 16.1% decrease compared to the same period in 2023.
- The Synthetic Indicator of Construction Activity (ISAC) reflects a concerning 35.2% drop compared to June 2023.
| Indicator | June 2024 Change (%) | First Half of 2024 Change (%) |
|---|---|---|
| IPI Manufacturing | -20.1% | -16.1% |
| ISAC Construction | -35.2% | -32.7% |
The Ripple Effect on Employment and Small Businesses
The departure of Makro is not just a loss for the wholesale sector; it signals broader concerns regarding employment and economic stability. With large corporations withdrawing from the market, the pressure mounts on small and medium enterprises that struggle to survive in a challenging economic climate. As unemployment rises, many families face economic hardship, exacerbating social issues.
Poverty and Social Challenges
According to recent reports, approximately 5 million pensioners and 8.6 million children in Argentina suffer from unmet needs, painting a grim picture of the socio-economic landscape. This situation is amplified by the challenges faced by pensioners, who are particularly vulnerable during economic downturns.
Such challenges underscore the importance of robust social policies to safeguard those most affected by the recession. The government’s inability to address these pressing issues has led to heightened social tension, further complicating the economic recovery process.
Strategic Options for Potential Buyers
As Makro seeks potential buyers for its operations, various options exist for interested parties:
- Expansion Opportunities: Established supermarket chains can leverage the acquisition of Makro branches to bolster their market positions and expand their customer base.
- Resource Optimization: Potential buyers can incorporate Makro’s supply chain efficiencies, ultimately leading to cost savings and enhanced competitiveness.
- Market Share Increase: By acquiring Makro, buyers can instantly increase their market share in the wholesale sector and engage new customer demographics.
- Real Estate Value: Makro’s existing locations, valuable real estate assets, can contribute to a buyer’s long-term strategic vision in key markets.
Conclusion
Makro’s exit from Argentina is emblematic of the broader economic challenges the country faces, signaling critical lessons about corporate sustainability amid recessionary pressures. The ripple effects of this departure will be felt not only within the wholesale sector but across the entire economy, highlighting the urgent need for comprehensive solutions to address the prevailing socio-economic crisis.
With the ongoing challenges, businesses and stakeholders must remain vigilant and adaptable to ensure resilience in the face of adversity. While uncertainty looms, potential buyers of Makro must strategically navigate the landscape to reinvigorate the market and drive sustainable growth in these trying times.
Poverty: 5 million pensioners and 8.6 million children live with unmet needs
Stunned by defeats, the Government is immersed in reproaches and settling scores
SMEs warn of more closures this year
