The Dallas Morning News
Tuesday, November 9, 2004

Welcoming Wal-Mart to Mexico

Despite protests, millions flock to Mexico's No. 1 retailer

By BRENDAN M. CASE / The Dallas Morning News

SAN JUAN TEOTIHUACÁN, Mexico When Wal-Mart de México SA began building a Bodega Aurrerá supermarket near two revered ancient pyramids, outraged activists rose to defend the hallowed ground.

Now locals are flocking to the recently opened supermarket, which is part of a Mexican chain that Wal-Mart Stores Inc. acquired in 1997.

"Almost everybody is in favor of the store because it has more products at lower prices," said Evangelina Enciso, 26, a graphic design student who previously had to travel 45 minutes by bus to the nearest supermarket. "We also need the jobs."

Mexican protesters have fought the expansion plans of U.S. multinationals from Wal-Mart to Costco Wholesale Corp. to McDonald's Corp. But the Teotihuacán skirmish spotlights another side of the battle: In a nation starved for jobs and strangled by high prices, some Mexicans think they need more Wal-Marts, not fewer.

Millions of them are voting with their wallets. Wal-Mart is now Mexico's largest retailer, with sales of $10.6 billion in 2003, and its largest private-sector employer, with 105,000 on the payroll. And the rest of Mexico's retail industry is rushing to adopt many of Wal-Mart's cost-cutting techniques.

"Wal-Mart has changed the way goods are sold," said José Alberto Galván, a financial analyst at BBVA Securities in Mexico City. "It greatly lowered costs with its centralized distribution and systems technology. Now everyone else is adopting similar practices."

On the flip side, Wal-Mart's growth has put countless small-time merchants out of business. That trend seems sure to continue as Wal-Mart moves into smaller towns such as San Juan Teotihuacán, a burg of 60,000 about 30 miles from downtown Mexico City.

The nearby Pyramid of the Sun and Pyramid of the Moon, which are about 2,000 years old, figure among Mexico's finest pre-Columbian treasures. In town, small shops and corner stores sell fruit, vegetables, meat and bread not to mention paint, tires, car batteries, motor oil, furniture and sheet glass.

Locals say prices are steeper there than in big supermarkets. Merchants say the opening of Wal-Mart's Bodega Aurrerá will devastate the local economy.

"San Juan lives off small-time commerce," said Consuelo Martínez, 68, who sells women's clothing from a small storefront. "I'm going to close my shop. There's no sense in paying rent when the new store is going to take all my customers."

Rapid growth

Wal-Mart opened a Sam's Club in Mexico City in 1991 its first foray outside the United States. It became the largest retailer in Mexico in 1997 when it acquired a controlling stake in Mexico's Cifra SA.

Mexico now ranks as the Arkansas-based company's third-largest market after the United States and Great Britain.

Wal-Mart de México's sales last year surpassed the combined sales of its three closest competitors, Grupo Gigante SA, Controladora Comercial Mexicana SA and Organización Soriana SA.

Wal-Mart has been opening new stores more quickly than its rivals. And it's been boosting sales at existing stores more effectively.

It now operates nearly 700 stores in more than 60 cities nationwide. More than half its stores are supermarkets. The rest are VIPS restaurants and Suburbia department stores.

More competition

Supermarkets now engage in ferocious competition after years of clubby coexistence, openly comparing their prices with those of their competitors on poster boards and supermarket shelves.

Moreover, Gigante, Comercial Mexicana and Soriana agreed last year to cut costs by combining purchasing, warehousing and distribution operations. While Mexico's antitrust agency limited the alliance's scope, the arrangement is still expected to generate some savings for consumers.

The bottom line: A basket of food and groceries typically costs about the same as in the United States. By contrast, Mexicans typically pay more than Americans do for everything from telephone calls to banking services to computers.

Such savings go a long way in places such as San Juan Teotihuacán, where the minimum wage is lower than in big cities.

"Why do people in a town like San Juan Teotihuacán have to pay more for things than the people who live in Mexico City, Guadalajara or Monterrey?" asked Raúl Argüelles, a spokesman for Wal-Mart de México.

Facing opposition

Wal-Mart's critics aren't buying any of it.

Emmanuel D'Herrera, a 56-year-old former diplomat, once left his son's umbilical cord atop the Pyramid of the Moon in hopes that the boy would feel spiritually connected to the ruins. Mr. D'Herrera is now a thorn in Wal-Mart's side.

Mr. D'Herrera held a 12-day hunger strike, shedding 17 pounds from his already spare frame. He said Wal-Mart's building permits contained irregularities, a charge that Wal-Mart denied. The record has not been made public.

And he argued that Wal-Mart was gobbling up a priceless patch of Mexico's past. The company's construction workers found a small altar and other minor artifacts, which they turned over to Mexico's National Institute of Anthropology and History. Mr. D'Herrera wondered if other artifacts were waiting to be found.

"This is the only inheritance I can leave my kids, and it's one of the few places that reinforce our national identity," he said. "We want to rescue what globalization has taken away from us."

The International Council on Monuments and Sites, a Paris-based preservation group known as Icomos, said the supermarket's construction would not cause damage.

The store is hardly the closest establishment to the pyramids. It lies in a budding commercial zone that includes a hotel, a small Ford Motor Co. dealership, an electronics retailer and a mattress store. The businesses are barely visible from Pyramid of the Sun's summit.

Still, Mr. D'Herrera has attracted strong support from local shop owners and a star-studded cast of Mexico's artistic and intellectual luminaries.

People who have signed letters against Wal-Mart include cookbook author Diana Kennedy, painters Leonora Carrington and Francisco Toledo, writers Carlos Monsiváis, Elena Poniatowska, Homero Aridjis, Laura Esquivel and Guadalupe Loaeza.

Some are veterans of efforts in 2002 to stop a McDonald's in the southern city of Oaxaca, and a Costco in a town near Mexico City.

Will they survive?

Back in San Juan Teotihuacán, it's too soon to say how many small shop owners will survive the arrival of Bodega Aurrerá.

Retail experts said shoppers might save up to 20 percent by going to the supermarket. But a few locals said they could find some goods more cheaply elsewhere.

Then there are the new jobs. In the United States, Wal-Mart has received withering criticism for paying low wages and hiring contractors that employed illegal immigrants. In San Juan Teotihuacán, Bodega Aurrerá got 2,000 applications for its 185 positions.

"Right now, many young people end up going to Mexico City for work, and some go to the United States," said Agustín Veloz, 60, a shop owner. "In this town, what we need the most are jobs."