Chilean Companies Are Cashing In On Peru's Boom

Retail: Chileans cash in on consumer boom

By Naomi Mapstone

Chilean retailers used to say Peru reminded them of Chile in the 1990s. Lately, Peru and its population of 29m has been looking more like Chile in the subsequent decade.

Surging domestic demand, the rapid expansion of regional markets and new social policies to alleviate poverty are expected to propel Peru’s retail sales to $48.8bn by 2014, up 22.1 per cent from this year, according to Business Monitor International.

“Private consumption will be the main driver of Peruvian growth in 2011 and 2012, supported by increased access to consumer credit and a rise in social security payments,” BMI says in an August report.

Chilean department stores, supermarket chains and mall operators already have footholds in Lima, where a third of Peru’s population lives.

Ripley and Saga Falabella dominate the department store sphere, which includes a thriving credit card financing market. They face increased competition from fellow Chilean group Cencosud, which announced last month it would invest $70m in 10 department stores by 2014. The company already operates Wong, the upmarket Peruvian supermarket chain, after a 2007 takeover.

Meanwhile, Saga Falabella is investing $100m in its department stores, its Tottus supermarkets and Sodimac home improvement centres. Ripley is pouring $56m into eight new department stores in the next two years.

Chile’s SMU Group joined the rush in January, snapping up supermarket operator Alvia, which has 11 stores in Peru.

Both retailers and mall operators, including Parque Arauco and Mall Plaza, are looking beyond Lima to booming regional centres such as Ica, Piura, Arequipa and Trujillo.

Forum, a Chilean car loan company, has sized up the buying power of Peru’s growing middle class and announced a $48m investment in the market.

New-car sales tripled between 2006 and 2010, and Peru’s automotive association is forecasting 170,000 sales this year after the signing of free- trade agreements with Japan, China and the US significantly lowered the tax on imports.

The growing number of Peruvians with the means to travel has also cemented the commitment of LAN, the Chilean flagship carrier, to its Latin American hub. Over the next five years, LAN will invest $700m in Peru, including the construction of a corporate headquarters.

Copyright The Financial Times Limited 2011. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.