Surge in Argentine Tourists Boosts Chilean Retail and Airline Profits
Chilean retail and airline sectors are prospering from a significant influx of Argentine tourists, driven by an overvalued peso and favorable spending conditions. Major retailers reported substantial sales increases, notably Falabella with a 21% rise in same-store sales in Q4. Analysts predict ongoing benefits for these companies as Argentina’s economy recovers, enhancing local spending power.
The recent economic situation in Argentina has significantly influenced retail earnings in Chile. Due to an overvalued peso, Argentine consumers are crossing into Chile to take advantage of more favorable pricing on various goods. Major retailers such as Falabella SA, Cencosud SA, and Latam Airlines Group SA experienced increased sales in the last quarter, attributed to this influx of shoppers.
Argentine President Javier Milei’s efforts to stabilize the peso are credited with enhancing the purchasing power of Argentines abroad. The number of Argentine visitors to Chile surged last year, with over 2 million crossing the border, representing a 73% increase from 2023, marking the highest figure since 2018. A remarkable 500,000 Argentines alone traveled to Chile in January, a 152% rise compared to the previous year.
“Thirty percent of total revenue is coming from tourism in the shopping centres that border Argentina,” stated Marisol Fernández, Cencosud’s chief sustainability officer. This increase in tourism significantly boosted Falabella’s sales, which saw a 21% rise in same-store sales in the fourth quarter. Cencosud and Latam Airlines also reported revenue increases of 5.4% and 4.4%, respectively.
The share prices of these companies have mirrored this growth, with Falabella’s stock increasing by 58% over the past year, Cencosud by 50%, and Latam Airlines by 30%. Retailer Ripley is anticipated to show similar positive trends when it reports its earnings.
Over the past year, the Argentine peso has depreciated by over 20% in both formal and informal markets against a backdrop of soaring consumer prices, which increased by 84%. The Argentine administration has facilitated spending abroad by relaxing restrictions on credit card transactions in foreign currencies, further promoting cross-border shopping.
Looking ahead, CEO Francisco Irarrázaval of Falabella’s retail unit expressed optimism about continued tourist activity, particularly during the summer season. “We expect that to remain in the short term,” he remarked. Even as the Southern Hemisphere’s summer concludes, local companies in Chile may see ongoing benefits as Argentina’s economy gradually rebounds, leading to increased spending.
“Argentines love to travel,” noted Roberto Alvo, CEO of Latam Airlines, emphasizing the consistent demand from Argentine tourists. Additionally, companies like Cencosud, Falabella, and Embotelladora Andina are poised to gain from improving economic conditions in Argentina.
Citi analysts, including Carolina Zelaya, project that enhancing consumer sentiment and potential lifting of capital controls by 2025 could provide significant advantages for Chilean firms with substantial operations in Argentina, presenting potential for higher returns.
In conclusion, the surge in Argentine tourists is considerably benefiting Chilean retailers and airlines, leading to increased earnings and stock performance. The Argentine peso’s depreciation and President Milei’s policies to improve purchasing power have driven this cross-border shopping trend. Local companies are expected to continue capitalizing on improved economic conditions as Argentina emerges from recession, with further advancements predicted for the near future.
Original Source: www.batimes.com.ar
