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Wal-Mart Invades, and Mexico Gladly Surrenders
by Tim Weiner
December 9, 2003

MEXICO CITY, Dec. 5 - The company that ate America is now swallowing Mexico.

Wal-Mart, the biggest corporation in the United States, is already the biggest private employer in Mexico, with 100,164 workers on its payroll here as of last week. Last year, when it gained its No. 1 status in employment, it created about 8,000 new positions - nearly half the permanent new jobs in this struggling country.

Wal-Mart's power is changing Mexico in the same way it changed the economic landscape of the United States, and with the same formula: cut prices relentlessly, pump up productivity, pay low wages, ban unions, give suppliers the tightest possible profit margins and sell everything under the sun for less than the guy next door.

"This is the game that Wal-Mart has played in the United States," said Diana Farrell, director of McKinsey Global Institute, a policy research group run by the international business consultancy McKinsey & Company. "They've changed the name of the game in Mexico."

In the United States and Western Europe, Wal-Mart has been accused of driving down wages, introducing cut-throat business practices and bankrupting local companies.

But in Mexico's dreary economy, foreign investment, especially American investment, is about the only bright light, and many Mexicans know it. Cries of economic and cultural imperialism, rampant 10 years ago, when the North American Free Trade Agreement took hold, are more muted now.

"Part of globalization is adopting the methods and customs of another country," said Francisco Rivero, an economic analyst in Mexico City.

Though it came to this country only 12 years ago, Wal-Mart is doing more business - closing in on $11 billion a year - than the entire tourism industry. Wal-Mart sells $6 billion worth of food a year, more than anyone else in Mexico. In fact, it sells more of almost everything than almost anyone. Economists say its price cuts actually drive down the country's rate of inflation.

Last year, 585 million people - nearly six times the population of Mexico - passed through its check-out lanes. With 633 outlets, Wal-Mart's Mexican operations are by far the biggest outside the United States.

Its sales represent about 2 percent of Mexico's gross domestic product - almost the same as in the United States. Analysts say it now controls something approaching 30 percent of all supermarket food sales in Mexico, and about 6 percent of all retail sales - also about the same as in the United States.

Though Wal-Mart is not the only game in town, it is the biggest, and its bigness is crushing its supermarket competitors. Its methods are creating "a radical change" in the way business is done here, Ms. Farrell said.

"Wal-Mart has changed the retail market in Mexico," said Raúl Argüelles, a Wal-Mart vice president in Mexico City. "Every store manager has authority to lower prices if he sees the store across the street selling for less. If you have to lower the price, you lower it."

For Mexicans trying to compete with Wal-Mart, a new business culture is emerging, based on those hard-nosed, sometimes cut-throat tactics. For Mexicans with money to spend, a new consumer culture is rising, along with the sales of McDonald's hamburgers and Domino's pizzas (the three favorite toppings here are jalapeño peppers, ham and pineapple).

The marketplace is making Mexico look more like the United States, like it or not.

"From the commercial point of view, it's a total convergence," said Luis de la Calle, who was a chief Nafta negotiator. "If you go to a supermarket in Mexico, the type of products, the service they give you, it's just like you find in the United States or Canada, in terms of variety, quality and price."

Wal-Mart shoppers here have become attuned to the company's smiley-face logo and its mantra of "Everyday Low Prices." At a Mexico City shopping center, Plaza Tepeyac, José Carrillo, 36, wended his way through the aisles on a weekday morning, admiring how neatly the merchandise was displayed.

"Sometimes I go to the street markets and sometimes I come here," said Mr. Carrillo, an administrative aide, who lives three blocks from a Wal-Mart. "Sure, I know Wal-Mart is a multinational company, but what are you going to do? That's globalization, and Mexico has to play the game, right? Maybe some of the profit leaves Mexico, but Mexico gets back some foreign investment, right? That's how things work. It doesn't matter to me if I'm buying from a multinational company, as long as they give me what I want."

Wal-Mart opened its first American store in 1962 and started its international expansion in 1991, when it began to build and buy its way into Mexico. Half its Mexican operations now are here in the capital, the other half in cities across the country, from Tijuana to Cancún.

Its 81 Wal-Mart stores and 52 Sam's Club outlets now ring up close to $6 billion a year. Annual sales at its Superama and Bodega supermarkets approach $4 billion. Wal-Mart also runs 52 Suburbia department stores and 267 Vips restaurants, with close to $1 billion a year in sales.

Wal-Mart has also become the largest retailer in Canada, and has outlets in Argentina, Brazil, Germany, South Korea, Puerto Rico and Britain. The global expansion has helped make it the world's biggest company in terms of revenues, with $245 billion in sales last year - a sum greater than the economies of all but 30 of the world's nations. Nowhere outside the United States are its stores as numerous as in Mexico, where the scope and scale of its operations have grown to resemble its dominion in the United States.

Wal-Mart says that it treats its Mexican employees so well that the workers want no union, and that it pays its workers better than do its Mexican competitors.

However, in the United States, a unionized supermarket worker makes, on average, about $19 an hour. At Wal-Mart, where there are no unions, that worker makes about $9 an hour. In Mexico, for a newly hired Wal-Mart cashier, the pay stub reads about $1.50 a hour.

www.nytimes.com/2003/12/06/international/americas/06MEXI.html?ex=1 071735162&ei=1&en=34a070f7bf8b9a90

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