Bolivia retail is underdeveloped when compared to its neighbors, however, the country presents qualified opportunities to savvy investors. Bolivia retail has been benefiting from the country’s solid macroeconomic finances, which have been posting solid gains in recent years thanks to strong terms of trade and prudent policies. Nevertheless, Bolivia remains South America’s poorest country, with about 60 percent of the population of 9.1 million mired in poverty. Under President Evo Morales, the country has seen a stretch of economic growth unrivaled in Bolivia’s turbulent recent history, largely a result of high prices for hydrocarbon exports and prudent economic policies. Even after spending heavily on cash payments to poor families, Mr. Morales’s government has still maintained a budget surplus. The external environment has presented Bolivia with a unique opportunity to initiate a period of sustained growth above historical rates. GDP is projected to reach about 4.5% in 2011, in line with 2010, according to the IMF. Under this positive economic framework, Bolivians have benefited from higher per-capita incomes ($1,800 – $3,100), depending on the calculation method, and are providing the conditions for retail sector growth opportunities.
Euro Monitor reports that Bolivia’s economic stability in 2010 encouraged retailers to continue investing in the country. The most notable investments are being made by hypermarket / supermarket competitors such as Hipermaxi SA , Ketal SA, Fidalga, IC Norte, in cities such as La Paz, Santa Cruz and Cochabamba. The larger formats and increasingly diverse product offerings such as as clothing, footwear, housewares, consumer electronics and appliances pose a threat to non-grocery retailers. Hypermarkets and supermarkets control 72% of Bolivia’s formal retail sales. New shopping center projects include Mega Center in La Paz and upcoming Ventura Mall in Santa Cruz who are attracting international brands such as Subway, Burger King, Mr. Pretzel, etc. A cautionary tale for international QSR brands interested in Bolivia is the case of McDonald’s failure in the Andean nation. The fast food sector, Bolivian hamburger chain Toby, Pollos Copacabana, and Eli’s Pizza rank at the top in QSR consumer preferences.
Retailers biggest challenges in Bolivia are contraband and informal retail, which cause employment losses, tax evasion, and social implications.The government showed its intent to fight against contraband during 2010. Contraband currently represents over US$1 billion per year. The authorities started restructuring the Customs Agency (ANB- Aduana Nacional de Bolivia) and drafted an Anti-Contraband Law which toughens sanctions on people involved in this illegal activity. Nevertheless, it is expected that it will take years for the regulations to be fully applied given the high number of people involved in this illegal activity. Informal retail remains the main threat to formal retail growth and will continue to lead formal retail retail in Bolivia for sometime.
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