Surging Argentine Tourist Numbers Boost Chilean Retail and Airline Earnings

Chilean retailers and airlines are benefiting from an influx of Argentine tourists, driven by an overvalued peso and government policies under President Javier Milei that improve purchasing power. Companies like Falabella and Cencosud report significant sales increases, while stock values rise accordingly. The trend is expected to continue as Argentina’s economy recovers.

Chilean retailers and airlines are witnessing increased earnings, largely attributed to Argentine tourists. The overvalued peso in Argentina is prompting shoppers to traverse the Andes for goods in Chile. Notable companies such as Falabella SA, Cencosud SA, and Latam Airlines Group SA reported growth in sales during the final quarter of last year due to this influx, as Argentines purchased everything from home appliances to clothing.

The administration of Argentine President Javier Milei has managed to restrict the peso’s decline in both official and parallel markets, thereby supporting Argentine purchasing power abroad. This resulted in over 2 million Argentines visiting Chile last year, a significant increase of 73% compared to 2023, marking the highest number since 2018. In January alone, over 500,000 crossed the border, reflecting a 152% increase from the previous year.

Marisol Fernández, Cencosud’s chief sustainability officer, noted that “thirty percent of total revenue is coming from tourism in the shopping centres that border Argentina” during a recent earnings call. Falabella’s retail segment reported a 21% rise in same-store sales for the last quarter, driven by tourism. Meanwhile, Cencosud’s Chilean operations saw a revenue increase of 5.4%, and Latam Airlines reported a 4.4% revenue gain.

The rise in sales has positively influenced stock performance, with Falabella’s shares soaring 58% within the last year, Cencosud’s shares rising by 50%, and those of Latam Airlines increasing by 30%. Retailer Ripley is also expected to report similar revenue trends. Over the past year, the Argentine peso depreciated by over 20%, markedly less than the 84% inflation hike. Restrictions on spending abroad have been eased under Milei’s leadership, encouraging foreign currency credit card usage.

As the first quarter commenced, tourist numbers continued to bolster growth. Francisco Irarrázaval, CEO of Falabella’s retail sector, expressed optimism for 2025, anticipating further impacts from Argentine shoppers as the summer season progresses. Local businesses may maintain momentum even after the summer, as Argentina’s economy gradually recovers, bringing additional financial relief to consumers.

Latam Airlines’ CEO Roberto Alvo highlighted the strong travel inclination of Argentines, stating that the ongoing recovery is beneficial for local enterprises. Companies including Cencosud and Falabella, which operate in Argentina, could also reap rewards from an improving economy there. According to Citi analysts, including Carolina Zelaya, positive consumer sentiment and the potential lifting of capital controls may further enhance prospects for Chilean firms heavily involved in the Argentine market.

In summary, the surge in Argentine tourists visiting Chile has significantly bolstered the earnings of Chilean retailers and airlines. Government actions to stabilize the peso and increase purchasing power have fostered this tourism boom. Retailers like Falabella and Cencosud are directly benefiting, seeing substantial increases in sales and stock value. Additionally, the potential recovery of the Argentine economy presents further opportunities for growth for Chilean firms.

Original Source: www.batimes.com.ar