The Tribune

EDITOR, The Tribune.

Kindly allow me space to reply to Richard Coulson’s February 25 letter to the editor, and to the public at large, with further insight on why Wal-Mart or a similar company entering the Bahamian market is not a good thing for the country.

Studies on the subject have been conducted over the last decade or more, with most research level institutions (Cornell University, University of Oxford, University of Illinois Chicago, Hunter College New York, etc.) leaning to the argument that Wal-Mart hurts more than it helps small economies/communities. I should note that Wal-Mart has also released its own study of how Wal-Mart stores help in small economies, stating only two, highly-contested benefits as the impetus for their argument.

While Mr Coulson used the developing country, Mexico, as an example with which to compare the potential positive influence of Wal-Mart in the Bahamas, on the Bahamian economy, respectfully, this comparison is not a good one for numerous reasons including the following:

1. Mexico has a population of 120+ million people; the Bahamas has 350,000+ people

2. The Mexican economy is the 11th largest in the world and exceeds US$2.4 trillion in GDP using Purchasing Power Parity ‘PPP’ (Source: OECD & CIA Fact Book)

3. Mexico is a country of heavy industry, including many manufacturers, and benefits from two-way trade in goods and services with the US to the tune of over $550 billion (2016)

4. Mexico is a net exporter of crude oil

5. Walmex has millions of customers in Mexico, and more than 2,000 store locations to supply its customers

6. Walmex’s annual sales exceed $25 billion, and are backed by its parent Wal-Mart with annual revenues of over $480 billion

7. Notwithstanding Walmex’s impressive commercial dominance in Mexico, the Pew Research Centre report on Mexicans living under the national poverty line, describes no reduction in poverty for the 10 years following Wal-Mart’s arrival in Mexico, with the World Bank’s 2016 estimate of persons living under the national poverty line at approximately 50 per cent.

Wal-Mart entered Mexico in 1991,and entered into a few joint ventures to include Mexican retailers Cifra and Aurrera. Shortly thereafter the company became known as Walmex. By 2001 Walmex is reported to have gained 46 per cent of Mexican retail market share (source, University of Oxford). Since inception, Walmex expanded its product and service offerings to include Bodega Aurrera (lower end grocery chain); Superama (basic big box store, without food); Walmex Supercenters (big box store, plus grocery store); Sam’s Club (bulk version of Supercenter); VIPs (restaurants); Suburbia (clothing); Banco Walmart (Commercial Bank); Farmacia de Walmart (Pharmacy).

A component of the accession to full World Trade Organisation (WTO) membership is the reduction of tariffs/Customs duties, so any local company like a Kelly’s, which was referenced by Mr Coulson, can come closer to competing with prices offered by a foreign-domiciled company like Wal-Mart. Other significant aspects of WTO membership include recourse to unfair trade practices of other countries, supporting a more ‘level playing field’ for trade/ business. While there are definite advantages to WTO membership, I believe “every” WTO member country - including the US, Canada, Germany and many others - negotiated various exceptions and/or concessions in an effort to protect areas of their economies. Provided WTO membership does not impose or invite the potential for economic and social deterioration, WTO membership can make sense to the Bahamas. A fundamental question as I see it is: “Are we prepared to replace the majority of our SMEs, which are the economic and employment engine of our economy, with a single mega-operator?”

There may be a handful of case studies which show Wal-Mart as having positive effects on the economies it enters, but those effects are owed mostly to the nature and large size of the economies. What appears as a recurring theme in the majority of studies analysing Wal-Mart’s impact on relatively small cities and townships - California, New York City, Chicago, North Carolina, Mexico, etc. - is that the smaller and more culturally unique the community or its economy is, the more negative the impact of the Wal-Mart store presence. The negative economic impact primarily, and repeatedly, includes mass local small business closures and reduced employment. Wal-Mart is very large by any measure, and in the Bahamas it would be one or two stores each employing a few hundred people, as opposed to many local smaller companies collectively employing a few thousand people.

One such study, produced in part by Cornell University and published in the Journal of Urban Economics, titled ‘The effects of Wal-Mart on local labour markets’, noted the following: In the US markets reviewed:

• “On average, Wal-Mart store openings reduced overall employment”.

• “Gross retail earnings in the county declined because of the Wal-Mart entry”.

• “In a review of a 43-year period, the study reported that employment levels in counties with a Wal-Mart were less than in those communities without a Wal-Mart”.

• “The study noted that Wal-Mart will place pressure on wages and cost of goods, with wage declines negatively impacting low-income families and, in turn, increasing the taxpayer burden as Government programmes must support a greater share of the population”.

• “The analysis revealed that Government tax receipts declined following Wal-Mart’s entry”.

Also, the point has been raised about selling the beauty or characteristics of our islands as tourism exports, but what do we anticipate as the obvious outcome if our islands lose the bit of character that still remains to transplanted, modular commercial programmes absent of our special and wonderful native idiosyncrasies? When visitors come to the Bahamas, they do not come here to shop at Wal-Mart or the ‘big box store’ from home; they come to shop at the quaint Bahamian stores, run and staffed by people whose passion and ownership is evident, and who can teach them about the culture and character of these islands.

Wal-Mart, in more than just a few studies, has been shown to reduce that character and culture of a community by altering the composition of the economy to eliminate small, local businesses. And, by hiring as few as possible on minimum wage, Wal-Mart will very likely reduce the level of employment in a small community. Providing fertile soil to launch young businesses is paramount. Our economic culture must serve to support small businesses. Small and Medium-Sized Enterprises (SMEs) are the lifeblood of our economy. SMEs presently provide the greatest employment in the private sector, and they are the engine of economic growth. Are we willing to compromise that very necessary feature of a flourishing economy?

The Bahamas continues to benefit from large, world-class resort investments, and we are very fortunate to have such partners. This form of foreign direct investment (FDI) is very different from that of a global retail giant operating in the Bahamas. The resort giant leverages our natural beauty and wonderful people in its efforts to import guests and export services. The global retailer, conversely, will derive its revenues from the pockets of Bahamians, and its market share will come from Bahamian businesses. Furthermore, a consequence of a transfer of business and income from local firms to the likes of a Wal-Mart will be the repatriation of money which would have historically remained in the Bahamas and been reinvested in the local economy.

Going forward, any study on how appropriate a Wal-Mart store is for our country must include both the social and economic analysis, describing the effects on cultural elements of our society, which is really where the special value of our country lies. The takeaway is that big box retailers and other imported, big retail businesses may not just harm the economy; they will change the character of our country, the hope of our youth and, by extension, the wonderful character of the tourism product presently available to the world.

By no means should we aim to encourage small Bahamian businesses to stay small - Wal-Mart was once a small business, too. But to grow a local business in the Bahamas from the ground up is inherently different than implanting a large one from the outside. We need to figure out what works best for us, and we must continue to address our ease of doing business challenges. All businesses, all consumers in the Bahamas with a vested interest in economic survival must decide what we want our economic model to be, how we want our economy to grow and, perhaps most importantly, what we want to look like after all is said and done. Our collective approach to WTO membership should seek to discover, through earnest research, discussion and modelling, what the Bahamas’ WTO membership profile must be.

MIKE MAURA

Bahamas Chamber of Commerce and Employers Confederation (BCCEC) chairman

Nassau,

February28, 2018.