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In Developing Strategy, Walmart Plans a Carnival of Brazilian Growth

Walmart (WMT) is accelerating its investment in Brazil, planning to spend $1.2 billion to open 100 to 110 stores in 2010, according to reports that lead back to a statement made by Hector Nunez, who heads the retailer's operations in the country.

Developing countries have figured more prominently in Walmart's overall strategy in recent years, and Latin America has been involved in several Walmart moves recently. The company became the exclusive retail distributor of FIFA merchandise for the 2010 World Cup, which gives it the right to sell goods tied to soccer's biggest event throughout its Latin American store system. That includes, in addition to Brazil, countries such as Argentina, Chile, Costa Rica, El Salvador, Guatemala, Honduras, Mexico and Nicaragua where soccer is a big deal.

Additionally, on Dec. 18, Walmart announced that it had named Eduardo Solórzano executive vice president, president and CEO of Walmart Latin America. Solórzano had been president and CEO of Walmart de Mexico.

Latin America fared better in the recession than some world regions, and, many of the continent's countries only suffered two quarters of decline. A large number of Latin American countries will see gross domestic product gains this year.

Brazil, the region's largest economy, has proven among the most resilient, with strong consumer spending helping pull it out of recession quickly. The country has a lot to recommend it going forward. The announcement that Brazil will host the 2016 Olympics -- coming after its capturing the 2014 World Cup -- is regarded as a business boon not only for it but all of Latin America. Multinationals such as Coca-Cola (KO) already are boosting investment in the region as a result.

Obviously, with its FIFA deal and store growth, Walmart is doing much the same. Yet, the company was paying close attention to Brazil long before the Olympic announcement. In August, 2008, Walmart announced it would invest a billion dollars to open 90 new stores in Brazil. The additional 90 locations were slated to drive the retailer's presence in the country to more than 400 stores. Brazil has enjoyed rising consumer incomes over the past decade and expanding credit accessibility, conditions that look to remain the case at least for the next several years. Since it withdrew from Germany a few years ago, Walmart has particularly focused on developing economies such as Brazil, Mexico, China and India for international growth. It also continues to flirt with a Russian initiative. The retailer has declined to open new markets in developed nations such as those in Western Europe, although it maintains a strong commitment to its operations in Britain. In Western Europe, sales growth is largely accomplished by tearing market share away from well-established retail companies such as Tesco (TSCO), Carrefour (CA), Ahold (AHONY), Aldi, Metro (MEO) and Auchan, all formidable competitors. In developing economies, Walmart locations compete against fewer stores that manage at a level of operational and technical sophistication comparable to its own. Additionally, developing countries such as Brazil demonstrated rapid economic growth before the recession, and they have the potential for more expansion in the recovery. That's the sort of tide that, as the saying goes, lifts all boats, and Walmart certainly will capitalize on the advantages regional currents provide.

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