Private banks have been players in the local market since banking laws changed in the 1990s, but it’s only in the last few years that they’ve been making a play for the Costa Rican market, swallowing up local brands like Interfin and running expensive ad campaigns.
Wal-Mart. Citibank. PriceSmart. Every year, the list of heavy hitters in Costa Rica looks less Costa Rican, more multinational.
But some locally owned companies are stepping up to the foreign competition. Businesses in the supermarket and banking sectors are forging alliances to take on the likes of foreign-owned Wal-Mart and HSBC.
In retail, the movement is regional, with 16 supermarket chains across Central America – including Costa Rica’s Auto Mercado and Perimercados – now forming Supermercados de Centroamérica y Panamá (SUCAP).
In banking, it’s local, with four feisty cooperatives joining Banco Popular to create a network that will allow them to cut back office costs and, eventually, share services.
“In the last few years there have been giants entering into both sectors,” said Henry Mora, dean of the National University’s social sciences department, who called the new alliances a “natural response.”
No one is talking about mergers. Instead, the associations will be about sharing best practices, cutting costs and working together to create economies of scale, company leaders say.
“This is a way of examining how to join forces to compete against other global-scale companies that are in the market,” said Diego Alonzo, vice president of sales for Auto Mercado.
Alonzo and others in the supermarket business in Central America likely felt a chill in 2005, when they heard Wal-Mart had purchased a minority stake in the Central America Retail Holding Co.
One year later, the retail giant had increased its stake to 51%, effectively giving it control over the company’s 447 stores in Central America. That includes the 145 Más x Menos, Palí, Hipermás and Maxi Bodega stores in Costa Rica, which together make up 32% of the total.
Carlos Lemus, executive director of the new supermarket alliance, said from SUCAP’s headquarters in El Salvador that the strategic alliance was six months in the making.
“The decision was that due to this being a much more globalized economy, we could take advantage of that energy by working together,” Lemus said.
The 16 chains owned by nine companies still don’t quite measure up to Wal-Mart Central America’s might, but their combined 279 stores will give them greater heft in the market, allowing them to share trade secrets, training and, in some cases, suppliers.
Costa Rica’s small-time financial institutions, meanwhile, have a big challenge in front of them too. They now have to compete with global financial giants, such as HSBC, Scotiabank and Citibank, on their home turf.
It’s been enough to give the country’s three public banks a scare, to the point that last month Banco Nacional, Banco de Costa Rica and Bancrédito got together to ask the government to consider allowing them to merge.
Four of the country’s cooperatives, led by the public-private Banco Popular, have taken a different path, forming an alliance that will start with cutting back office costs and end with an integration of services.
“It’s a normal reaction to competition,” said Banco Popular CEO Gerardo Porras, adding, “If the (private banks) hadn’t entered, we probably wouldn’t be thinking about this.”
Banco Popular – with its much greater resources and personal market niche – is heading up the alliance, with the idea being that the rest of the country’s three-dozen cooperatives are welcome to join when they wish.
To start, the network will focus on cutting costs. Porras gave as an example the community of Roble, in the Pacific province of Puntarenas, where five co-ops and a Banco Popular branch all do business.
“Let’s say every single one of us wants to send money to the office in Roble,”Porras said. “So each one of us pays, and it’s probably the same truck. They’re charging us five times.”
Other costs that could be shared include security and basic back office operations. Some two years down the road, the alliance will begin integrating services like credit cards and automatic teller machine networks, Porras said.
If all the other co-ops join the network, it would have 375 branches and be “the biggest network in the country,” Porras said.
“I think that one has to have these processes of integration,” said Francisco Montoya, manager of Coopealianza, one of the four co-ops to join the network. “The entry of the big worldwide consortiums definitely obliges us to do this faster.”