Retail Powerhouse

Rising local interest rates and shockwaves from the global financial crisis likely mean that Brazilian supermarket sales will decline in 2009, according to a top official at Brazil’s Supermarkets Association, or Abras.

Supermarket sales have been growing at breakneck speed over the past year amid robust domestic growth and expanding credit availability. Abras forecasts sales will grow 8% in 2008.

“But we won’t manage to maintain that pace of growth in 2009,” said Sussumu Honda, Abras’ president, at a press conference in Sao Paulo on Tuesday.

He noted that Brazil’s banking system remained solid in the face of the crisis that hit U.S. banks but the country won’t be immune from the real economy fallout.

Meanwhile, the Brazilian Central Bank has been raising interest rates this year and this will start clipping demand in the future, said Honda.

The benchmark Selic interest rate currently stands at 13.75% after starting the year at 11.25%. According to a central bank market survey, the rate is expected to reach around 14.50% by the end of the year.

“Revenues are currently being driven by rising real incomes among Brazilians, which is going directly into consumption. This trend could turn with greater restrictions on credit,” he said.

In the first eight months of 2008, Brazilian supermarket sales were up 9.4% compared with the same period of 2007.

Brazil’s largest grocers are Companhia Brasiliera de Distribuicao (CBD), or CBD; France’s Carrefour SA (12017.FR); and U.S. retail titan Wal-Mart Stores Inc. (WMT). French retailer Casino Guichard Perrachon SA (12558.FR) owns a 35.3% stake in CBD.