Colombia taxing capital
“One more item deserves mentioning, Colombia established a new tax on businesses based upon their level of equity which went into effect this calendar year”
Colombian peso devaluation had impact on financials
“As Jose Luis mentioned the extraordinary devaluation of the Colombian peso over the past several months has had a material impact on our financials in the most recent fiscal quarter. Given the level of merchandise that we import into our markets that is purchased in U.S. dollars, dramatic changes in currency can impact us in a number of ways all of which came into play in Colombia in Q2.”
Merchandise purchased in US dollars, payment due in local currency opens to exchange rate risk between time of order and payment
“When imported merchandise’s purchased, the liability is incurred in U.S. dollars. At the time payment is due, it is satisfied with local currency and therefore subject to the fluctuating exchange rate between that currency and the dollar.
During the first quarter and extending into the second quarter, a very large volume of U.S. value merchandise and fixed asset shipments were received by Colombia in advance of and during the initial opening of the three new warehouse clubs. This created large U.S. dollar liabilities which upon later settlement at a weaker Colombian peso resulted in realized currency losses.”
If you’re taking the long view in business, sometimes you have to take short term pain to maintain your position
“So there were so many fluctuations that we would keep bringing merchandise at different cost level. So it was little bit hard to in the second quarter in particular to even price merchandise them but we believe that definitely given our long-term view in Colombia the most important thing for us is try to be more reasonable with price increases and obviously be there for our members to sustain the long-term position.”
This is an opportunity to continue to look for places to grow
“on Colombia probably that currency concerns us but that doesn’t change our view of a market that has a lot of opportunity long-term.
So the initial results are encouraging obviously since we started in Colombia, we knew it wasn’t going to be without challenges. And I believe that this is good opportunity for us to keep looking for opportunities to grow there definitely the in particular the Bogota in cities are big cities where we still see opportunities for us.’
It takes people about a year to readjust after the currency devalues
“Assuming it doesn’t keep moving or it doesn’t goes the other way but I think it’s obviously very hard for us to tell but we believe that within a year timeframe people get adjusted. They just kind of realize that the new currency and that they go back to normal spending. So that is when we will probably be considering, I guess the normal condition.”
Definitely see an opportunity in buying land
“definitely we see the opportunity of buying land because all the opportunities are in all the land is quoted in pesos. We definitely depend on getting permits and getting through all those processes before acquiring land but as I mentioned we haven’t changed our position in Colombia.”