Eduardo Solorzano

President, Wal-Mart Mexico

Remarks prepared for the Americas Competitiveness Forum

INTRODUCTION

THANK YOU LUIS ALBERTO FOR THAT KIND INTRODUCTION. I APPRECIATE THE OPPORTUNITY TO JOIN IN THIS DISCUSSION TODAY.

THE CHALLENGES THAT OUR REGION FACES TODAY REQUIERE THE INVOLVEMENT AND COMMITMENT OF ALL MEMBERS OF SOCIETY IN ORDER TO EFFECTIVALY REACH THE FUNDAMENTAL AND COMMON GOAL OF ACHIEVING AN INCREASE IN COMPETITIVENESS OF OUR REGION.

IN PARTICULAR, THE ROLE OF GOVERNMENT IS KEY, AND I HAVE NO DOUBT THAT IT MUST ACT DECISIVELY IN SUBJECTS SUCH AS THE RULE OF LAW, INFRASTRUCTURE, EDUCATION, SOUND MACROECONOMIC VARIABLES, ETC.

BUT IT IS NOT WHAT INDIVIDUAL GOVERNMENTS CAN OR SHOULD DO THAT I WISH TO DISCUSS. RATHER IT IS WHAT PRIVATE COMPANIES CAN —AND IN FACT ARE ALREADY DOING— THAT I WILL TALK ABOUT TODAY.

AT WAL-MART WE BELIEVE THAT THE PRIVATE SECTOR PLAYS AN IMPORTANT ROLE IN BRINGING OPPORTUNITY TO EMERGING MARKETS TO ULTIMATELY LIFT INDIVIDUALS AND SOCIETIES FROM POVERTY. AND I SPEAK AS A PERSON WHO HAS SEEN IT.

OUR COMPANY OPERATES IN MEXICO WITH A LONG TERM VIEW AND HAS A FIRM COMMITMENT TO IMPROVE THE QUALITY OF LIFE OF MEXICAN FAMILIES. IN THE LAST 6 YEARS, THE COMPANY HAS REINVESTED 100% OF ITS PROFITS, REPRESENTING AN EQUIVALENT OF OVER 3.5 BILLION DOLLARS.

APART FROM FUNDING OUR GROWTH, A LARGE PORTION OF THESE RESOURCES ARE CHANNELED TO INVESTMENTS IN LOGISTICS, INFORMATION TECNOLOGY, AND PEOPLE DEVELOPMENT. AS A COMPANY THAT IS BUILT ON “EVERYDAY LOW PRICES” AS ITS CORE VALUE PROPOSITION, WE MUST CONTINUOUSLY INNOVATE AND IMPROVE PROCESSES AND INCREASE PRODUCTIVITY SO OUR CLIENTS CONTINUE TO RECIEVE THE BENEFITS OF GOOD QUALITY, SAFE PRODUCTS, AT A FAIR PRICE. THIS COMBINATION IS KEY IN OUR COUNTRIES SINCE IT HAS INCREASED COMPETITION AND TRANSPARENCY TO THE SECTOR AND PROVIDED THE POPULATION WITH MUCH NEEDED DISPOSABLE INCOME TO SATISFY, IN MANY CASES, BASIC NEEDS.

INNOVATION IS A KEY FACTOR IN OUR SECTOR; IT MAINTAINS COMPANY´S IN SHAPE, CLIENTS INTERESTED AND SATISFIED, AND OPERATIONS EFFICIENT. RECOGNIZING THIS FACT, WE HAVE CREATED AN INITIATIVE CALLED “IDEAS WITH IMPACT” BY WHICH ALL OUR ASSOCIATES ARE INVITED TO SUBMIT IDEAS, PROCESSES AND PROJECTS THAT MAY CONTRIBUTE TO THE IMPROVEMENT OF OPERATIONS, CLIENTS BUYING EXPERIENCE, LOWER COSTS OR INCREASE PRODUCTIVITY.

IN ADDITION TO THIS INTRODUCTION, TODAY I WOULD LIKE TO SHARE WITH YOU THREE WAYS THAT I BELIEVE WE CAN SPUR COMPETITIVENESS IN THE WESTERN HEMISPHERE—PARTICULARLY IN MEXICO, THEY ARE: 1) DEVELOPING SUPPLIERS; 2) BUILDING LABOR PRODUCTIVITY; AND 3) LIVING AND PROMOTING CORPORATE SOCIAL RESPONSABILITY.

1. DEVELOPING OUR SUPPLIERS.

FOR SMALL AND MEDIUM SIZE COMPANIES TO JOIN THE FORMAL SECTOR OR DEVELOP IN A SUSTAINABLE MANNER, THERE ARE SEVERAL OBSTACLES WHICH MUST BE OVERCOME.

ON ONE HAND INFORMAL COMPANIES LACK ACCESS TO THE RESOURCES AND THE NETWORKS NECESSARY TO GROW THEIR BUSINESS, AND ULTIMATELY JOIN THE FORMAL ECONOMY. OFTEN, THEY ARE SHUT OFF FROM TRADITIONAL FINANCING SOURCES – SUCH AS FORMAL BANKING SYSTEMS—AND MUST FINANCE AT INFLATED RATES.

ON THE OTHER HAND SMALL AND MEDIUM ENTERPRISES MAY HAVE ACCESS TO FINANCING AND REGISTER VARIOUS LEVELS OF SOPHISTICATION, BUT FUNDING MAY BE EXPENSIVE AND MANY COMPANIES LACK THE PROCESSES, PLANNING AND PRODUCT DEVELOPMENT CAPABILITIES THAT ARE ESSENTIAL IN A COMPETITIVE ENVIRONMENT. THEREFORE THESE COMPANIES ARE RESTRICTED TO OPERATING IN SMALL, LOCAL MARKETS AND WITHOUT ACCESS TO REGIONAL, NATIONAL AND INTERNATIONAL DISTRIBUTION NETWORKS.

WAL-MART’S MEXICO SUPPLY CHAIN PROCESS CAN HELP THESE BUSINESSES OVERCOME THESE OBSTACLES. BY BECOMING A WAL-MART SUPPLIER, A SMALL GROWER OF FRESH FRUIT OR PRODUCE, OR A MANUFACTURER OF CONSUMER GOODS CAN:

• PARTICIPATE IN WAL-MART SPONSORED WORKING GROUPS, WHERE COMPANY BUYERS AND SUPPLIERS ANALYZE MARKET TRENDS AND DISCUSS STRATEGIES IN AREAS LIKE LOGISTICS, COSTING, PACKAGING AND RE-SUPPLYING SCHEDULES.

• BE PART OF OUR SUPPLIER DEVELOPMENT PROGRAM WHICH HAS SPONSORED DURING THE LAST 3 YEARS 25 LOCAL MARKET FAIRS ALL OVER MEXICO, WHERE WE PROVIDE TECHNICAL ASSISTANCE AND DEVELOP STRATEGIES THAT SEEK TO EXPAND THE SCOPE OF THE MARKET THAT SMALL ENTERPRISES SERVE.

• MONITOR SALES OF ITS PRODUCTS ON A DAILY BASIS THROUGH A SPECIAL INTERNET TOOL CALLED “RETAIL LINK”. WITH THIS INFORMATION SUPPLIERS CAN BETTER MANGE THEIR INVENTORIES AND PLAN THEIR PRODUCTION FOR THE FUTURE.

• AND AS A WAL-MART SUPPLIER THEY CAN OBTAIN WORKING CAPITAL WITH CREDIT FACILITIES AND PROGRAMS ESTABLISHED BY WAL-MART AND FINANCIAL INSTITUTIONS, UNDER TERMS AND CONDITIONS BELOW THOSE GENERALLY OFFERED BY COMMERCIAL BANKS TO THE REST OF THEIR CUSTOMERS.

LAST YEAR WAL-MART MEXICO ESTABLISHED A 100 MILLION DOLLAR FUND WITH NACIONAL FINANCIERA, MEXICO’S DEVELOPMENT BANK IN ORDER TO IMPROVE FINANCING CONDITIONS FOR SMALL AND MEDIUM SUPPLIERS.

AS A RESULT OF THESE PROGRAMS, WE NOW HAVE MORE THAN 8,000 SMALL AND MEDIUM SIZE LOCAL SUPPLIERS, FROM WHICH A SIGNIFICANT NUMBER HAS ACQUIRED A WIDER PRESENCE THROUGHOUT THE COUNTRY. IN FACT 93% OF OUR PURCHASING IS IN MEXICO AND 86% OF OUR SUPPLIERS SELL US UNDER 4 MILLION DOLLARS ANNUALLY AND ARE THUS CLASSIFIED AS SMALL AND MEDIUM ENTERPRISES.

MOREOVER, IN 2006 OUR GLOBAL PROCUREMENT AREA PURCHASED 4.5 BILLION DOLLARS OF MEXICAN-MADE MERCHANDISE AND PRODUCE TO BE SOLD IN STORES OUTSIDE MEXICO. THIS FIGURE IS QUITE SIGNIFICANT FOR THE ECONOMY AT LARGE, SINCE IT EQUALS AROUND 7% OF ALL MEXICAN CONSUMER GOODS EXPORTS AND REPRESENTS A GOLDEN OPPORTUNITY FOR THE COUNTRY.

ONE GREAT EXAMPLE OF HOW WAL-MART MEXICO COLLABORATES WITH ITS SUPPLIER BASE IS GMEX, A SPECIAL INITIATIVE DESIGNED TO IMPROVE THE PRODUCTIVITY OF OUR CLOTHING SUPPLY CHAIN WITH A STRONG EMPHASIS ON QUALITY AND THE EFFICIENCY OF PROCESSES.

WE HAVE WORKED WITH MORE THAN ONE HUNDRED MANUFACTURERS OF THE TEXTILE AND GARMENT INDUSTRIES, AND AS THE PROGRAM EVOLVES, INVENTORY MANAGEMENT, QUALITY, COSTS AND THE SUPPLY CHAIN’S ABILITY TO REACT TO MARKET DEMAND AND TRENDS HAVE IMPROVED DRAMATICALLY.

2. BUILDING UP LABOR PRODUCTIVITY

WHILE THESE PROGRAMS ARE HELPING MANY SMALL AND MEDIUM BUSINESSES INCREASE THEIR CAPABILITIES, TO TRULY FOSTER COMPETITIVENESS WE MUST ALSO SEIZE THE OPPORTUNITY TO HELP BOOST LABOR PRODUCTIVITY IN THE COUNTRIES WHERE THE COMPANY OPERATES.

FOR WAL-MART, ASSOCIATE TRAINING IS KEY AND SPECIFICALLY GEARED TOWARD DEVELOPING THE SKILLS THEY NEED TO GROW WHICH IN TURN BOOSTS OUR LABOUR FORCE PRODUCTIVITY. DURING 2006 MORE THAN 81% OF WAL-MART MEXICO ASSOCIATES RECEIVED INTENSIVE TRAINING AND 19,569 OF THEM WERE PROMOTED.

IN MEXICO, WAL-MART CURRENTLY HAS OVER 149,000 ASSOCIATES, A NUMBER THAT MAKES US THE LARGEST PRIVATE EMPLOYER IN ONE THE COUNTRY.

SINCE RECORDS BEGAN TO FOLLOW THIS STATISTIC IN 2001, OUR RECORDS SHOW THAT WAL-MART HAS BEEN THE FIRST FORMAL EMPLOYER TO MORE THAN 70% OF NEW ASSOCIATES. IN RECENT YEARS AND GIVEN THE KIND OF SKILLS DEVELOPED, THEY ARE ALSO A VALUABLE ASSET FOR THOSE WHO CHOOSE TO SEEK EMPLOYMENT ELSEWHERE OR DECIDE TO START THEIR OWN BUSINESS. IN THOSE CASES, THE TRAINING BENEFITS THAT ARE NOT CAPTURED DIRECTLY BY WAL-MART ARE NOT LOST: THEY ARE SIMPLY TRANSFERRED TO THE REST OF THE MEXICAN ECONOMY AS A FORM OF LABOR FORCE EMPOWERMENT MUCH NEEDED IN LATIN AMERICA.

THE MOST VALUABLE ASSET OF A COMPANY LIKE US -- IS CLEARLY THE HUMAN CAPITAL. IN MEXICO, WAL-MART WORKS HARD EVERY DAY TO BUILD THIS HUMAN CAPITAL, AND WE ARE PROUD OF THE POSITIVE SPILLOVER EFFECTS THIS EFFORT HAS ON THE ECONOMY AT LARGE.

3. CORPORATE SOCIAL RESPONSABILITY AND PROMOTING SUSTAINABLE PRACTICES

IN TODAYS WORLD, FINANCIAL SUCCESS IS NOT ENOUGH. YOU NEED TO SUCCED AS A SOCIALLY RESPONSABLE COMPANY.

IN THIS SENSE, WE HAVE PLACED GREAT EFFORT AND RESOURCES VIA WAL-MART DE MEXICO FOUNDATION, TO SUPPORT TWO OF OUR COUNTRY´S BIGGEST CHALLENGES, NUTRITION AND HEALTH. MORE RECENTLY, WE HAVE BEEN IMPLEMENTING PROGRAMS THAT FOCUS ON CHANGING THE WAY WE INTERACT WITH THE ENVIRONMENT.

JUST AS ONE EXAMPLE OF WHAT THIS MEANS, ALL OF OUR NEW STORES HAVE WATER TREATMENT PLANTS. SINCE 2004, WE HAVE BUILT MORE THAN 200 PLANTS AND HAVE SAVED MORE THAN 1.1 MILLION CUBIC METERS OF POTABLE WATER.

ANOTHER GOOD EXAMPLE OF CONTRIBUITING AS A COMPANY TO THE PRESERVATION OF THE ENVIRONMENT IS THE SUBSTITUTION OF OUR ILUMNATION TECNOLOGY IN STORES. IN ADDITION TO THE SAVINGS IN ENERGY CONSUMPTION THAT OUR NEW T5 SYSTEM PROVIDES, IT IS SPACE EFFICIENT AND HAS RESULTED IN A REDUCTION OF USE OF 1,000 TONS OF STEEL IN STORE CONSTRUCTIONS.

CONCLUSION

I THINK WE ALL AGREE THAT THERE IS A LOT THAT GOVERNMENT CAN DO TO FOSTER COMPETITIVENESS-- INVEST IN EDUCATION, R&D, AND INNOVATION FUNDS; PROMOTE MORE COMPETITION IN STRATEGIC SECTORS LIKE ENERGY, TELECOMMUNICATIONS AND FINANCIAL SERVICES; IMPROVE INFRASTRUCTURE; REDUCE THE COST OF DOING BUSINESS; ENCOURAGE FORMALIZATION AND MOST IMPORTANT, THE RULE OF LAW.

BUT I HOPE THAT IF I HAVE CONVEYED ANYTHING TODAY, IT IS THAT IN THE CORPORATE WORLD WE CAN PLAY A KEY ROLE IN FOSTERING COMPETITIVENESS—PARTICULARLY IN OUR COUNTRIES AND REGIONS.

• WE CAN CONTRIBUTE TO THE IMPROVEMENT OF THE QUALITY OF PRODUCTS AND SERVICE THROUGH INVESTMENT, COMPETITION AND INNOVATION.

• WE CAN HELP BOOST PRODUCTIVITY THROUGH AN EMPHASIS ON PARTNERSHIP AND TRAINING, AND;

• WE CAN SHARE AND PROMOTE CORPORATE SOCIAL RESPONSABILITY PRACTICES.

WE NEED TO WORK TOGETHER WITH ALL THE STAKEHOLDERS: SOCIETY AND GOVERNMENT, IN ORDER TO IMPROVE COMPETITIVENESS IN THE COUNTRY OR REGION AND CONTRIBUTE TO IMPROVE THE QUALITY OF LIFE OF THE FAMILIES WE SERVE.

THANK YOU.