Exclusive Interview: Pricesmart Assures All Permits In Order For Poblado, 2nd Medellín & 10th Colombia Location Pledges To Be A Good Neighbor
San Diego, California based membership warehouse-club operator Pricesmart (NASDAQ: PSMT) has grown steadily through its unique business model of being US-based, but only operating outlets in the Caribbean or Latin America, outside of the 50 US states and México. The publicly-traded company founded by warehouse-club pioneer Sol Price and his son Robert (currently serving as interim CEO) has a so-far successful track record, so it was quite notable when controversy broke out locally with resistance from some sectors to its second Medellín, Colombia location.
The second Pricesmart, well under construction on the road known as Transversal Inferior (Carrera 32) in the leafy (but congested) neighborhood of San Lucas in Medellín’s affluent Poblado district. While no one from Pricesmart said so, documents obtained by Finance Colombia seem to indicate that the opposition is spearheaded by new Medellín city councilwoman Claudia Marcela Ramirez Echeverri, a member of ex-President Alvaro Uribe’s Centro Democrático political party.
Finance Colombia was able to arrange an exclusive interview, presented below, with Andrés Romero, Pricesmart’s country manager for Colombia to “clear the air” and present Pricesmart’s position with regards to allegations that the new site’s construction permits and business licenses are out of order. Romero assures shopers and investors that everything is in order, and promises Poblado residents that Pricesmart is a good corporate citizen and that the new store will be a good neighbor.
Finance Colombia: My first question is: the part of Medellín where you are building the second Pricesmart known as San Lucas, Poblado has a little bit of infamy for its traffic congestion. What was the thinking behind choosing this location? Obviously, it’s one of the highest income areas of Medellín, equivalent to Chicó in Bogotá; but what was the strategy in choosing this part of the city that doesn’t have very good traffic flow?
Andrés Romero: To that point, when we did the study, we evaluated various factors. One very important one is where we have the most active members. Where can the company be most beneficial to the members of Pricesmart? We want to be as close as possible to our members, minimizing their travel across the city. That creates a positive impact on the city’s mobility. It also increases our level of service.
On the theme of mobility, our design also contextualizes functionality that allows us to operate mitigating the impact of, and eases the access to the club. We have planned on a service [entry] way that eases the traffic flow for our members, and we have also attended the comments and requests of the authorities to improve the design. One item for example is a ramp that had an 18 degree incline, we adjusted it to a 16 degree incline specifically at the request of the control entities, to ensure a flexible, fluid process.
Finance Colombia: That’s one thing I like about the store you have in La Mota (neighborhood in Belén, Medellín where the existing Pricesmart is located). That zone also has a lot of traffic, but you have an innovative design, a space like a patio where cars can enter, and taxis and delivery services like Rappi can come in and wait, and not impede traffic. Across the street, a big new mall came and there is a lot of congestion, but it’s not caused by Pricesmart.
My question is, you started apparently with all the correct licenses and permits, but what happened? Did you have conversations with the neighbors and the surrounding community before starting? Where did this opposition come from?
Andrés Romero: The first thing would be important to indicate that our licenses are the same from the beginning; they have not changed. We have done all the paperwork before all the government entities of the city; the control entities, attending to their requirements and providing all the information that has been requested in order to comply with everything of course. We have been working since the planning stages, going through the process right now of construction, and soon with training.
With our second club in the city of Medellín, what has been presented is completely natural, talking with the community and concerns arise, for example about what time the club will operate, etc. We have been very open to meet with [the community], to talk to them, we have met with them to discuss the generalities of the new club. We have always attended to each of the requirements. [We] have not been negligent at any time; on the contrary. We have been very up front with response times. So much so, that for example last week we had a very good meeting with the city of Medellín, where we met with planning, with the transportation police, many of the actors that have been involved with the whole process to be able to attend to all the concerns that have arisen.
I can mention for example, two important aspects. One, the police inspectors visited us and found everything within the rules, everything working according to the regulations, and that is why the work continues to operate. Also, the things we do in response to those meetings with businesses and the community, with our neighbors in this case. Well, the cover of the parking lot has been changed to a green design based on input from the community in those meetings.
I can assure you that from the start we have done all processes correctly, complying with all the norms, both thematically as well as legally to guarantee that we are positively involved with the community, that we contribute to the development of the community, and of the city.
Finance Colombia: I find it strange that Pricesmart has always had a good reputation with regards to ESG (Environmental, Social, Governance), its social commitment here in Colombia, but also in Panamá, Dominican Republic, Jamaica, Costa Rica, in many locations, and the company hasn’t had trouble. Quite the reverse, consumers want to have a local Pricesmart. Pricesmart carries a lot of items that are hard to find in the locations where it operates. Pricesmart is always doing things in the local schools and communities.
My question is this: You apparently took out the necessary permits. The construction advisory sign that is mandatory for construction projects in Colombia is up and displayed at your construction site listing all the approvals and licenses, I went and checked for myself yesterday. Colombia has a reputation for legal certainty, at least for Latin America, and you operate in much more difficult places. Some of the locations where you operate in Central America are much more difficult, but at your construction site, you already have the roof in place.
How is it that the government can after issuing all the licenses and permits, change their mind, or I don’t know how that works, but how can they try to revoke the licenses as in this process? And how are you going to fight this to get legal certainty or “páz y salvo” (peace and safe) as they say here in Colombia, with the local government?
Andrés Romero: Well the first thing I would like to mention is that the company operates very calmly. We have certainly complied with all the procedures before the government entities. As you mentioned, we have a presence in several countries…We operate in thirteen countries, we have 50 clubs and counting, where in each of these openings, we have done everything corresponding to compliance with all the rules and everything that has to do with the legal and juridical components. Among other things, we as a public company in the United States are obliged to maintain an ethical line of the highest level, where we are not allowed for any reason to miss any of these commitments or corporate values, and compliance at the international level in all of the markets where we operate. We are very strict with that, and likewise the licenses were ideal as you mentioned, handled in the correct, transparent way.
So things at the moment, we have complied with any requests by the authorities, and all the answers that are related to the issues impacting us at the time. Now particularly with the revocation you talk about, it is a process that we are monitoring, and we will give a response when we receive an official statement. But in the end what I can tell you is that we are completely sure of the processes we have carried out from day zero until today. That gives us a completely clear path to where we want to go, where we are always going, hand in hand with the community, with the control entities, and obviously with all the departments that are part of the organization in the function of being able to always bring to fruition our projects.
And in this case, we expect to open our doors to the community more or less in August.
Finance Colombia: You have been very generous with your time, so this is the last question: ESG is very important with investors. When you open the doors, at this newest, what I would imagine is the most modern Pricesmart…You already mentioned innovations with the roof. I see it will have three floors. How are you using the space? It is in a limited-space location For example at the Bogotá location off 26th Ave. (Avenida El Dorado), or the other Medellín location, space is at a premium so you put the parking lot under the building to maximize use of space.
What new or novel innovations can we expect to see in your next, newest Pricesmart?
Andrés Romero: Look, I could tell you that right now we have a lot of focus on offering this building with a very positive environmental impact. Yes, everything…our cooling system is CO2 based, which is the most modern and most environmentally friendly technology. That is a point that I think is quite important to highlight. Another is that we will have a state of the art wastewater treatment plant, probably one of the most modern in the country, where we are going to guarantee that the water is treated and very clean, even before we release it into the public sewer.
All of our lighting will be LED that will have a positive impact, a savings that contributes to the reduction of CO2 emissions and pollution to the environment. It is also important to mention that the club will have a very innovative design with the floor plan. The sales floor will be on the first level and parking will be on the second floor. This is done with a view towards efficiency from both a construction standpoint, but also so that we can offer our members a facility that is completely comfortable and secure for everyone who visits our excellent new club.
Finance Colombia: I know you are very busy managing your existing stores here in Colombia, not to mention this process with the new one, so thank you very much for your time. Construction is a stressful process even when things go perfectly, so I know you have your hands full. Much success to you.
Andrés Romero: We are working very hard, without rest so that we can achieve this objective, and we hope to see you at our grand opening in August!