WAL-MART PUERTO RICO: PROMOTING DEVELOPMENT THROUGH

A PUBLIC-PRIVATE PARTNERSHIP

Submitted by: Group 4

A

Introduction and Objective• Sowing the Development of the Country was a public-private partnership

between Wal-Mart Puerto Rico, the island's Department of Agriculture and its Economic Development Bank, an NGO, and a group of farmers. ConectaRSE, a local CSR consultancy, had facilitated the project development.

• The objective of the project was to promote sustainable development on the island by encouraging entrepreneurship among farmers and the development of small and medium agribusinesses.

• Wal-Mart PR would provide the market demand, the government would provide technical support and micro-loans, and the farmers would grow farm products to be sold under the Del País brand name, a brand created by the government to promote local produce consumption.

• The goal of the program was to reduce the 70 per cent to 30 per cent ratio of imported foodstuffs versus local food products available in Wal-Mart's Puerto Rico stores.

Walmart’s Growth in Puerto Rico• In 1992, Walmart opened its first store in the country.• In 2003, purchased Amigo supermarkets which had 33 stores across the island• By 2006, Wal-Mart Puerto Rico sales had reached $650 million.• By 2008, Wal-Mart operated 57 establishments in the island and was the largest

private employer of the island, with more than 14,000 employees

Early CriticismCriticized by NGO’s for:1. large supply chains of foreign products2. bad working conditions at suppliers' factories3. displacement of local businesses to foreign countries 4. disappearance of urban centres and small and medium businesses (SMEs)

Walmart’s defence against criticism1. Created jobs for local people.2. Offered low prices to customers.3. Pro-active and socially responsible programs in its stores and supply chains such

as energy saving and recycling programs, local purchasing programs, and a Supplier Diversity Program for women and minorities.

4. The food and agriculture network set up by Walmart brought together buyers, suppliers, NGOs, in an effort to sell local products, reduce the distance food traveled (e.g. in the United States, food traveled an average of 1,500 miles), reduce gas emissions and transportation costs, use innovative packaging requiring fewer trees and less water in its manufacture, use packaging made of renewable resources, and remove links from the supply chains.

Puerto Rico Problems in agriculture1. In 2007, the total value of agricultural production was calculated at $733.3

million or one per cent of GDP2. A farmer's average age was 58.2 years and more than a third were more than 65

years old. 3. Mostly uneducated farmers4. Agricultural production in Puerto Rico was also affected by extreme weather

events such as hurricanes which could devastate crops. 5. Local production consisted mainly of milk, eggs and coffee6. All together, the island's food supply chain, local as well as imported (varying

fuel prices), was extremely vulnerable.

The PPP project - August 2008Involved Parties: Wal-Mart PR, the Government of Puerto Rico (Department of Agriculture and Economic Development Bank), and a non- profit organization and ConectaRSE, a CSR consultancyThe project had benefits for all partners involved: 1. Wal-Mart can position itself as a driving force in the agricultural development of Puerto Rico, since it would create agricultural businesses, increase the quantity and quality of local food production (especially fresh produce), reduce the dependence of the island on imported goods. It guaranteed a negotiated volume of purchases from farmers and integrated them in its supply chain to avoid middle-men2. EDB would get a good return on investment and somewhat lower risks and would meet its social responsibility commitments 3. Farmers could generate some $2.3 million in sales for the year 2008-2009.4. NGO could obtain considerable funds to help it meet its mandate 5. Farmers delivered their products to collection centers run by the DA where they were classified, packed and branded with the Del País brand (from the country).

Challenges1. Lack of Communication between key stakeholders.2. The NGO was small and could not estimate the magnitude of the project, thus

proved to be unsuccessful in proper trainings to the farmers, ConectaRSE was hired.

3. Irregularities in meeting delivery schedules – no specific production schedules and no quality control standards were fixed

4. Changes in Government Administration