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Argentina Is The Fastest Growing Market For Ber – But Without Its Commission


09/24/2018


Argentina Is The Fastest Growing Market For Ber – But Without Its Commission
It is perhaps very surprising to many after Uber executives identified Argentina to be its fastest growing market in the world currently. The growth has been attributed to the sudden economic downturn of the country that has increased unemployment and reduced the purchasing power of people there.
 
Just before they joined Uber, about 20 per cent of the drivers of the company in Buenos Aires – which is the only Brazilian city where the company runs its services, were unemployed.
 
Felipe Fernandez Aramburu, who runs Uber business development in Argentina said in a media interview that the economic slowdown “has certainly helped many people find us as an alternative source of income.”
 
However Uber believes that the number of drivers that join the company is not at all dependent on a recession in an economy and without an equivalent increase in demand for rides, despite the firm raising concerns about the economy of Argentina. In the second quarter of the current year, the economy of the country shrank by 4.2 per following the decision of the central bank of the country to hike rates to counter the economic crisis and the falling currency.
 
“Our growth today is less about economic conditions on the rider side,” said Andrew Macdonald, who runs Uber in Latin America. The expected growth in demand in Argentina instead would be because of shortage of public transport systems according to Macdonald. He further said that that the company had noted the highest growth in those areas where there is the minimum of public bus and train services.
 
But in Argentina, Uber does not charge the drivers the 25 per cent commission that it theoretically has right upon. This is because Argentine law mandates that such commission payment can be made only with the use of cash or credit cards issued abroad and both are very hard to come by for locals.
 
Currently, most of the Uber drivers do not have any means to pay Uber its 25 percent commission when the drivers themselves are paid in cash which means that all such drivers are running up huge debts with Uber. Commissions from drivers are Uber’s only source of revenue.
 
A larger problem area for the ride hailing service is reflected by the issue of Uber not being able to profit from the growth in Argentina. And Uber is very keen to show investors about its profitability especially in light of its planned initial public offering in 2019.
 
“It’s not about whether we are making money in the near term,” Macdonald said and adde that eventually drivers would have to pay the 25 per cent commission.
 
Macdonald however did not comment on whether the company was making profits from the Argentine market. Earlier, Uber had said that that its operations in its second-biggest market worldwide – Brazil, a next door neighbour to Argentina, have turned out to be profitable.  
 
The ride hailing company said it would be able to recover its dues from the drivers once it is given permission to accept local credit and debit cards for payments. .
 
But according to reports quoting the Uber drivers, the non-existence of the commission charge is the primary cause of the current growth spree in Argentina. 
 
(Source:www.reuters.com)