Almacenes Exito (EXTOY) Risk Factors

We are subject to various regulations, and our failure to comply with these regulations may have a material adverse effect on us. For example, our ability to complete mergers, acquisitions and/or to develop our business may be limited by applicable antitrust and competition laws and any non-compliance may adversely affect our reputation and financial position. These laws include a general prohibition against all types of practices, procedures, or systems that tend to limit free competition, or to maintain or determine inequitable prices. Any failure to comply with these laws may result in the imposition of fines and material sanctions. We are also subject to regulations in respect to the manufacture, importation, distribution and marketing of our products and any change regulations could adversely affect us. The activities described above are subject to surveillance of competent authorities with sufficient authority to impose warnings, fines, sanctions, including temporary or permanent closing of operations, upon breaches, which could have a material adverse effect on us. Moreover, we are subject to governmental export and import controls that could impair our ability to compete in international markets and subject us to liability if we are not in compliance with applicable laws. We could be subject to possible loss of export or import privileges, fines and material sanctions, which could have a material adverse effect on us. In addition, our business may be subject to U.S. and foreign trade control laws and regulations, including economic sanctions programs such as those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury. Violations of trade control laws and sanctions regulations are punishable by severe criminal or civil sanctions, which could have a material adverse effect on our business, financial condition and results of operations.

We are subject to a number of anti-corruption laws, including, without limitation, the U.S. Foreign Corrupt Practices Act (the "FCPA") and Colombian Law No. 2195 of 2022. The FCPA and similar anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other persons for the purpose of obtaining or retaining business. Recent years have seen a substantial increase in anti-corruption law enforcement activity, with more frequent and aggressive investigations and enforcement proceedings by both the U.S. Department of Justice and the SEC increased enforcement activity by non-U.S. regulators, and increases in criminal and civil proceedings brought against companies and individuals. In Colombia, Law No. 1778 of 2016, as amended by Law No. 2195 of 2022, created a new case of liability for companies in case any of their controlling shareholders, employees, contractors or administrators or of any of their subsidiaries, carry out foreign bribery offences. The sanctions include fines (up to 200,000x the current minimum monthly wage), among other administrative sanctions, civil liability (extracontractual) caused by a criminal conduct, and a prohibition to contract with the Colombian Government. Likewise, Colombian law contemplates among its criteria for limiting corporate liability the existence, execution and effectiveness of transparency and business ethics programs or anti-corruption mechanisms within the company. Failure to comply with anti-corruption laws in any of the countries where we have operations or to which we are subject or any investigations of misconduct, or enforcement actions could subject us to fines, loss of operating licenses, disbarment from entering into contracts, and reputational harm as well as other penalties, including individual arrests, which may materially and adversely affect us, our reputation, and the trading price of Éxito common shares, ADSs and BDRs.

As a public company listed in Colombia, the United States and Brazil, we are subject to various corporate governance and compliance rules and regulations. Accordingly, we will incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), as well as rules subsequently adopted by the SEC and the NYSE, have imposed various requirements on public companies, including setting forth rules regarding corporate governance practices. For example, Sarbanes-Oxley requires, among other things, that we maintain and periodically evaluate our internal control over financial reporting and disclosure controls and procedures. In particular, we and our managers will have to perform system and process evaluation and testing of our and their internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of Sarbanes-Oxley. We currently test our internal control over financial reporting on a regular basis. Effectively designing, implementing, operating and testing our internal controls as a standalone entity may require our management and other personnel to devote a substantial amount of time to comply with these requirements and also increase our legal and financial compliance costs. Compliance with Section 404 of Sarbanes-Oxley as a standalone entity will require a substantial accounting expense and significant management efforts. Our controls could not be considered effective and our internal control over financial reporting may not satisfy the regulatory requirements. For more information about internal control over financing reporting see "Item 5. Operating And Financial Review And Prospects - A. Operating Results - Internal Controls over Financial Reporting" and "Item 15. Controls and Procedures-B. Management's Annual Report on Internal Control over Financial Reporting". Furthermore, the listing of our securities on the BVC, the NYSE and the B3 require us to comply with the listing, reporting and other regulations for each exchange. Compliance with two sets of regulations, which may have different standards and requirements, require more time and effort from management.

Pursuant to Articles 58 and 59 of the Colombian constitution, the Colombian Government can exercise its eminent domain powers in respect of our assets if any such action is deemed by the Colombian Government to be required in order to protect public interests. Eminent domain powers may be exercised through: (i) an ordinary judicial expropriation proceeding (expropiación judicial), (ii) an administrative expropriation proceeding (expropiación administrativa) or (iii) an expropriation for war reasons (expropiación en caso de guerra). In all cases, we would be entitled to a compensation (indemnización previa) for the expropriated assets. Also, as a general rule, compensation must be paid before the asset is effectively expropriated (except in the case of expropriation for reasons of war, in which case compensation may be quantified and paid later). However, the compensation may be lower than the price for which the expropriated asset could be sold in a free-market sale or the value of the asset as part of an ongoing business. Any seizure or expropriation by the Colombian Government could adversely affect our business, results of operations and financial condition and the market price of the Éxito common shares, ADSs and BDRs.

The implementation of the peace agreement with the FARC has required and may continue to require the enactment of new laws and regulations, which may impact our activity in ways we cannot anticipate. Legislation has been enacted in connection with the implementation of the Rural Reform (Reforma Rural Integral) as provided under the peace agreement. Such legislation included the creation of a Land Fund for the Rural Reform (Fondo de Tierras para la Reforma Rural Integral) and set forth certain parameters to grant land to certain benefited populations and which properties are subject to be granted. In addition, the Colombian congress approved laws governing the Special Peace Justice System (Jurisdicción Especial para la Paz), which has been advancing in accordance with the peace agreement. The impact of such new legislation is still unknown, and further regulations may be required for such legislation to be implemented. Also, laws enacted by the Colombian congress may differ from the provisions of the peace agreement and lead to an escalation of criminal and terrorist acts by the FARC or other groups in Colombia. New laws or regulations enacted in connection with the implementation of the peace agreement may impact our activity and may have a negative effect on our financial condition and results of operations and the market price of the Éxito common shares, ADSs and BDRs.

Éxito is registered in Colombia and therefore cannot adhere to the current special listing segments of the B3. For this reason, investors in Éxito may be assured less protection than those guaranteed to investors in companies listed on the special listing segments of the B3, which are required to adopt corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian laws and regulations.

The corporate disclosure requirements applicable to us may not be equivalent to the requirements applicable to a U.S. company and, as a result, you may receive less information about us than you might otherwise receive in connection with a comparable U.S. company. We are subject to the periodic reporting requirements of the Exchange Act that apply to "foreign private issuers." The periodic disclosure required of foreign private issuers under the Exchange Act is more limited than the periodic disclosure required of U.S. issuers. For example, we are required only to file an annual report on Form 20-F, but we are not required to file any quarterly reports. A U.S. registrant must file an annual report on Form 10-K and three quarterly reports on Form 10-Q. In addition, we are required to file current reports on Form 6-K, but the information that we must disclose in those reports is governed primarily by Colombian law disclosure requirements and may differ from Form 8-K's current reporting requirements imposed on a U.S. issuer. Finally, we are not subject to the proxy requirements of Section 14 of the Exchange Act and our officers, directors and principal shareholders are not subject to the short swing insider trading reporting and recovery requirements under Section 16 of the Exchange Act.

As a foreign issuer in Brazil, we are subject to certain rules under the laws and regulations applicable to publicly traded companies in Brazil, including rules and regulations issued by the CVM and the B3. These rules and regulations may increase our legal, accounting and financial compliance costs and may make certain activities more time-consuming and expensive. For example, as a foreign issuer of BDRs in Brazil, we are required to appoint a legal representative in Brazil, prepare and annually disclose certain forms, as well as disclose a Portuguese-language version of all material information disclosed by us in Colombia and in the United States, including financial statements, material facts and other filings. Any new rules and regulations relating to disclosure, reporting, financial controls and corporate governance that are adopted by the CVM, B3 or other regulatory or self-regulatory bodies may result in a significant increase in our costs, which could adversely affect our business, financial condition and results of operations. Existing and any new obligations will also require substantial attention from our management and may divert management's attention from our business. Such cost increases and detour of management's attention could materially and adversely affect our business, financial condition and results of operations.

The Éxito ADS Deposit Agreement will provide that holders of Éxito ADSs irrevocably agree that any legal suit, action or proceeding against or involving us or the Éxito ADS Depositary brought by Éxito ADS holders arising out of or based upon the Éxito ADS Deposit Agreement, the Éxito ADSs or the transactions contemplated thereby, including, without limitation, claims under the Securities Act or the Exchange Act, may be only instituted in the United States District Court for the Southern District of New York (or in the state courts of New York County in New York if either (i) the United States District Court for the Southern District of New York lacks subject matter jurisdiction over a particular dispute or (ii) the designation of the United States District Court for the Southern District of New York as the exclusive forum for any particular dispute is, or becomes, invalid, illegal or unenforceable). While this exclusive forum provision does not restrict the ability of Éxito ADS holders to bring claims, including claims under U.S. federal securities laws, it may increase litigation costs or limit their ability to bring a claim in the judicial forum that they find favorable, which may discourage the filing of claims under the Éxito ADS Deposit Agreement against us or the Éxito ADS Depositary. Additionally, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce the exclusive forum provision of the Éxito ADS Deposit Agreement. In light of this uncertainty, investors bringing a claim may face certain additional risks, including increased costs and uncertainty of litigation outcomes. If a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

We are organized under the laws of Colombia. As of December 31, 2023, most of our directors and executive officers resided in Colombia. Furthermore, most of our assets are located in Colombia. As such, it may be difficult or impossible for you to effect service of process on, or to enforce judgments of U.S. courts against us and/or against our directors and officers based on the civil liability provisions of the U.S. federal securities laws. Colombia and the United States are parties of the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, commonly referred to as the Hague Service Convention (the "Convention"). In order to effect service of process within the United States upon us, the rules of the Convention must be followed. Such rules establish the following mechanisms to transmit a judicial document for service abroad: (i) a formal request conforming to the model of the Convention, (ii) directly through its diplomatic or consular agents, or (iii) alternative methods, such as postal channels or directly through judicial officers, officials or other competent persons of the country of destination. Colombian courts will enforce a U.S. judgment predicated on the U.S. securities laws through a procedural system known under Colombian law as exequatur. Colombian courts will enforce a foreign judgment, without reconsideration of the merits, only if the judgment satisfies the requirements set out in Articles 605 through 607 of Law No. 1564 of 2012, also known as the Colombian General Code of Procedure (Código General del Proceso), which provides that the foreign judgment will be enforced if certain conditions are met.

The average annual rate of inflation in Colombia for the past ten years has been 5.69%. As reported by the Colombian Central Bank, the annual consumer price index, the measure of inflation, for the year ended December 31, 2023 and the years ended December 31, 2022 and 2021 was 9.3%, 13.1% and 5.6%, respectively. The decrease in inflation in 2023 was mainly due to: (1) lower growth in food prices; (2) clear signals from monetary policy to reduce short term inflation expectations; and (3) valuation of the Colombian peso against the other currencies. However, inflation is still above the goal of 3.0% set by the Colombian Central Bank. Inflation impacts the prices of goods, raw materials and local interest rates as a result of government measures to control inflation. In Uruguay, the rate of inflation was 5.1%, 8.3% and 8.0% for the years ended December 31, 2023, 2022, and 2021, respectively. In Argentina, the rate of inflation was 211.4%, 94.8%, and 50.9% for the years ended December 31, 2023, 2022, and 2021 respectively. For the year ended December 31, 2023, the internal wholesale price index was 276.4%. The measures taken by the central banks in the countries where we operate, often include maintaining a tight monetary policy with high interest rates, restricting the availability of credit and negatively affecting the rate of economic growth. We cannot assure that the measures taken by the central banks in the countries where we operate will be effective in curbing inflation. High rates of inflation have impacted our business historically and may continue to do so in the future, as increased good prices may result in reduced consumer spending, which could reduce our revenues and/or our margins. For more information, see "Item 5. Operating and Financial Review and Prospects-A. Operating Results-Macroeconomic Environment and Factors Affecting Our Results of Operations-Macroeconomic Environment." Inflation is also likely to increase some of our costs and expenses. More than 96% of our costs and expenses are denominated in local currency as of December 31, 2023, and we cannot guarantee that we will be able to pass on price increases to our customers, in the event of further inflation hikes, which could have a material adverse effect on us. Inflation has impacted our margins negatively for the year ended December 31, 2023 compared to the year ended December 31, 2022. We estimate that during this period, approximately COP 416,000 million of additional expenses, mainly related to labor costs, utilities, cleaning, security, supplies and rent costs were due to inflation. See also, "Item 5. Operating and Financial Review and Prospects-A. Operating Results-Current Conditions and Trends in our Industry-Inflation."

Economic and political conditions in Colombia may adversely affect our business, results of operations and the trading price of the Éxito common shares, ADSs and BDRs, as our operations in Colombia represented 75.0% and 74.1% of our consolidated revenue from contracts with customers in the years ended December 31, 2023 and 2022, respectively. Economic growth or contractions, inflation, changes in law, regulation, policy or future judicial rulings and interpretations of policies involving exchange controls and other matters such as (but not limited to) currency depreciation, inflation, interest rates, taxation, banking laws and regulations and other political or economic developments in or affecting Colombia may affect the overall business environment and may, in turn, adversely affect us. President Gustavo Petro, who took office in August 2022, inherited high government spending levels, and measures to meet fiscal targets led to protests around the country, paralyzing activities in the main cities in Colombia for days. Furthermore, although throughout recent history elected governments and members of the Colombian congress have pursued free market economic policies with almost no economic interventions, we cannot predict which policies, if any, will be adopted by the current government and/or congress and whether those policies would have a negative impact on the Colombian economy or our business and financial performance. On August 8, 2022, the Ministry of Finance of Colombia submitted a tax reform bill to the Colombian congress proposing several changes to the current Colombian tax regime. The tax reform bill was approved by the Colombian congress on November 17, 2022, and was sanctioned by President Gustavo Petro on December 13, 2022 as Law No. 2277 of 2022. The tax reform is effective as of January 1, 2023. The tax reform includes, among others: (1) a new permanent equity tax applicable to Colombian individuals and non-residents; (2) an increase in the dividend tax rate for local and foreign shareholders (in the case of foreign shareholders the rate increased from 10% to 20%); (3) an increase in the long-term capital gains tax rate, from 10% to 15%; (4) the elimination of specific tax benefits and exemptions such as the rule that exempted the taxing of capital gains from the sale of publicly listed shares (currently applicable to sale of less than 10% of the total shares in circulation, which would be limited to 3% of the total shares in circulation as from 2023); (5) an income tax surtax for companies engaged in the extraction of crude oil and coal ranging from 0% to 15% and based on international prices; and (6) the introduction of a minimum tax based on effective tax rate on accounting profits (with adjustments). See "Item 10. Additional Information-E. Taxation--Material Colombian Tax Consequences". Additionally, the Colombian Government presented other relevant bills, which are currently being discussed by the Colombian congress. One of them is the bill for a pension reform, which restructures the pension system into a "pillar system" which manages and assigns funds in accordance with age, the condition of the affiliates, among others, as well as changes to pension schemes applicable to women. Another relevant bill presented by the Colombian Government is the bill of the labor reform, which includes an 18-point reform to individual and collective labor legislation. The labor reform bill was shelved, but the Colombian Government decided to present the bill again before the Colombian congress with some amendments; nevertheless, the bill keeps the principal aspects promoted in the first bill, covering several areas such as: outsourcing/subcontracting, employment stability and hiring modalities; regulations regarding the use of service contracts; apprenticeship contracts; workday length; work through digital platforms; informal and migrant work, surcharges and termination severance; among others. In connection with overtime dispositions, employees would be entitled to high work surcharges for an extra two hours daily, and work performed on work rest days would be compensated with an additional 25%. Other key elements of the labor reform bill include higher severance payments for unilateral termination and new regulations for apprenticeship contracts that would involve all labor costs. Additionally, gradual decrease in the maximum legal workweek from 48 to 42 hours is currently underway, with no salary reduction allowed for employees. This decrease is expected to be fully implemented by July 2026. The Colombian Government has also presented a bill which proposes amendments to the health insurance regulation in Colombia, by trying to put in place a public health system in the country. The National Development Plan bill was approved by the Colombian congress on May 5, 2023 and sanctioned by the president on May 19, 2023. We may be adversely affected by changes in government or fiscal policies, and other political, diplomatic, social and economic developments that may affect Colombia. We cannot predict what policies will be adopted by the Colombian Government and whether those policies would adversely affect the Colombian economy and, consequently, us. In May 2021, S&P Global Ratings ("S&P") downgraded Colombia's long-term foreign currency sovereign credit rating "BBB" to "BB+" after protests forced the country's government to withdraw a fiscal reform proposal that aimed to finance transitory and structural higher spending. In July 2021, Fitch Ratings ("Fitch") also downgraded Colombia´s credit rating from "BBB-" to "BB+" due to deterioration of public finances with large fiscal deficits and a rising government debt level. In October 2021, Moody's Investors Service ("Moody's") affirmed Baa2 rating and changed outlook on Colombia's rating to stable from negative, supported by the government's track record of prudent macroeconomic management and capacity to build consensus and promote policies that foster economic growth and support fiscal metrics. The stable outlook reflects Moody's expectation that the fiscal measures approved by the government and the post-pandemic economic recovery will support debt stabilization. In January 2023 and December 2022 S&P and Fitch, respectively, affirmed Colombia's credit rating. Any further downgrade of Colombia's credit rating could adversely affect the Colombian economy and us. In January 2024, S&P maintained Colombia's long-term foreign currency sovereign credit rating in "BB+", however, it downgraded the outlook on Colombian's rating from stable to negative due to low economic growth and its effects on public finances. In December 2023 Fitch affirmed Colombia´s credit rating at "BB+" and its outlook on stable. In June 2023, Fitch Ratings upgraded Uruguay´s rating from "BBB-" to "BBB" and revised the credit rating outlook to stable. The revision reflects Uruguay´s fiscal resilience through the pandemic and ongoing improvement on the structural fiscal position. The "BBB" rating is supported by relatively high per capita GDP, and strong governance indicators and institutional strength. It is constrained by weak medium-term economic growth prospects and competitiveness challenges, high public debt and its large foreign currency component, a record of high inflation, and policy flexibility that its weak in the context of prevalent dollarization, indexation and shallow financial debt. Any downgrade of Uruguay´s credit rating could adversely affect the Uruguayan economy and us. In June 2023, Fitch Ratings upgraded Argentina´s Long-Term Foreign Currency (FC) Issuer Default Rating (IDR) rating from "C" to "CC", reflecting that no longer has a perception that a default-like process has commenced in the country. Argentina´s debt repayment record is one of the weakest among rated sovereigns. Any downgrade of Argentina's credit rating could adversely affect the Argentinian economy and us. On December 2023 Javier Milei took place as president of Argentina bringing huge economic proposals to address longstanding macroeconomic disfunction and stagnation. However, it cannot be assured whether such changes will occur or their timing, nor can be estimated the impact they may have on Argentine economic, political and regulatory conditions and in our business.

We are vulnerable to international economic crises and declining per capita income in the countries in which we operate. A decrease in consumption in these markets could adversely affect our sales. We face risks related to the international markets in which we operate, primarily including: - interference by local governments in economic policies;- unstable exchange rates and devaluation of local currencies;- deterioration of economic conditions;- inflation and interest rates;- highly regulated environment;- wage increases and price controls;- foreign exchange controls and restrictions on remittances abroad, including remittance of dividends;- fiscal policy and tax regime;- foreign trade policy, including taxes and tariffs;- liquidity in the financial, capital and credit markets;- other political, social, and economic risks that affect the markets in which we operate; and - the outbreaks of infectious diseases, or the risk of an outbreak (e.g. pandemics, epidemics, including a potential new wave of COVID-19), its effects and the manner in which such events may continue to impact us are highly uncertain and unpredictable and may result in further adverse effects on our business and may impact our ability to continue operating our business. The occurrence of any of these factors, as well as any other factor affecting economic, political and social conditions in the markets in which we operate or intend to operate, may prevent us from fulfilling our strategic goals in these countries or in our international operations as a whole, and may adversely affect us.

We may decide to withdraw the Éxito BDRs from the B3. Voluntary discontinuance of the BDR program will depend, among other obligations, on compliance with the procedures for eventual discontinuance of the program established by the B3 in its Issuer Manual. Unlike the deregistration of Brazilian public companies for trading in regulated securities markets, there is currently no requirement for a tender offer as a condition for the discontinuation of the BDR program. Thus, holders of the Éxito BDRs will not be able to prevent us from cancelling our registration with the CVM and withdrawing the Éxito BDRs from the B3.

Since the beginning of the negotiations of the peace agreements executed between the Colombian Government and the FARC on November 24, 2016, guerrilla actions against maintenance related activities in our sector have diminished. Nonetheless, the process of implementation entails some risks that may affect our operations in the future, such as the emergence of new criminal structures composed of dissident members of the FARC and the resulting increase in criminal activity, especially in urban areas, new requests for restitution of land stripped during the conflict, areas with high presence of antipersonnel mines, the formation of a new political party composed by ex-guerrilla, along with the emergence of new political forces throughout regions in which we operate, and the strengthening of social pressure groups. In addition, depending on actions of President Petro, the implementation of the peace treaties could produce uncertain political results. Should any of these risks materialize, the development of new projects could be slowed or discontinued, and/or could lead to a scenario of socio-political instability, which may increase demands of social and economic investment to the companies operating in Colombia.

Colombia has experienced several periods of violence over the past five decades, primarily due to the activities of guerrillas, paramilitary groups, drug cartels and criminal bands known as Bacrim. In response, the Colombian Government has implemented various security policies and has strengthened its military and police forces, including the creation of specialized units. Despite the peace treaty between the Colombian Government and the Revolutionary Armed Forces of Colombia ("Fuerzas Armadas Revolucionarias de Colombia) ("FARC"), a lasting decrease in violence or drug-related crime in Colombia or the successful integration of former guerilla members into Colombian society, may not be achieved. In 2018, the Colombian Government suspended the peace negotiations with the National Liberation Army (Ejército de Liberación Nacional) ("ELN") and in 2019, a minority group of dissidents within FARC announced their return to illegal activities. During 2019, ELN perpetrated different terrorist attacks in Colombia, including a car bomb in a police academy in Bogotá, which resulted in 21 people dead, and many other injured. During 2023, ELN has perpetrated attacks against the police and military forces, as well as attacks to energy and oil infrastructure. Other criminal bands have also increased activities throughout the country. An escalation of violence or drug-related crime may have a negative impact on the Colombian economy and on us. In addition, the peace agreement reached with FARC may be modified by future governments, including the current president. If there are deviations from the peace agreement, there can be no assurance that criminal actions will not escalate in Colombia. Although the Colombian congress has approved certain regulations to implement the final peace agreement such as the law governing the Special Peace Justice System (Jurisdicción Especial para la Paz), laws enacted by the Colombian congress in this regard may differ from the provisions of the peace agreement. During 2022 and 2023, the ELN and FARC dissidents, together with other splinter criminal groups, continued to operate in Colombia and while the security situation has improved dramatically in recent years, there can be no guarantee that the situation will not again deteriorate. Any increase in kidnapping or terrorist activity in Colombia or in the areas of our projects generally may disrupt supply chains and discourage qualified individuals from being involved with our operations. During his presidential campaign, the President of Colombia, Mr. Gustavo Petro expressed his support for the reinstatement of negotiations with ELN. In October 2022, the government of President Gustavo Petro announced the reinstatement of such negotiations. On December 31, 2022, President Gustavo Petro announced a bilateral ceasefire, starting on January 1, 2023 until June 30, 2023, which was extended in August 3, 2023 for 180 days until January 29, 2024 in consideration of current negotiations with illegal armed organizations. In March 2023, the second round of the dialogue between the Colombian Government and the ELN ended. The third round took place in Havana, Cuba and the fourth round was developed in Caracas, Venezuela reaching some partial agreements on the ceasefire and its verification. Furthermore, also in March 2023, President Gustavo Petro announced the start of a peace process with the FARC dissidents, who did not align to the peace agreement signed in 2016. To this date, we may not be able to anticipate the outcome, or consequences of such negotiations, and how they may affect our business. Moreover, the Latin American region has experienced a wave of protests and violence calling for demanding social reforms to pension and retirement regimes, access to health care, access to education, environmental protection, and taking measures against inequality, among others experienced strikes and other demonstrations relating to political unrest in the region. Such protests also occurred in Colombia, and the Colombian Government has failed to reach an agreement with the leaders of the protests. All of the above may impact the perception that matters have not improved in Colombia and may hinder our ability to access capital in a timely or cost-effective manner. There can be no assurance that continuing attempts to reduce or prevent guerilla, drug trafficking or criminal activity will be successful or that guerilla, drug trafficking and/or criminal activity will not disrupt our operations in the future.

The Colombian peso has historically experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. The Colombian peso depreciated against the U.S. dollar by 16.0% in 2021 and 20.8% in 2022, and it appreciated in 20.5% in 2023. The appreciation of the Colombian peso was promoted in the final quarter of the year by the market expectations about the FED reducing the U.S. interest rate. This appreciation of the Colombian peso helped the country lowering inflationary pressures but was not enough to maintain low interest rates. Fluctuations of the Colombian peso against the U.S. dollar would also affect the U.S. dollar value of distributions and dividends. Our sales in each of our countries of operations are also priced in local currencies. The effect of exchange rate fluctuations is mitigated by the fact that most of our operating costs and expenses are denominated in local currency and a significant part of our indebtedness is denominated in Colombian pesos. The Uruguayan peso depreciated against the U.S. dollar by 5.6% in 2021 and appreciated by 10.3% in 2022 and 2.6% in 2023. The effectiveness of monetary policy in the country may be a concern given the heavily dollarized economy. The Argentinian peso depreciated against the U.S. dollar by 22.1% in 2021, 72.5% in 2022 and 356.3% in 2023. The last depreciation of the Argentinian peso was promoted by the government of Javier Milei, seeking to reduce the public spend on maintaining the value of the currency against the U.S. dollar.

The Argentine government and the Argentine Central Bank have implemented certain measures that control and restrict the ability of companies and individuals to access the foreign exchange market to purchase foreign currencies and to transfer such currencies abroad. Those measures include restricting access to the Argentine foreign exchange market for the payment of dividends to non-residents stakeholders, restrictions on the acquisition of any foreign currency to be held as cash in Argentina, requiring exporters to repatriate and settle in Argentine pesos in the local exchange market, limitations on the transfer of securities into and from Argentina, establishing certain mandatory refinancing of debt maturities, restrictions to make intercompany debt service payments, restrictions on the ability of Argentine companies to make import payments, the implementation of taxes on certain transactions involving the acquisition of foreign currency, among others. In response to the re-imposed foreign exchange restrictions, an unofficial U.S. dollar trading market developed again in which the Argentine peso-U.S. dollar exchange rate differed substantially from the official Argentine peso -U.S. dollar exchange rate in the foreign exchange market. In addition, access to foreign currency and its transfer out of Argentina can also be obtained through capital markets transactions denominated "blue-chip swap" subject to certain restrictions, which is significantly more expensive than acquiring foreign currency in the foreign exchange. In the past, the Argentine government also imposed informal restrictions on the ability of entities and individuals to purchase foreign currency, consisting in de facto measures as those described in the first paragraph. Notwithstanding the measures adopted by the Argentine government in the recent years, in the future the Argentine government could reinstate further exchange controls, transfer restrictions, restrictions on the free movement of capital, and may implement other measures in response to capital flight or a significant depreciation of the Argentine peso, which could further limit our ability to receive dividends, distributions, or the proceeds from any sale of shares from our investments in Argentina. Such measures could lead to renewed political and social tensions, and could undermine the Argentine government's public finances, which could adversely affect Argentina's economy and prospects for economic growth and, consequently, adversely affect our business and results of operations.

In Colombia, in the years ended December 31, 2023, and 2022, approximately 72% and 71%, respectively, of our products were distributed through our distribution centers and warehouses and logistics platforms. As of December 31, 2023, we had 10 distribution centers and warehouses and 3 logistics platforms in Colombia. In Argentina, in the years ended December 31, 2023, and 2022 approximately 50% and 59%, respectively, of our products were distributed through our distribution center located in the central region of the country. In Uruguay, in the years ended December 31, 2023, and 2022 approximately 41% and 34%, respectively, of our products were distributed through our distribution centers and warehouses. As of December 31, 2023, we had six distribution centers and warehouses in Uruguay. The transportation system and infrastructure in Colombia, Argentina and Uruguay are underdeveloped and need significant investment to work efficiently and to meet our business needs. Any significant interruption or reduction in the use or operation of transportation infrastructure in the cities where our distribution centers are located or in operations at one of our distribution centers, as a result of natural disasters, fire, accidents, systemic failures, strikes or other unexpected causes, may delay or affect our ability to distribute products to our stores and may decrease our sales, which may have a material adverse effect on us. Our growth strategy includes the opening of new stores which may require the opening of new distribution centers or the expansion of the existing ones to supply and meet the demand of additional stores. Our operations may be negatively affected if we are not able to open new distribution centers or expand our existing distribution centers in order to meet the supply needs of these new stores.

We are increasingly dependent on credit card sales. In our Colombia segment, sales to customers using credit cards, including Tuya credit card, accounted for 32.7%, 33.1% and 32.2% of our consolidated revenue from contracts with customers in the years ended December 31, 2023, 2022 and 2021, respectively. In our Uruguay segment, customers using credit cards accounted for 31.2%, 30.2% and 29.1% of our consolidated revenue from contracts with customers in the years ended December 31, 2023, 2022 and 2021, respectively. In our Argentina segment, credit card sales accounted for 35.0%, 38.1% and 40.1% of our consolidated revenue from contracts with customers in the years ended December 31, 2023, 2022 and 2021, respectively. In order to offer credit card sales to our customers, we depend on the policies of merchant acquirers, including fees charged by acquirers. Any change in the policies of acquirers, including, for example, their merchant discount rates, may adversely affect us.