Brazilian Overview Monthly Report - MAY 2024

MAIN FACTS

The catastrophe that occurred in Rio Grande do Sul, a state in the extreme south of Brazil, due to floods, captured the attention of the entire country. Entire cities were destroyed and severe flooding hit the capital of Rio Grande do Sul, Porto Alegre, killing almost 200 people and thousands who remain homeless. It is a dramatic situation, as there will be a need for significant reconstruction, which had certainly never been considered previously. The waters also invaded the capital’s international airport, the 10th busiest in the country, leading to an indefinite interruption of operations.

In addition to the humanitarian aspects, which are priorities at this moment, aid for supplies and food, there will be another impact on the Brazilian economy due to the economic relevance of the state, the fifth largest GDP in the country, accounting for 6% of the total. It is a large producer of rice, soybeans, wheat, grapes, among other crops and there is doubt about the potential of the planted area and the productivity of the next harvest, since the quality of the flooded soil is not known. Not to mention that important industries such as steel, also relevant in the region, suffer and generate a negative effect due to a stoppage in production, workers shaken by the situation and logistical limitations, with roads closed in several places.

This scenario could contribute with an influence of -0.2% on the national GDP, which is forecast for this year at around 2%. It is worth pointing out another factor that should limit a stronger advance in the economy: high interest rates. The Central Bank’s Monetary Policy Council decided to slow the rate of decline in the basic interest rate from 0.50 p.p. to 0.25 p.p., taking the SELIC to the level of 10.50%

per year.

The caution in reducing interest rates further is due to the fact that the Brazilian government is unable to implement its plan to bring the fiscal deficit to zero for this year, postponing this intention to 2025, that is, 2024 being another year with the accounts in the red. This change brings uncertainty to the market and also affects the Brazilian currency, which continues to fluctuate between the level of R$5.10 for every dollar.

This, without a doubt, is the country’s Achilles’ heel, because it hampers investments and leaves the Brazilian economy with a huge weight on its shoulders, without the conditions for more robust traction. And this is possible to observe in the main sectors of the economy, which in the most recent data, from March, points to a 2.9% drop in industry, a 2.3% retraction in services and commerce is the only one that continues in the positive with an increase of 5.7%, but with a positive result concentrated in essential segments such as supermarkets and pharmacies.

The restriction of family consumption, of not being able to expand activities with products that require credit and long-term commitment, such as household appliances and vehicles, is derived from pressure on prices. IBGE’s IPCA, which is the official inflation index, registered an increase of 1.80% in the year to April. However, the main family consumption group, food and beverages, shows double this variation, 3.59%, still influenced by the El Niño period that harmed agricultural production, reducing the available supply.

Tourism has been losing its momentum throughout this year. In March, according to data from FecomercioSP, revenue grew only 0.4%, a

result supported by the 17% increase in the accommodation sector and 8.3% in food, as most of the segments analyzed are declining in the annual comparison, with emphasis on the first drop after a positive cycle of 35 months. The explanation is not a drop in demand, on the contrary, it continues to rise. The issue is that air tickets are reducing in price and this has contributed to lower revenue in the sector.

At the domestic level, therefore, there are many challenges ahead and complex ones to be resolved, from the consequences in Rio Grande do Sul, the vulnerability of Brazilian accounts, persistent inflation, low productivity and high tax burden, all these factors limiting further growth. strong sectors of the economy and consumption.

IMPORTANT FACTS:

1

Employment in the 1st quarter of this year reached 7.9%, below the 8.8% in the same period last year, according to the National Household Sample Survey, PNAD. This is the lowest percentage for the period since 2014.

2

From an external perspective, there is still an environment of caution with the United States maintaining high interest rates for a longer period of time than expected and China, which continues to have an aging population and without the same ability to activate the economy that it had previously. some years. What should be favorable to Brazil is the rapid improvement in indicators in Argentina, one of the country’s main trading partners, with inflation being controlled and public accounts being put in order.

By not doing its homework, Brazil misses a great opportunity to place the country at a higher level of growth, with the confidence of foreign investors and an even stronger generation of jobs and income. But history shows that Brazil always misses big chances, unfortunately.

The IBC-br, the preview of GDP measured by the Central Bank, showed a drop of 2.18% in March, however, it rose 1.04% in the quarter.

3

The average interest rate charged to consumers in Brazil reached 53.4% per year in March, well below the 58.6% in the same period in 2023, following the downward trend of the SELIC.

CONFIDENCE INDEXES:

The Consumer Confidence Index (ICC) recorded the second consecutive drop and reached 129.6 points in April, a drop of 2.2% compared to March, however, it remains 3.6% above the April 2023 level This is the lowest level since October last year and inflation is the big villain, especially in relation to food items which rise twice the general average. The drop in confidence has resulted in a decline in sales of durable goods segments, such as household appliances and electronics, as the budget is currently being directed towards basic household expenses.

The Commerce Business Confidence Index (ICEC) fell 1.9% in April and returned to January’s level. The 108.9 points for the month are practically the same as those seen a year earlier.

Entrepreneurs in the sector, in addition to seeing a less favorable scenario for the Brazilian economy in the near future, are finding it difficult to increase their margins given the increase in costs, whether operational or financial. This framework of uncertainties and challenges limits the advancement of trust.

Note: The ICC and ICEC range from 0 to 200. From 100 to 200 points is considered an optimistic level, and below 100 points is considered pessimistic.

Although the indicators are from the city of São Paulo, they follow the trend of what is happening in the rest of the country as the city, the largest in Brazil, represents 11% of the national GDP.

Consumer Confident Index (ICC) and Comerce Businessman (ICEC)

ICC ICEC

TRAVEL AND TOURISM

The year is approaching its halfway point and the performance of the different sectors of the Tourism economy continues at different speeds and moments. Leisure remains strong, but already at a slower pace than during the recovery boom, and corporate travel, which should recover between the end of this year and 2025, is experiencing momentum in the country, with anonymous accusations and investigation into the processes of a large TMC, which should generate changes in the market in general.

The air network continues to be a major challenge, even more so with Gol in Chapter 11 and Porto Alegre Airport closed indefinitely due to the floods that occurred in May. The forecast is for a modest increase in domestic capacity and limited international expansion.

MORE FLIGHTS BY LATAM

Latam Airlines announced, at once, an increase in flights to eight destinations abroad, starting October 27th:

from São Paulo/Guarulhos to Orlando (increase from 4 to 7 flights per week) from São Paulo/Guarulhos to Los Angeles (increase from 3 to 4 flights per week) from São Paulo/Guarulhos to Johannesburg (increase from 3 to 5 flights per week) from São Paulo/Guarulhos to Milan (increase from 5 to 6 flights per week) from São Paulo/Guarulhos to Rome (increase from 5 to 6 flights per week)

from São Paulo/Guarulhos to Madrid (increase from 7 to 10 flights per week).

The route from São Paulo/Guarulhos to Lisbon will receive monthly increases, going from 7 to 8 weekly flights from October 28th until reaching 11 weekly flights from December 9th.

Before that, on June 1st, Latam will inaugurate the Brasília-Santiago route with three weekly flights on board the Airbus A320 (174 passengers) and the Airbus A321 (220 passengers).

SALES AT BRAZTOA TOUR OPERATORS

Braztoa tour operators sold R$19.24 billion (almost US$ 4 billion) in 2023, an average growth of 39% compared to the previous year and an increase of 68.58% in the association’s representation compared to 2022. These companies transported 11.8 million passengers in the period, an increase of 22.7% compared to 2022.

THE DATA IS CONTAINED IN THE BRAZTOA 2023 YEARBOOK, RELEASED IN MAY.

Domestic: Travel through Brazil represented 60% of revenue, reaching R$11.55 billion in 2023, an increase of 122% compared to the previous year and a historic record in the entity’s records.

International: International travel also recorded growth, but more moderately, 22% more than in the previous year, reaching revenues of R$7.69 billion, which corresponds to 40% of total sales. Although with a more timid

performance, this result still represents a new record for international revenue, for the second year in a row, as recorded by Braztoa. This index highlights the resilience and potential of the international travel market, even amid challenges and changes in the global scenario. Passengers: In 2023, 11.8 million boardings were made by operators associated with Braztoa, an increase of 40.5% in the association’s representation compared to 2022; National represented 74% of total, reaching the mark of 8.71 million boardings, an increase of 60% compared to 2022;

The international sector grew by 4.5%, even so, surpassing the association’s historical numbers and reaching 3.09 million boardings, which corresponds to 26% of the total.

MORE DETAILS FROM THE BRAZTOA YEARBOOK:

70% of sales are made via travel agencies; 5% through freelance travel agents; 20% directly to the consumer; and 5% others.

65.52% of sales were made via credit card – at once or in installments;

18.46% via bank transfer; 8.31% via bank slip;

7.71% other

28.44% sold the complete experience (air + hotel + services and tours); 24.03% just accommodation; 17.22% land experience (hotel + services and tours);

13.78% cruises; 16.55% others.

BEST-SELLING CITIES NATIONWIDE

The Braztoa 2024 Yearbook also shows that the best-selling cities nationally in 2023 were:

1. São Paulo

2. Maceió and Porto Seguro

3. Porto de Galinhas and Recife

BEST-SELLING ATTRACTIONS

IN BRAZIL IN 2023:

1. The Beto Carrero World theme park (SC)

2. The Beach Park water park (CE)

3. The Iguaçu Falls natural park (PR)

DURATION OF TRIPS AND GENERATIONAL PROFILE

The main duration of national trips was 5 to 9 days, with an average national ticket of R$2,190. The generational profile of national travel was divided as follows:

29.86% of trips were made by Generation Y (34 to 43 years old);

28.82% made by Generation X (44 to 64 years old);

20.73% by Baby Boomers (64 to 80+ years old); 14.73% by Generation Z (14 to 33 years old); 5.86% by children/adolescents up to 14 years old.

Regarding advance purchase, the predominance is 31 to 60 days before boarding (23.13%), followed by:

More than 91 days before boarding (22.3%); Between 61 and 90 days before boarding (19.33%);

Up to ten days before boarding (17.87%);

Between 11 and 30 days before boarding (17.37%).

BEST-SELLING INTERNATIONAL DESTINATIONS IN 2023

Internationally, the region most sold by operators associated with Braztoa in 2023 was Europe. The main duration of international trips was more than 10 days and the average international ticket was US$2,564. The best-selling international countries were:

1. Unites States

2. Italy

3. Argentina

The best-selling international cities were:

1. Orlando;

2. Buenos Aires;

3. Lisbon, Rome and Punta Cana

Best-selling international attractions

Walt Disney World and Universal Orlando

OTHER NEWS OF THE MONTH

• Gol and Azul announce codeshare flights within Brazil.

• Trend Operadora holds Summit in Orlando, with partnerships with Universal Orlando, SeaWorld and Disney Destinations.

• CVC Corp says that B2B will grow again, after the profitability of companies in the segment has been restored. Bet on Visual international sales, that accounts for 60%

of total (the opposite of CVC, which has 40% of international sales).

• 50 thousand Brazilians are expected in Bariloche for the winter season.

• MSC Cruises holds convention in the Caribbean and announces season in Brazil with fewer beds available (one less ship) and more mini cruises.

Check out PANROTAS Magazine coverage of IPW 2024, in Los Angeles, ILTM Latin America, in São Paulo, and Sindepat Summit, in Foz do Iguaçu.

This report is produced by PANROTAS and FECOMERCIOSP to support your business decisions. The contents are valuable assets to Destinations and Travel Organizations, both domestic as well as international. For further information please contact ri@fecomercio.com.br redacao@panrotas.com.br