MAIN FACTS
The main economic news from abroad came from the United States, with the Federal Reserve maintaining the interest rate at its current level, between 5.25% and 5.50% per year. The indication now is that there should be no changes throughout this year, contrary to expectations that there would be a possible start of the downward cycle. The economic data are positive, with the job market booming and services inflation still higher than expected, which is why the American Central Bank is cautious about keeping interest rates at their highest.
And, obviously, any measure in the American market has an influence on the world economy, especially in emerging countries like Brazil. The most significant impact at the moment was on the exchange rate, fluctuating close to R$5.50 for each dollar, whereas a few weeks ago it was quoted slightly above five reais. This devaluation of the real is not only due to American interest rates, but due to the increase in uncertainty in the Brazilian economy, mainly due to the fiscal issue, of how the government should work to balance its accounts. More than that, there is a climate of legal and economic insecurity, with measures being taken by the government with the aim of increasing revenue without proper negotiation with the sectors, which brings a natural increase in distrust and criticism on the part of businesspeople.
Faced with a more turbulent scenario, the Brazilian Central Bank prematurely ended the cycle of falling interest rates, which began in August last year, and decided to maintain the SELIC at 10.50% per year. This cautious movement helps to avoid a stronger devaluation of the real, contributing to smaller effects on inflation. The relatively positive point is
that commodity prices are low, which helps not to put pressure on prices, especially food prices in the country.
Addressing this topic, the IPCA, the country’s official price index, rose 0.46% in May and accumulated 3.93% in the last 12 months. There is still an expectation of some pressure on the prices of some foods resulting from the tragic situation of the floods in Rio Grande do Sul, which impacted either the production or the flow of products in the region.
Meanwhile, the Brazilian economy shows good growth in the first quarter of this year, with an increase in GDP of 0.8% in relation to the immediately previous period, with strong seasonal influence from agriculture (11.3%) and services (1. 4%). Investments, although they rose 4.1% in the first three months, continue to lose share in relation to GDP, with 16.9% compared to 17.1% in the 1st quarter of 2023. With this percentage it is difficult to imagine stronger growth in the country, mainly with the brake on the interest rate reduction cycle, keeping credit expensive for companies and families.
Not to mention that the data for the next period, the 2nd quarter, will capture the losses in Rio Grande do Sul, a state that participates with just over 5% in the national economy, an important producer of agricultural and industrial products. The expectation is that there will be an impact of -0.2 percentage points on Brazilian GDP.
Despite a favorable cycle, Brazil remains in its eternal trap of low growth. The economic sectors have even shown very positive results. However, a relatively low level of investment will lead to a bottleneck in the long term, given the imbalance of supply and demand. In other words, demand today continues to rise with the advance in the job market and the recovery of income, but, on the
other hand, there is a timid increase in supply.
To give you an idea, the unemployment rate in the country fell to 7.5% compared to 8.5% in the same quarter ending in April last year. With the increase in the average real income of workers, it enabled an increase of almost 15 billion reais in the mass of income in the quarter (Feb-Mar-Apr), which means more resources in the possession of workers. This extra money helps with commercial sales, for example. In April, according to IBGE, sales rose 2.2% in the annual comparison, and 4.9% in expanded retail, which includes the vehicle, supermarket wholesale and construction materials sectors. In services, there was an increase of 5.6% in the annual comparison and accumulated an increase of 2.3%. And the industry expanded 8.4% in April,
IMPORTANT FACTS:
According to IBGE’s IPCA, accumulated inflation in the year up to May was 2.27%. However, the main family consumption group, food and beverages, rose almost double, 4.23%, still under the effects of El Nino which reduced the supply of some products since the end of last year. 1
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also according to information from IBGE. And according to the monthly survey by FecomercioSP, national tourism earned R$15.7 billion in April, an increase of 4.7% compared to the same period in 2023, and accumulates an increase of 2.6% in the four months.
Therefore, these positive numbers should be celebrated, but, at the same time, they must be analyzed with caution, as there are numerous challenges that could hinder this positive cycle in the medium and long term, the main one being fiscal balance. Without a clear direction on the topic, doubts remain about the trajectories of inflation and public debt which, consequently, limit the reduction of interest rates and the entry of investments, hindering stronger growth, with the projection of 2% remaining. for this year, a decrease compared to last year’s 3%.
New estimates point to a 5.9% reduction in the 2024 harvest, with drops in important productions for the Brazilian table such as rice (-6.5%), beans (-6.1%) and soybeans (-3.3%), according to IBGE.
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National tourism grows 2.6% in the first four months, with emphasis on the transport rental sector (12.3%) and accommodation services (7.2%). The segment with the highest revenue is air passenger transport, at R$15.9 billion for the period, an increase of 2.5%, according to a survey by
CONFIDENCE INDEXES:
The Consumer Confidence Index (ICC) returns to 126.5 points in May with a monthly drop of 2.4%. However, this level is 3.5% above that recorded in the same period last year. Although the job market in the capital is booming, inflation, especially food inflation, is disrupting families’ shopping routines. Furthermore, São Paulo residents are increasingly having a negative assessment of the country in the next 12 months, due to low growth and deficit public accounts. The Commerce Entrepreneur Confidence Index (ICEC) retracted 0.9% in May and stood at 107.9 points, practically the same as seen in May 2023. Entrepreneurs are pessimistic regarding the current situation of the Brazilian economy and with the retail sector. In addition to low Brazilian growth, costs have risen, which affects sales results.
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.
Confident Index (ICC) and Comerce Businessman (ICEC)
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
ICC ICEC
TRAVEL AND TOURISM
More international flights. Little by little, the industry is moving towards surpassing the international flight supply compared to prepandemic levels, which should occur by 2025. In the last month there were many announcements of new flights, and even resumptions, as is the case of the São PauloMunich flight, by Lufthansa. The return will be on December 9th, three times a week. In addition to Lufthansa, these companies announced new international flights or increased frequencies:
• Gol: flights to Aruba, Cancun and Costa Rica. The company promises to strengthen its flights to Florida, Bogotá and Buenos Aires and return strongly to the Caribbean. The company also resumed the connection between Fortaleza and Orlando.
• Copa Airlines: New flight to Florianopolis (bound to Panama City) and increased frequencies to Brasília.
• Tap Air Portugal: Flight to Florianopolis, due to the closure of Porto Alegre Airport. And return flight to Manaus, starting November 4th.
• Iberia: Iberia announced that, from October, it will operate two daily flights between São Paulo and Madrid and that, from June, it will offer a flight six times a week between Rio de Janeiro and the Spanish capital. The return of Royal Air Maroc to Brazil and, as
we saw in the last BOM Report, the new routes and additions of Latam Airlines leaving Latin America have also been announced. Including more flights on the São Paulo-Los Angeles route.
RECORD NUMBER OF PASSENGERS
In May, the number of passengers transported on international flights grew for the 38th month in a row in Brazil. The country registered a record number of travelers going abroad (1.9 million tourists, the best result for the month since the beginning of the historical series — which began in 2000). The result is 18.2% higher compared to the same period last year and exceeds the pre-pandemic volume. The data are from the National Civil Aviation Agency (Anac) and also reveal that the route that transported the most passengers to Brazil was Santiago-São Paulo. Last month, more than 112 thousand tourists arrived in the country using this flight (6% of the total transported). The Chilean capital also had the second route with the highest number of travelers, to Rio de Janeiro, with around 50 thousand tourists. The Bogotá (Colombia)/ Guarulhos section rounds out the top 3, with more than 48 thousand people transported. The United States, as in May last year, continued to be the country with the highest volume of passengers transported. In the fifth month of this year, there were more than 325 thousand passengers arriving or departing for the country, an increase of 10.8% compared
to the same period in 2023. Argentina and Portugal, with 231 thousand and 218 thousand, respectively, are at the top of countries most visited by tourists who are on Brazilian soil. Chile, in turn, was the country that showed the highest percentage of growth in the movement of travelers to and from Brazil. With almost 200 thousand passengers, the country grew 70% in this indicator. In May 2023, the movement reached 116 thousand.
OTHER NEWS
• Travel agencies and OTAs have won lawsuits in court so that they do not have to respond for all problems throughout the customer’s trip, remaining responsible only for the part that is their responsibility (as an agency).
• The new General Tourism Law includes this specification and is in the final stages of approval by Congress.
• Israel now requires electronic visas for Brazilians.
• Mexico postpones electronic visa decision and tourism companies feel the impact of this impasse.
• Gol announces that it must leave Chapter 11 at the beginning of 2025 and that it has
completed the first phase, of operational normalization. New teams and leadership for the commercial department should be announced in the coming days.
PREPARE FOR THE SECOND SEMESTER:
• Abav Expo (September 26th to 28th, in Brasília)
• Fit Argentina (September 28th to October 1st)
• Unav Awards (October 18th and 19th)
• BTM (October 24th and 25th)
• Festuris (November 7th to 10th)
And PANROTAS will have 2 events (one of them new) and special actions:
• Anchor stand at Abav Expo
• Anchor stand at Festuris, where we will celebrate our 50th anniversary
• Download 3rd edition (event for Corporate Travel managers): September 16
• Travel Tech Hub Day (event on Technology for Travel and Tourism – 1st edition): November 4th
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
