MAIN FACTS
In Brazil, the hot topic on the agenda at the moment is Tax Reform. At the beginning of July, the Chamber of Deputies approved the basic text that will be discussed in the Federal Senate, with no voting date yet scheduled. From an extremely complex current tax system to what is being addressed, there is a great advance. However, VAT (Value Added Tax), which will unify taxes, is expected to be just below 30%, which keeps the country with one of the highest tax burdens in the world. Furthermore, there is a risk of tax increases for the services sector, the most important in the economy (and where Tourism is inserted). In other words, this is an improvement in the system, but it still burdens productivity in the business environment and loses global competitiveness.
And the exchange rate has also been a focus of alert in the national economy. After stress in the exchange rate of the real, reaching R$5.70 for each dollar, with the appropriate combination of external and internal factors, the Brazilian currency gives way and returns to oscillation close to R$5.50. Still, it is a higher level than seen in previous months, of just over 5 reais. Remaining at the current level for a longer period of time could have effects on internal inflation.
For now, the data is still favorable. According to IBGE, prices slowed down 0.21% in June, compared to 0.46% in May, and accumulated an increase of 4.23% in the last 12 months. This percentage follows the defined inflation target parameters defined by the National Monetary Council. However, for the coming months, there are forecasts of relevant pressures such as the adjustment in the price of gasoline, alleviating a
little the lag in relation to the international price, and in electricity, with the change in the tariff flag, from green to yellow, since it will be necessary to use thermoelectric plants until the end of the year, at a higher cost. Both consumption items have relevant weights in the indicator and in the household budget. What has brought relief to families’ daily lives is the improvement in income through the very strong job market. The unemployment rate, in the quarter ending in May, reached 7.1%, the lowest level in 10 years. With relatively low inflation, it has allowed a gain in income, which is nothing more than the money held by workers, which reached R$318 billion in the quarter, an increase of 9% compared to the same period last year , already discounted for inflation.
As Brazilian families do not have a saving profile, on the contrary, they spend practically everything they receive monthly, the result can be seen in the real economy. The most symbolic data is sales in retail trade, which, in May, grew 8.1% in the annual comparison, with emphasis on supermarkets (10.5%) and pharmacies (13.6%). Even those nonessential sectors that depend on credit also followed the positive trend, such as furniture and household appliances, with an annual increase of 2.1%.
Although services, in general, showed a slight increase in May, of 0.8%, it is important to carry out a more detailed analysis of the results, as there are numerous activities with very different characteristics. If, on the one hand, transport services fall by 4.8%, services provided to families rise by 6.5%, also according to an IBGE release. On this topic linked to Tourism, FecomercioSP, through its monthly survey, points out that the sector grew 1.9% in May compared to the same period last year. However, there is an imbalance, with the food
and accommodation sectors having respective increases of 6.6% and 16.6%, and, on the other hand, a drop in road passenger transport (-7.9%) and in air transport of passengers (-3.1%). Part of this last result has to do with the reduction in average air ticket prices, as shown by data from IBGE and ANAC. In the last 12 months, there was deflation of 2.6%.
In a regional analysis, it is worth highlighting the strong drop of 16.6% in Tourism revenue in Rio Grande do Sul, as a result of the floods in May, which interrupted the activities of the region’s main airport, Porto Alegre, capital of state. Industry, on the other hand, fell 1% in May, but rose 2.5% in the year. This is a warning sign, as with trade growing strongly and without a
IMPORTANT FACTS:
1
According to the National Commerce Confederation (CNC), the default rate in Brazilian capitals fell from 29.2% to 28.8% between the months of June 2023 and 2024, a consequence of an improvement in the economic conditions of families, more employment and less pressured inflation.
manufacturing industry following the same trend, it could generate some inflationary impact, given the imbalance between supply and demand. Therefore, the need to seek fiscal adjustment, control over public accounts, to help reduce interest rates and exchange rates, providing an increase in confidence and investments, essential to accelerate the pace of the economy. The government has even been announcing some spending cuts, but these are still insufficient to bring about a more optimistic scenario in relation to the fiscal deficit.
The Brazilian economy has seen important developments in its large sectors and with social gains due to the job market. The challenges remain and need to be resolved so that the current gain does not become, once again, a flight of chicken.
2
Cattle slaughter in Brazil grew 26% in the 1st quarter of this year, reaching 9.3 million heads. This has led to a deflation in average meat prices in Brazil, of -6.5%, according to IBGE.
3
Until May this year, the country created 1.1 million formal job vacancies, according to CAGED. The majority comes from the services sector (624 thousand), followed by industry (210 thousand).
CONFIDENCE INDEXES:
The Consumer Confidence Index (ICC) registered growth of 0.5% in June in the monthly comparison and rose 1.4% in the annual comparison and reached 127 points. More modest inflation has contributed to maintaining household optimism at a high level. However, the Brazilian economy continues at a slow pace and increases in gasoline and electricity prices become factors that hinder a stronger increase in confidence.
The Commerce Business Confidence Index (ICEC) fell once again by 0.9% and reached 106.9 points in June, the lowest level of the year. Sales in the region are breaking records, however, high costs for business owners have made it difficult to transform sales into consistent profits. Furthermore, the instability and unpredictability of the national economy raise fears among businesspeople in São Paulo.
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)
TRAVEL AND TOURISM
July arrived with an avalanche of changes of command in Brazilian Tourism companies and destinations. Airlines such as Gol and Delta, TMCs such as Avipam, BeFly, Copastur and Onfly, GDS Travelport, and even destinations such as Argentina and Florida have made moves that impact the market in Brazil. The biggest surprise was the departure of Danillo Barbizan from Delta to take over as commercial director at Gol. Delta and Gol were partners in the past, but the former broke the relationship to sign a strategic agreement with Latam.
At Delta, there is still no information about Barbizan’s replacement.
Other July changes:
• Reifer Souza left BeFly to become chief revenue officer at Copastur.
• Peterson Prado left TMC Avipam for travel tech Onfly.
And two favorite destinations for Brazilians saw important changes:
• Marcela Cuesta left Argentine Tourism. She was a constant interface between Brazilians and the destination for years.
• And Gabriel Martinez left Brightline for Visit Florida. He is the new global director of Travel. Florida is the number 1 destination for Brazilians and the market awaits news and projects from the Martinez administration, which has always been close to the Brazilian trade in the destinations and companies where he has worked, such as Visit Lauderdale and SeaWorld.
• And finally, expectations are high for Fred Dixon’s tenure at the helm of Brand USA. Dixon knows the Brazilian market well (which is one of the Top producers for New York, his former home) and will know how to further enhance our desire to travel to the United States beyond traditional destinations. Brazil awaits you, Fred.
CORPORATE TRAVEL
Held in Atlanta this year, the GBTA Conference brought the results of the 2024 Business Travel Index Outlook, carried out with 4,100 corporate travelers in 72 countries and 44 industries. The sector is expected to reach expenditures of around US$1.48 trillion, with growth forecast to US$2 trillion in four years, which demonstrates post-pandemic economic stability.
Latin America is responsible for 3.6%, reaching US$53.3 billion. Brazil is the 10th country in the ranking of those that spend the most on corporate travel, with a forecast of US$ 30.3 billion this year, and growth of 6%. The Brazilian corporate travel market lags behind China, the United States, Germany, Japan, the United Kingdom, France, South Korea, India and Italy. The Top 15, according to Alagev’s survey, accounts for 84% of the total, that is, US$1.25 trillion.
In its most recent report of the year, Alagev confirms the good moment of corporate travel in Brazil. Estimated expenses by companies with corporate travel in April 2024 reached R$ 11 billion (US$ 2 billion), a value 4.8% higher compared to the same month in 2023. Data are from the Corporate Travel Survey (LVC), created
by FecomercioSP in partnership with Alagev.
The value accumulated over the first four months of the year also grew by 4.8% compared to the same period last year, totaling revenues of R$40.1 billion (around US$8 billion) for the corporate travel.
The amount invoiced in April is the second largest historical gain of the month, behind only that achieved in 2014, and there is the prospect that, over the next few years, this record could be surpassed.
MORE NEWS FROM JULY
According to the National Civil Aviation Agency (Anac), 11.9 million international passengers traveled abroad in the first six months of the year, an increase of 20% compared to the first half of last year.
In total, including domestic flights, there were 56 million passengers in the semester, an increase of 4% over 2023.
International passengers transported by airline (1st half 2024):
1 – LATAM 3.32 million
2 – TAP 983 thousand
3 – GOL 845 thousand
4 – AF-KLM 582.6 thousand
5 – COPA 570 thousand
6 – AZUL 548 thousand
7 – AEROLÍNEAS ARGENTINAS 516 thousand
8 – AMERICAN AIRLINES 497 thousand
9 – UNITED AIRLINES 404 thousand
10 – JET SMART 379 thousand
11 – IBERIA/BRITISH 362.5 thousand
12 – SKY 353 thousand
13 – DELTA 318 thousand
14 – AVIANCA 313 thousand
15 – LUFTHANSA GROUP 280 thousand
16 – ITA 261 thousand
17 – FLYBONDI 234 thousand
18 – QATAR 197 thousand
19 – EMIRATES 181 thousand
20 – AIR CANADA 168 thousand
21 – AIR EUROPA 149 thousand
22 – TURKISH 126 thousand
AND
• The market served by Porto Alegre Airport (inbound and outbound) should return with strength by the end of the year. The airport is expected to reopen for flights in October, with full operation until December. The airport has been closed to landings and takeoffs since May, due to flooding in Rio Grande do Sul.
• At Embratur, strategic changes: Bruno Reis takes over as Director of Marketing and Business, with the departure of Jaqueline Gil. Monica Samia also left the agency.
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
