APRIL/22
BRAZILIAN ECONOMY.........................................................................2 IMPORTANT DATA.................................................................................3 LATIN AMERICA MACRO DATA..............................................................3 CONFIDENCE INDEXES..........................................................................4
TRAVEL INDUSTRY ............................................................................5
MAIN FACTS Although the tense atmosphere because of the war in Ukraine has cooled down, its consequences for the global economy are growing in consumers’ wallets. The rise in commodities’ prices, especially oil, pushed up the inflation indexes and Brazil has absorbed this fact already in March’s IPCA (Extended National Consumer Price Index, by IBGE). This month’s inflation has been the highest one since 1994, 1.62% higher and 11.30% accumulated in 12 months. The group that has most driven the index was transportation, drawn by the increases in gas (6.95%) and diesel (13.65%). And as the country depends on the highway network, the 25% readjustment of diesel oil in midMarch given by Petrobras, resulted in a ripple effect in the economic chain by making the freight more expensive. Food, for instance, has increased 2.42% in this third month of the year. Besides the issue with high transportation costs, and also climate matters, with excessive rain in some regions of the country, and the effect of the rise of the wheat and soy in the international market, again an outcome from the war. Such that the soy oil rose almost 9% in the month, and the wheat flour 4.03%. This has been the Central Bank’s major problem, and it keeps increasing interest rates to counteract the rising prices. From last year to date, the basic rate has increased from 2% to 11.75% a year, and the effect on the inflation was almost null. Especially because it’s known that the problem comes from the supply shock, and not from excessive demand. Even so, the tendency is for new rises in the rate, and it must reach an amount between 13 and 14% until the beginning of the second semester. Anyhow, the highest interests have stimulated the arrival of speculative capital in the country and, as a consequence, this helps valuing the national currency, currently ranging next to R$ 4.70 per dollar, considering that at the beginning of the year, the dollar exchange rate was slightly above R$ 5.50. However, the stronger Real has only been able to mitigate the effects from commodities on the rise in the short-term, but in the mid and long-term it will have a huge positive effect on the Brazilian economy. Another variable that has helped with the families’ income rearrangement is the job positions. Only in the first bimester of this year, almost half a million new jobs were created, formally, according to data by CAGED (General Register of Employed and Unemployed Individuals). This number shows an acceleration in the job market, which in 2021 generated 2.7 million jobs. Considering these numbers, it was possible to reduce the amount of unemployed people in Brazil from 15 to 12 million, contributing to protecting profits from inflation and sales from the trade industry, even if at a slower pace. In February, commerce sales registered a slight growth of 0.3% in relation to the same month last year. In the bimester, the balance is still 0.6% negative. The performance, however, has been quite uneven. While the drugstore sector breaks records, with an annual increase of 9.4%, the furniture and home appliances segments retract 12.6%. While supermarkets present a smaller outcome, of 2%.
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The industrial business is the one that most feels the economic cooling, and embitters a downfall of 4.3% in February, and accumulates -5.8% in the bimester. As for the service sector, taking advantage of a weaker comparison base, it registered an increase of 7.4% in the second month of the year and accumulated 8.4% in the first bimester. This outcome was influenced by those sectors linked to tourism, such as accommodation and food services (18.1%), and air transport (37.5%). On the monthly survey by FecomercioSP, Brazilian tourism profited R$ 13.2 billion in February, 17.8% higher in the yearly comparison. Yet, the current threshold is still 15.7% below the pre-pandemic level, from February 2020. Generally, the Brazilian economy outlines important signs of recovery and the major one is the job positions. However, inflation has become the greatest challenge at the moment, and it should remain so for the next few months, not only in Brazil, but in most countries. The vast increase in prices undermines workers’ incomes and reduces the purchasing power. The interest rate, at 12% a year, contributed negatively to a slower recovery, discouraging productive investments with the income and job generation. Consequently, the expectation is still of a GDP near zero with high inflation, with better projections only for 2023.
IMPORTANT DATA: Good news comes from the farming industry. The estimation for the Brazilian 2022 grain harvest is a record, with 258.9 million tons, according to the survey by IBGE. Rises in prices and amounts should help increase the agricultural profit and the GDP of producing states.
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The increase in the basic economic interest rate has pushed up the credit to consumers. The average interest employed to consumers by the financial system went from 39.4% to 46.3% per year, in one year, according to data by the Central Bank.
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Finding it difficult to consume through the income, families are seeking more credit, however the interest has risen. So much that, in March, there was a record number of indebted families. According to the National Confederation of Commerce (CNC), the rate of families that have any kind of debts has reached 77.5%.
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Latin America Macro Data
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Unemployment rate
7,00%
11,20%
7,50%
12,90%
3,70%
8,90%
Basic interest rate
47,00%
11,75%
7,00%
5,00%
6,50%
4,50%
Inflation (LTM - feb*)
55,10%
11,30%
9,40%
8,53%
7,45%
7,75%
*LTM - Last Twelve Months Until Dec Legend: Green, Red and Black The data get better, worse and equal than the previous month.
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CONFIDENCE INDEXES: The Consumer Confidence Index registers a slight growth of 1% going from 104 to 105.1 points between February and March. However, in relation to March 2021, the index presents a downfall of 6.9%. The favorable performance in the month is related to the more positive perspective after the acknowledgement that the Omicron variant wouldn’t stay for longer, having reached its peak at the end of January and in February. The indicator doesn’t advance more due to the inflation that has taken the peace of families day-to-day. The Trade Entrepreneur Confidence Index (ICEC) pinpointed a downfall of 2% in March and reached 114.4 points. The outcome can be explained by the slower pace of sales than expected previously. Nevertheless, in relation to last year, the ICEC rose 16.2%, but being compared to a much more delicate moment, when the country had its second wave of the coronavirus pandemic and the trade business going back to having restrictions on its activities and on the circulation of people. Consumer Confident Index (ICC) and Comerce (ICEC) Consumer Confident Index (ICC) Businessman and Comerce Businessman
(ICEC)
150 140 130 120 110 100 90 80
ICC
fev/22
nov/21
ago/21
mai/21
fev/21
nov/20
ago/20
mai/20
fev/20
nov/19
ago/19
mai/19
fev/19
nov/18
ago/18
mai/18
fev/18
nov/17
ago/17
mai/17
fev/17
nov/16
ago/16
mai/16
60
fev/16
70
ICEC
Note: The ICC and ICEC vary from 0 to 200. From a 100 to 200 points, it is considered an optimistic threshold, and below 100 points, a pessimistic one. Although the indexes are from the city of São Paulo, they follow a tendency of what is happening in the rest of the country since the city, the largest in Brazil, represents 11% of the National GDP.
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TIME FOR INTERNATIONAL TRIPS AND EVENTS In the domestic market, there are some explanations for the increase in the airfare, which has been scaring Brazilian travelers: higher leisure demand, the corporate segment demand is gradually returning, but in a consistent way, higher costs for the airlines, especially the fuel and the exchange rate, the return of events and the end of restrictions, like the use of masks. All those factors conspire in favor of an overheated demand domestically, and the offer of Brazilian airlines already exceeds 100% in comparison to the pre-pandemic scenario. In the international market, the currency is disturbing, although Real showed a reaction regarding the dollar in the last weeks, the costs are high (but the fuel is cheaper than the one for domestic flights), restrictions are falling down (and Brazilians think twice before having to travel and going on wasting time and money with Covid tests), but there is a key factor for the fares to be so high and many Brazilians to be postponing their vacation: the seat offer hasn’t reached normal levels yet. As for the national companies Latam and Gol, international destinations are already back to the air network, but only with 50% of the pre-pandemic capacity. In other words, seats are limited. As we have seen crowded flights, even with prices skyrocketing, the tendency is that with the input of more flights, the fares drop a little and the volume of travelers increase considerably. TOP VISITOR The international market should return to 100% of the pre-pandemic levels next year (2023), but Brazil already shows promising results: we are Top 4 in sending tourists to the United States (February data), Top 3 in visitors at Walt Disney World and Universal Orlando parks, and frequent visitors in the Caribbean and Europe. The American borders only reopened last November, therefore, this accomodation is natural, and the great season will be in July, for which there are already many bookings, including from groups to Florida. The Brazilians are back planning trips and the downfall of restrictions, like the end in the demand for Covid tests when returning to the country, only motivates this planning return. If last year, the Caribbean and Europe dominated operators’ sales, according to the annual report by Braztoa, the sector’s association, this year the United States should fight for first place. But that depends on the return of flights. NATIONAL AIRLINES In May, Gol will resume its connections from Brasília to Miami and Orlando, 4 times a week, which corroborates with the theory that this comeback is happening with fewer frequencies. Latam has already resumed all the international destinations that it operated before the pandemic (except for Israel and South Africa), but with 50% of seats in relation to the previous period. And Azul is being very conservative, with flights to Orlando (4 times a week) and Fort Lauderdale (5 times a week), departing from Campinas.
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The national companies take advantage of deals with the American ones to increase its capillarity and access to the United States: Latam and Delta only await the approval by the American FAA to start a joint venture; Azul and United Airlines are keeping the deals in several flights; Gol and American already began an alliance. VISA TO THE UNITED STATES If the currency is still unfavorable for trips (especially to the upper middle class, which makes family trips) and there are still restrictions for travels (as the necessity for a Covid test to enter in some countries), the Brazilians face one more obstacle: many have an expired American visa or have never gotten one. The American consulates in Brazil are fully functioning to meet this restrained demand, that includes millions of Brazilians whose 10 years visas have expired during the pandemic. The consulate in São Paulo is an example of this effort, with 2.5 thousand visas being issued per day, and a dynamic system that keeps opening new interview slots during the week. Even so, there is a delay of months for an opening to get the visa. The upturn situation is complex, long, but it is happening. This year we have the presidential elections in Brazil, FIFA’s Soccer World Cup in a different period (November and December), and still many economic uncertainties and difficulties. Traveling abroad still focuses on the upper classes and on the demand. The corporative segment has shyly returned to traveling abroad after March. We still have the events and incentives to return. The important thing is to be in Brazil, close to the market and getting real time information. And, if possible, more attractive prices and benefits.
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.
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