april/21
BRAZILIAN ECONOMY...........................................................................2 IMPORTANT DATA....................................................................................3 LATIN AMERICA MACRO DATA.................................................................3 CONFIDENCE INDEXES.............................................................................4
TRAVEL INDUSTRY................................................................................5 LUXURY TRAVEL WITH ILTM...............................................................7
MAIN FACTS Brazil continues to face the coronavirus pandemic, with its main regions maintaining restrictions on operations of non-essential sectors and circulation, in the face of the challenging situation of the health system. At the same time, on the economy side, families face a major problem in their daily lives, inflation. According to the IBGE, the official index, the IPCA [Extended National Consumer Price Index], has risen 6.10% in the 12-month period calculated up to March. This variation is above the established by the Central Bank as a target for this year, 3.75%. Also, regarding prices, food and transport groups, which weigh the most in the household budget, have risen 14% and 8.6%, respectively, in one year. In view of this scenario, in order to curb the increase in prices, the Central Bank decided to raise the basic interest rate, the SELIC, from 2% to 2.75% per year, the first increase in six years. However, there is an interesting discussion: many consider the moment as inappropriate for the increase of interest rates, due to the economy with no reaction to the crisis, which may make it difficult to recover and it is even more expensive for the government to finance its debt. On the other hand, there is the interpretation that the increase in interest rates will help to contain inflation, not by reducing the stimulus to demand, but to curb the devaluation of the real. In fact, interest rates are unlikely to have an effect on inflation in the short term because the problem is in supply, in rising costs. Recalling that the dollar at the beginning of last year was quoted approximately R$ 4 and it is now around R$ 5.70 per dollar. In other words, imported products became more expensive, both those that reach the consumer directly, as well as production inputs, as is the case with most agricultural pesticides for production in rural areas, parts for the automobile and electronics industries, among others. Added to this, the advance in commodity prices, products quoted in dollars, put pressure on production costs. A more expensive dollar also provided an advantage for exports. Slaughterhouses, for example, are allocating part of their production in the international market, then, the internal supply is reduced, raising the price to the consumer. In some regions, the stock of beef cattle is very low, which makes it possible to project a scenario that is still challenging ahead. The demand situation, on the part of the consumers, is very delicate, with the decrease of the purchasing power and the fear of losing their job in the middle of the second ─ or third, as some say, coronavirus wave. So much so that the retail trade continues, for the second consecutive month, to have negative results. In February, sales fell 1.9% after falling 3.1% in the first month of the year, always compared to the same period of the previous year. While in supermarkets sales decreased 4.6%, sectors related to civil construction and renovations are avoiding a worse scenario for trade. Household appliances, furniture and building materials managed to surpass sales occurred in February 2020. Sales are increased in these sectors and the IBGE confirms it with the annual increase of 14.5% in the cost of civil construction. The industry, in turn, registered a slight increase of 0.4% in February, compared to the same period in 2020. As with retail trade, there is also an asymmetry in the sector results of industry. The group of capital goods, such as machinery and equipment, grew 16.1%, while the production of durable goods fell 8.4%. Part of the industry is trying to restore the balance between supply and demand, but the lack of products and the increase of input prices are raising difficulties for the recovery of the industrial sector.
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The service sector, the most important in the economy, with almost 70% of GDP, registered an eleventh consecutive drop of 2%. Some sectors related to information and communication are still able to breathe in the midst of the crisis, but the tourism sector remains negative and, in January, retracted 30.2%, accumulating a loss of R$ 60 billion in the period of the pandemic (approx. US$ 10.5 billion), according to calculations by FecomercioSP. To mitigate the impacts of the pandemic and help the most vulnerable, emergency aid, which was important for the recovery of the economy in the second half of last year and ended in December, will return for a period of four months with smaller average installments, R$ 250 (approx. US$ 44). The impact on the economy will be lower in this new cycle, but it helps not to disrupt local economies in inland areas in Brazil. On the other hand, the political wear and tear regarding the budget vote and the fact that investors fear the government to break the spending ceiling is another complicating element at this time, even for the Central Bank to seek the valorization of the national currency, while risks push up the value of the dollar. At last, there are still many challenges ahead, and it is complex to make medium and longterm forecasts. What is expected at this time is the acceleration of mass vaccination, as one of the main factors for the resumption of the economy in a safer and more sustainable way. IMPORTANT DATA: The employment information, released by the Ministry of Economy, is positive. In February, just over 400,000 formal jobs were created, and a balance of 660,000 formal jobs accumulated in the bimester, with emphasis on Services (254,000), and Industry (185,000)
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IBGE data show that 88.1% of students above 10 years old have access to the internet, being most of the accesses made through cell phones. n
E-commerce grew 21% in February, with highlights for drugstores (86%), pet products (79%) and food and beverages (53%). Tourism, on the other hand, fell by 23.25%. The data are from the company Conversion.
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The indebtedness of Brazilian families rose from 66.7% to 67.3% between February and March. The positive point is that default, when it is not possible to pay the debt until the due date, was stable at 24.4%, according to a survey by the National Trade Confederation. n
Latin America Macro Data
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Unemployment rate
11,00%
14,20%
10,30%
15,90%
4,40%
14,50%
Basic interest rate
38,00%
2,75%
0,50%
1,75%
4,00%
0,25%
Inflation (LTM - oct*)
40,70%
6,10%
2,88%
1,51%
4,67%
2,94%
*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 showed a drop of 2.9% in March, and reached 112.9 points. It is natural that there is a reduction in confidence because the capital São Paulo has gone through the most rigid phase of restrictions. In addition to the fear regarding the occupation of the health system with patients with Covid-19, the fear of closing stores, losing jobs, the impact of inflation on the budget are factors that make consumer confidence to decrease. The Retail Businessmen Confidence Index (ICEC) increased again after two consecutive decreases, but the indicator is still pessimistic: 98.5 points, 1.4% above the percentage seen in February. Compared to March 2020, the drop in confidence is 21.3%. Activity restrictions reached non-essential sectors, which remain with the doors closed. The businessmen’s pessimism is related to a drop in sales, difficulty in paying day-to-day operating costs, obtaining credit in the market and the lack of predictability of when business will reopen. Consumer Confident Index (ICC) and Comerce Businessman (ICEC)
Note: The ICC and ICEC range from 0 to 200 points. The level from 100 to 200 points is considered optimistic and below 100 points, 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 since the largest city in Brazil represents 11% of the national GDP.
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TRAVEL AND TOURISM - APRIL 2021 Brazilian destinations still have many restrictions, despite the beginning of flexibilization of the measures adopted to combat Covid-19 in the second half of April, and as long as they last consumers will continue to postpone their trips for the second half of the year. In April, national airlines operated less than 200 flights a day each. As a comparison, in December 2020 there were about 650 flights a day. It is the closest approximation of April 2020 rates, when the essential network of each company offered 50 flights a day. In March 2021, the Brazilian Airline Association (Abear) had foreseen an offer of 40% of the pre-pandemic period, but that rate dropped to less than 30%. Internationally, borders remain closed, and France, Portugal, Argentina and Chile are extending restrictions on flights from Brazil. See below, by sector, the expectation for the rest of the year.
Daily take-offs
Compared to pre-crisis
Source: ABEAR
TOUR OPERATORS: Continue to live a critical situation, with closed destinations. Rescheduling still occupies a good part of the companies’ time, which foresee a recovery in the second half, especially among vaccinated people and those looking for travel niches. The 2022 World Cup in Qatar and thematic trips (such as LGBT festivals and cruises, or music festivals in 2022) have put operators into motion, while these companies are also awaiting the cruises to make a comeback and the opening of borders in Europe and in the United States. Some tour operators continue to face more difficulties and the Viagens Master was the most recent company to file a court-supervised reorganization.
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TRAVEL AGENCIES: Mostly small businesses, travel agencies suffer from the difficulty of accessing credit and the large number of rescheduling and cancellations. Abav and other sector entities have achieved wins with the federal government, such as postponing deadlines for payment of refunds and the bill for a tourism aid program, but the measures arrive very slowly. In order to have an idea of how slow it may be, the issue of the cross-border remittance fees has been going on since the beginning of the year, with no prospects of approval. There is a proposal to reduce it to 6%, but for now the percentage in force is 25%, which has led companies to look for payment alternatives abroad. According to CNC [National Confederation for the Trade of Goods, Services and Tourism] data, Tourism lost 35,000 companies in 2020, including around 1,400 travel agencies. HOTELS: The challenges of 2020 continue with the new restrictions imposed by the destinations and the hotel industry will only recover from the end of 2021. Even so, a survey by HotelInvest shows that the number of hotels under construction fell only 13% compared to the forecast before the pandemic. There are R$ 6.1 billion in investments in new hotels, especially in inland cities (outside the capitals) and in the economic category. Sophisticated hotels, associated to major brands, are also growing, as well as the franchises. In 2020, Rio de Janeiro was the destination with the lowest occupancy rates decline and highest RevPAR. It also has an expectation of very small growth in its hotel offer: only 3 hotels under construction in the city.
Variation of the new capacity (number of hotels)
new hotels
New capacity before pandemic
Cancellations
Openings
New projects
New capacity
new rooms
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AIRPORTS: The federal government ended the sixth round of airport concessions to the private sector and raised R$ 3.3 billion, including Manaus Airport. Practically all the main airports in the country have been concessioned, with the exception of Congonhas (SP) and Santos Dumont (RJ), which are to be auctioned in the next stage of the airport concession project. With the exception of Viracopos, in Campinas (SP), and Natal (in Rio Grande do Norte), the concession projects have so far been quite successful. CORPORATE TRIPS AND EVENTS: Business travel now represents about 30% of the pre-pandemic, with a focus on essential travel. The recovery perspective is expected for 2022. As for the events, the recovery perspective is also expected for the next year, since the agglomerations of people depend on the acceleration in the vaccination process. LUXURY: With this edition BOM Report starts a partnership with ILTM [International Luxury Travel Market], a world reference in events and content related to luxury travel. Check out the ILTM content below:
LUXURY TRAVEL WITH
WITH AN EYE ON APAC Encouraging Asia Pacific (APAC)’s luxury travellers to roam more widely will be key to making 2021 a successful one for global luxury travel according to a report published this month by ILTM. High Net Worth (HNW) travellers from the APAC region contribute $363bn to the Global Luxury Travel Universe (flights, lodgings and activities), as also identified by ILTM in a comprehensive report published in 2020. APAC is the fastest growing region for wealth in terms of both population and total wealth, with China the biggest success story for international travel – China represents 29% of the total APAC HNW population but over 50% of the spend on global airfares and lodging. How-
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ever, well-established wealthy markets such as Japan, Australia and South Korea, along with fast-growing ones like Vietnam, India and the Philippines will all contribute to the return of global luxury travel as we hope. ILTM Asia Pacific – a virtual event for luxury travel suppliers looking to reach key agents from this market – will take place 20 – 22 July 2021. And once the APAC world begins to travel again, the indications from the ILTM research are that both South and North America, with the variety of cultural and sporting activities, as well as food experiences from formal dining to the café society and of course the great outdoors, will be high on their lists to visit.
For more information, please see www.iltm.com 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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