FEBRUARY/22
BRAZILIAN ECONOMY...........................................................................2 IMPORTANT DATA....................................................................................3 LATIN AMERICA MACRO DATA.................................................................3 CONFIDENCE INDEXES.............................................................................4
TRAVEL INDUSTRY................................................................................5
MAIN FACTS The Brazilian economy starts 2022 with not so positive signs. Before the Omicron variant’s arrival in the country in January, some sectors, like the trade sector, had already demonstrated a loss of vitality. In the last bimester, for example, sales retreated 2.8% in relation to 2020, although the year ended with a positive balance of 4.5%, according to the IBGE’s data. This output was beyond expected. Especially because there was a generation of 2.7 million formal job positions last year, and consequently, more workers received their 13th salary in the last two months of the year, which could boost the retail segment. However, the consumers weren’t in a favorable situation to expand consumption. The percentage of indebted families reached a record amount of 73.6% in December, according to the National Trade Confederation (CNC). Furthermore, the official inflation in the country, the Extended National Consumer Price Index (IPCA) closed 2021 on a high of 10.06%, the highest since 2015. If this income tightening weren’t enough, the basic interest rates, SELIC, rose from 2% per year to 9.25% throughout last year, increasing the credit and financing for the consumer. Likewise, the industry sector that closed the year with a positive output, higher 3.9%, but registered a drop of 4.7% in the last bimester of 2021. With the demand reduction and the increase in interests, it would be natural to expect a downturn in the industrial production. The service sector, on the other hand, emerged on a high of 10.9% last year, and of 10.3% in the last quarter. Moreover, having had a weak base in comparison to 2020, with a downturn of 7.8%, two groups contributed considerably for the segment’s progress which corresponds to more than 70% of the GDP: tourism and IT (information technology). Although the former has shown a growth of 22.1%, it still hasn’t outperformed the 2019 pre-pandemic threshold. And the latter, besides having grown 9.4% last year, reached the series’ highest level in December. Therefore, the services have distinct results in relation to the historical series, but most importantly is that it shows a more consolidated recovery. Still in relation to tourism, in the FecomercioSP Survey, the national tourism cashed in R$ 152 billion last year, 12% higher. However, this amount is 24.2% below 2019’s level. It’s crucial to highlight that the segment managed to better recover on the second stage of 2021, due to the mitigation of Covid’s second wave and the vaccination pace, a vital variable for the tourism upturn. However, entering 2022, with the outbreak of Omicron variant cases, the tourism and the event sectors were again impacted with canceling and rescheduling, in addition to the postponement of Carnival celebrations, which initially, would take place at the beginning of March. The scenario for this year is challenging. The necessity of increasing the interest rates to restrain the inflation will have a damaging effect on the economy. It is important to highlight that this movement isn’t exclusive to Brazil, inflation is rising in the whole world and the central banks are following the trend of the increase in the interest rates. In Brazil, the SELIC exceeded from 2% to 9.25% last year, rising this month in the last meeting of the Monetary Policy Committee (COPOM) of the Central Bank of Brazil, to 10.75%, and heading towards 12%. Usually, the monetary expansion or contraction cycles are long. However, with the pandemic, the movements were more significant, and will surely curb the aggregate demand, investments, and consuming.
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At the same time, the inflation should not bounce back. The expectation is of an increase in prices of 6% this year. The supply shock caused by the pandemic still generates remnants for the global production chain, commodities prices, and what ends up reaching the consumers. The problem is the stagflation condition, zero growth with high inflation. With a lower incentive to the production investment, due to the rising in interests, the working market tends to decline and, therefore, reduces the possibility of an income upturn. Consequently, the trade sector should suffer with a lower consuming rate. A cheaper dollar rate could contribute to soothing the inflation. Recently ranging next to R$ 5.20 per dollar, it still has decreased too little to counterbalance the progress of commodities, for example, the Brent oil that surpassed the amount of 80 dollars per barrel and exceeded 90 dollars, in the last months. Nevertheless, the interest rate heading to near 12%, and inflation reaching 6%, will make Brazil attractive to external speculative capital. In other words, with more dollars entering the economy, the lower tends to be the exchange rate. Although, as the country’s economy and politics are varying significantly, always maintaining the uncertainties, this wields a counter pressure avoiding an even bigger valorization in the national currency. Therefore, 2022 will be one more year of weak growth, high inflation, and extremely high interests. Once more, this isn’t exclusive to Brazil, but these are the challenges that the countries will face in this third year of the global pandemic. IMPORTANT DATA: The unemployment rate between the months of September and November was 11.6%, way below the 14.4% in the same period in 2020. Currently, there are 12.4 million people looking for a job, 2 million less than a year before.
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The expectation for the grain harvest in Brazil is very positive. According to IBGE, there should be a production of 138 million tons of soy this year, 2.4% more in relation to the previous one. Corn has its projected growth of 2.4% with the production of almost 110 million tons.
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The gas price has risen in the whole world. In Brazil, the fuel increased 42.71% in the 12-month accumulated value until January, according to IBGE.
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The average market interest rate collected from the consumer reached 45.1% per year in December. A year before, the rate was 37.2%. If the consumers don’t, for example, pay the credit card bill, they will pay an average rate of 349.6% per year.
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Latin America Macro Data
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Unemployment rate
8,20%
11,60%
7,20%
11,00%
4,00%
10,70%
Basic interest rate
40,00%
10,75%
5,50%
4,00%
5,50%
3,00%
Inflation (LTM - oct*)
50,90%
10,38%
7,70%
6,94%
7,07%
6,33%
*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 retreats again, influenced by the Omicron variant’s effects. In January, the ICCF reached 108.4 points, a downturn of 3.3% in relation to December, and retracted 6.7% in the annual counterpoint. Besides, there is a confidence decrease due to the high inflation and the record number of indebted families. The Trade Entrepreneur Confidence Index (ICEC) reached the highest threshold since March 2020 with 119.6 points, a monthly high of 2.1%, and growth of 21.8% in the annual comparison. It’s important to highlight that the business owners were optimistic in relation to the sales at the end of the year, which in fact, didn’t happen. Therefore, the trend is a confidence reduction within the next months due to the income restraint by the consumer. Consumer Confident Index (ICC) and Comerce Businessman (ICEC)
Consumer Confident Index (ICC) and Comerce Businessman (ICEC) 150 140 130 120 110 100 90 80
CCI
Nov-21
Aug-21
May-21
Feb-21
Nov-20
Aug-20
May-20
Feb-20
Nov-19
Aug-19
May-19
Feb-19
Nov-18
Aug-18
May-18
Feb-18
Nov-17
Aug-17
May-17
Feb-17
Nov-16
Aug-16
May-16
60
Feb-16
70
ICEC
Note: The ICC and ICEC vary from 0 to 200. From 100 to 200 points 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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TRAVEL INDUSTRY Despite Omicron’s impact and the economy’s weakening in Brazil at the beginning of this year, a significant number of Brazilians are keeping the trips as one of the consumption priorities and intend taking some days off away from home at least once in 2022. The vaccination advancement resulted in more confident consumers to face the pandemic and to put into action the hindered plans during the isolation period. Almost half (43%) of the people are saving money to travel within the next 6 months, as shown in a study published on “Plataforma Gente”, which belongs to Rede Globo, seeking wellness and distraction from the personal and professional setbacks derived from the crisis. And it’s the national leisure that should continue to lead the sector within the next few months. The international air offer hasn’t reached the pre-pandemic volume yet, the Brazilian currency is unfavorable, and overall, the consumers seem to feel safer in traveling within their own country. Leisure trips attract 83% of Brazilians who intend to travel, and 71% of them are attracted by the prices as a major factor. One of the largest OTAs in Brazil, Viajanet, pinpointed that the purchase of domestic flights increased more than 76% in 2021. Nevertheless, there is an upward trend regarding international flights in Brazil, as most of the consumers’ targeted countries have already opened their borders, like the United States, France, Spain, Portugal, and Argentina, many of them on their way to loosen their entrance rules and protocols. The Brazilian hotel business presented recovery signs in 2021. It increased 47.9% in occupation, and 46.2% in revenue per apartment in comparison to 2020, but still, the sector is below the pre-pandemic numbers: 32.8% less occupation, and 37.5% less revenue per apartment versus 2019. The presented data resulted from the Brazilian Hotel Business Operators Forum (Fórum de Operadores Hoteleiros do Brasil - FOHB). Last year, CVC Corp, the largest tourism company in the country, reached half of 2019’s sales, and had 7.7 million clients flying in the same period. The revenue of R$ 9 billion in 2021 exceeded the R$ 6.4 billion one in 2020. Another index that points out an upturn in Brazilian tourism in 2021 is the employment rate. The sector was responsible for 5.76% of new positions registered in the country, which represents 162.6 thousand out of the 2.82 million registered positions as a positive balance in the year. Data by Monitora Turismo. In the corporate sector, which presents the smallest growth curve during the pandemic, it’s expected that the TMCs will reach the pre-pandemic numbers still in July, this year. The data is by Abracorp, the major Corporate Travel Agencies Association in the country,
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which is supported by the sum of R$ 4.3 billion in 2021, representing 40% of the volume in 2019. Two of the most negative records in these first weeks of 2022 are the uncertainties regarding the withholding income tax on offshore remittances, a tax that heavily impacts the international travel sales for the Brazilian players, resulting in a bitter disparity in the competition with foreign suppliers and OTAs. The Ministry of Tourism guarantees that they have been searching for a solution, but they depend on other departments, especially the Ministry of Economics, so they can come up with one. Lastly, the cruise season that was halted on January 4th, and after many postponements regarding the return to its activities, keeps causing financial damage to the sector. Presumably, there is a political dispute in the Brazilian States so that the return can be consolidated. It is an election year in the country.
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