June/20
BRAZILIAN ECONOMY...........................................................................2 IMPORTANT DATA....................................................................................3 LATIN AMERICA MACRO DATA.................................................................3 CONFIDENCE INDEXES.............................................................................4
TRAVEL AND TOURISM..........................................................................4 PANROTAS..............................................................................................5
MAIN FACTS In the main Brazilian city, São Paulo, the gradual opening of commerce began in June, but in a very restricted way regarding opening hours (only for four hours) and customers movement. However, it is a relative relief for businessmen who have had their businesses closed for 77 days throughout the quarantine. According to FecomercioSP, trade losses totalized R$ 17 billion in the period. On first days of reopening, the streets of popular commerce were full, with lines at the doors. But there was a pent-up demand for cheaper basic products. The government’s emergency aid of R$ 600 for two months for the most vulnerable, which will be extended for a few months, but in the amount of R$ 300, also contributes to increase consumption in a punctual manner. However, the picture of this initial period tends not to be maintained in the near future. This is because the economic conditions of families are deteriorated, that is, the increase in unemployment caused the loss of income. And due to the risk of default, banks became more selective regarding credit, which limits the consumption capacity. The most recent data available for retail sales, in April, from IBGE, shows a scenario of strong retraction in consumption: 27.1% in sales compared to the same period of the previous year, the biggest drop in 20 years. Unlike other cities in the world, the city of São Paulo, for example, is reopening businesses when the record of deaths from coronavirus is being reported. However, the percentage of hospital beds occupied for COVID-19 is well below 100%, which has allowed the government to propose the reopening in a staggered way. The financial market reacted positively to the gradual opening of the economy and has shown signs of a return to 100,000 points. In March it reached the lowest variation of the period: 63,000 points. The exchange rate, which was close to R$ 6 per dollar, returned to the level of R$ 5. Evidently, the stock market’s mood is a trend of how investors see Brazil in the future. With inflation at 1.88% in the 12-month period, the Central Bank tends to reduce even more the interest rate in order to attempt a faster recovery of the domestic market. And that is what happened: at the last Central Bank meeting, the decisions were a reduction of 75 basis points and the basic interest rate decrease from 3% to 2.25% per year, another record low. The tendency is that the real interest rate, that is, discounting inflation, is practically zero. Therefore, it is understood that Central Bank may further reduce the SELIC [the basic interest tax defined by the government] to around 1.5% per year. This data is extremely positive, since once the debt x GDP ratio rises from 80% to just over 90%, the cost to finance the debt will be lower, giving the government more impetus to establish measures to stimulate the economy. Besides that, it will reduce the attraction of speculative investments in the country, which can be left at any time, and opening space for the search for productive investments, generating employment and income. The government’s agenda is to continue both administrative and tax reforms, as well as following privatization and concession plans. With a low interest rate, wellcontrolled inflation and a more devalued exchange rate, these are favorable conditions to attract foreign investors. And national investors will benefit from the cost of cheaper money, since it shall impact the interest rate for businessmen.
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In summary, the most important thing is that the scenario is shifting from the field of uncertainty to the field of negative, but more clearly. In other words, even if the scenario is unfavorable in the short term, it is possible to structure the business strategies better, to make more informed decisions about the feasibility of reopening or not the companies. The situation seems to have reached the bottom of the well in the months of April and May and as of this month of June, there’s a beginning of a gradual and slow recovery of the economy, as it has occurred in most of the countries strongly affected by COVID-19. IMPORTANT DATA: May inflation was negative by -0.38%, accumulating 1.88% in 12 months. The Transport group contributed the most to the drop in prices in general; this group showed a retraction of 1.90% in the month. And this is influenced by the drop in fuel prices (-4.56%), caused by the reduction in oil prices plus low domestic demand. n
Brazilian retail trade decreased 27.1% in April in the annual comparison, according to the IBGE. The only sector that achieved a positive performance was, evidently, supermarkets, with an increase of 4.7%. The most affected sector in this pandemic period is Clothing and Footwear, with a drop of 75.6% in sales. Activities that depend on credit, such as home appliances and vehicles, also showed a sharp drop in sales ─ 33.5% and 57.8%, respectively.
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The industry registered a strong retraction in April, 27.2% compared to the same period of the previous year. For the year to date, the balance is negative by 8.2%. n
In April, the Services sector decreased by 17.2%, the worst result in 10 years, according to IBGE. The drop in Air Transport (-77.2%) and Services provided to families (-65.2%), such as accommodation, food, etc. stands out in the survey. The performance was not only worse due to sectors that benefit from this moment of adaptation of people and companies, as is the case of technology, which grew 5.3%.
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On the other hand, e-commerce has benefited from this crisis. According to Compre e Confie website, sales grew 81% in April, with revenues of R$ 9.4 billion. The most demanded sectors were Food and beverages (+ 294.8%), Musical instruments (+ 252.4%), Toys (+ 241.6%), Electronics (+ 169.5%) and Bed, table and bath articles (+ 165.9%). n
Latin America Macro Data
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Unemployment rate
8,90%
12,20%
9,00%
19,80%
3,50%
9,00%
Basic interest rate
38,00%
2,25%
0,50%
2,75%
5,50%
0,25%
Inflation (LTM - may*)
43,40%
1,88%
2,75%
2,85%
2,84%
1,76%
*LTM - Last Twelve Months Until April 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 (ICC) of the city of São Paulo registered a strong decrease of 13.5% between April and May and accumulates a loss of 26.5% in only three months. After four years, the indicator returned to the pessimistic area, below 100 points, showing 96.8 points. The negative performance was expected, due to the news about the pandemic and rising unemployment. The Retail Businessmen Confidence Index (ICEC) of the city of São Paulo maintained the negative trend and showed another decrease in May (21%) compared to April and reaches 93.8 points, the lowest level since February 2017. Naturally, the quarantine and social isolation caused a sharp drop in sales, and businessmen do not see a favorable recovery scenario in the short term, even with the gradual opening of the economy. 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.
TRAVEL AND TOURISM The recovery in the Travel and Tourism sector is starting very slowly in Brazil, but it is already visible. Here are 10 signs of this recovery:
1 - CVC has already opened 900 of its 1,400 stores and said it is ready to resume operations
in July. It will reach the seventh month of the year (our winter holidays in normal times) with 25% of the sales volume for the same period in 2019 and with most trips towards the end of the year. They are short-distance domestic trips, using cars. The Northeastern region is the favorite destination. Also, CVC revealed the top international destinations searched for the end of the year travels: Cancun/Caribbean, Florida and Portugal. South America does not appear in the map at this moment.
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2 - Gol Airlines announced that in July it will reach 250 domestic flights per day (against 1,000 in
the same month of 2019). The expectation is to reach December with 70% of the network and all destinations offered before the crisis. Internationally, the capitals of South America will be the first to be resumed. But the company believes charter flights to the Caribbean will be resumed as early as next summer.
3 - Azul and Latam Airlines Brasil joined in a codeshare agreement and frequent flyer programs. Thus, the two airlines will have a more connected network and more strength for this recovery period.
4 - Latam announced that it should return to fly in July to Mexico City, Portugal and Uruguay. (The Latam Group, however, closed its airline in Argentina).
5 - The Brazilian resorts begin to reopen between June and July and by September all of them shall be operating, making the options for short-distance trips around the country easier.
6 - Theme parks, such as Beto Carrero World, the largest in the country, have also reopened, keeping an eye on the flow of regional and domestic travelers.
7 - Research carried out by IGLTA shows that 64% of the LGBT public wants to travel this year. Among
Brazilians, the preference is for destinations close to home (50%) and for places they usually go to (41%). Only 30% would make long trips at this time.
8 - Flights to Europe begin to return. Air France-KLM will have 18 operations in July. Iberia will fly again on August 2, with three weekly flights to São Paulo. Swiss will also return its flights to Sao Paulo in July.
9 - Qatar Airways has expanded its operation in Brazil to five weekly flights and plans to return to have
a daily flight on August 31.
10 - According to the flight search website Kayak, Brazilians are willing to travel to large metropolitan
cities, being Buenos Aires, New York and Orlando the most popular destinations (updated on June 14). However, the data also shows that domestic travel will recover first. Brazilians are looking for beach destinations like Navegantes (+ 26%), in southern Brazil, and Porto Seguro (+ 25%), in Bahia. Large domestic cities like Rio de Janeiro and São Paulo seem to have very low demand as a travel destination, according to Kayak.
PANROTAS In June we celebrate 20 years of the Portal PANROTAS. We reached an average of 24,000 unique visitors per day, an increase of 60% over the pre-pandemic period. Live streaming, webinars and service articles (for example, about health protocols and reopenings) are some of the most searched topics today.
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