Brazilian Overview Monthly Report - MAY 2023

MAIN FACTS

The Brazilian economy continues its expansion course. Central Bank’s second indicator, the IBC-Br, which works as a kind of GDP preview, registered a 2.84% growth in the first bimester this year. Only in February, it rose 3.32%, exceeding – a lot – the market’s expectations. If it wasn’t for the increased interest rate, currently at 13.75% a year, the pace could be even higher. The tendency is that Central Bank’s Monetary Policy Committee will initiate a reduction cycle in the SELIC rate at the end of this year. There was even hope that it could possibly have signaling of downfall by the middle of the year, however, chances are increasingly lower.

That’s because the last disclosed inflation data, in April, turned out to be above expectations and the elevated prices widely spread. In that month, the variation was 0.61% in the face of 0.71% in March. The accumulated value in 12 months was 4.18%. It seems a low percentage, nevertheless, given a statistical issue of the comparison base, it should lower to around 3% by June, and increase again by the end of the year, closing next to 6.5%, once again exceeding the inflation target maximum threshold, defined by the National Monetary Council. All 9 consumption groups researched by IBGE pointed out an elevation in April. The highest pressure came from health and people care with a 1.49% increase, influenced by the traditional readjustments in medications, between the months of March and April. The main family’s expenditure is on food, and this group advanced 0.71% within the month. Recently, Petrobrás announced that it will no

longer follow the international price parity policy for its fuels. In addition to this measure, it has readjusted gas prices, cooking gas, and diesel prices downward. Certainly, this will help to restrain inflation. However, the new price policy and the factors that will be considered weren’t clear. The immediate effect of this scenario is positive for consumers’ wallets, but it generates long-term uncertainties about the company’s finances, mainly given the fact that the country still depends, in parts, on fuel imports. In other words, how would the price situation be, in case there was an acceleration of the dollar and oil? While inflation doesn’t relent in a faster way and interests don’t drop, the actual economy at least shows positive data. The service sector, for example, registered in March, a 6.3% increase in comparison with the same period in 2022, accumulating a 5.8% rise in a year. Four of the five analyzed groups by IBGE indicated increases within the month.

Specifically, regarding tourism, according to the monthly survey by FecomercioSP, there was a 14.6% growth in March in the annual counterbalance. And the revenue of R$ 18.5 billion is the highest one for the month since 2015. It is noteworthy to highlight another one from the Entity’s indicator, the Monthly Index of Tourism Activity, IMAT, in partnership with SPTuris, which showed that in the city of São Paulo, specifically, tourism had in March, its best performance in the series initiated in 2020.

In relation to the industry, there was a 0.9% growth in March, in the annual comparison. And in commerce, sales rose 3.2% in the third month of the year and accumulated a 2.4% increase in

the first quarter.

In a more global context, the dollar’s depreciation in the face of global currencies has brought benefits to Brazil. Real’s value decreased from 5 reals per dollar, and fluctuates around 4.90 reals. Additionally, commodities, on average, have sought lower prices than a year ago. If on the one hand, the combination of the valued Brazilian real, and commodities dropping, helps with inflation, on the other hand, it takes away an important gain for the Brazilian economy, one of the main exporters of commodities in the world.

In a nutshell, in the domestic picture, it is clear that the economic activity continues expanding, however, at a slow pace due to an obstacle,

IMPORTANT DATA:

which is the elevated interest rate. The heated job market and the earning of income with moderate inflation allow the progression of commerce and service sectors. Just to have an idea, the unemployment rate in the first quarter this year was 8.8%, way below the 11.1% from the same period last year. Besides that, there was a real gain of income, already deducting the inflation, slightly higher than 7% according to IBGE. Therefore, amidst several internal and external challenges, Brazil has been obtaining positive results, in productive activity, and in consumers’ economic conditions. If the interest rate lowers, the country will be ready for a new and important growing cycle, with the generation of job positions and income.

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Contributing to inflation’s quenching, agribusiness has shown significant data concerning the offer increase. The grain harvest should exceed the barrier of 300 million tons for the first time in history. Additionally, the bovine, chicken, and pig slaughter grew in the first quarter of the year.

Currently, the unemployment rate in the country is 8.8%, which represents 9.4 million people searching for an opportunity, 2.5 million fewer people than a year ago.

RESUME APRIL/2023

Legend: Green, Red and BlackThe data get better, worse and equal than the previous month.

CONFIDENCE INDEXES:

The Consumer Confidence Index (ICC) is at a threshold of 20% above the one seen a year ago. In April, the indicator reached 125.1 points, keeping people’s optimism in São Paulo. The combination of the heated job market and more moderate inflation is the basis for this annual growth to occur.

The Trade Entrepreneur Confidence Index (ICEC) registered 109.4 points in April, practically the same threshold as March and a reduction of 4.7% in comparison with the same month in 2022. Although consumers’ confidence expanded, not necessarily the earning of income has been destined to commerce. Especially because there’s still an elevated number of families with overdue bills, in addition to the increased interest rate that bothers business owners and impairs sales.

Note: The ICC and ICEC vary from 0 to 200. From 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.

Consumer Confident Index (ICC) and Comerce Businessman (ICEC)

Consumer Confident Index (ICC) and Comerce Businessman (ICEC)

ICC ICEC

TRAVEL AND TOURISM

In the first quarter of 2023, Brazil was the number 3 market in International Overseas Visitors to the United States. The United Kingdom was the number 1 market, with 756,543 visitors; followed by South Korea, with 364,337 and Brazil, with 340, 475.

WEEKLY FLIGHTS TO/FROM BRAZIL FLIGHTS FROM BRAZIL TO THE US - MAY 2023 ONLY DIRECT FLIGHTS

The National Travel and Tourism Office forecasts

1.46 million Brazilian tourists this year and 2 million only in 2025, reaching 2019 numbers. Again, there are some challenges for the full recovery at a faster pace: long waiting time for new visas or renewing old ones, number of flights between Brazil and the US still below 2019 levels, and the currency exchange (US$ 1 still R$ 5).

FLIGHTS

SEASONAL/NEW FLIGHTS TO THE US

• American Airlines will fly from Rio de Janeiro to New York in October/23.

The number of direct flights between Brazil and the US, in May, reached 661/month (see below). If we count options with connections, such as through Panama or Mexico, that would be a greater amount. Also, there are some new or seasonal flights beginning soon:

• Azul will fly from Belo Horizonte to Fort Lauderdale (jun/23) and Orlando (Sep/23). And from Recife to Orlando (jun/23).

• Delta will fly from Rio de Janeiro to Atlanta (Dec/23) and New York (Dec/23).

• Azul will fly from Belo Horizonte to Fort Lauderdale (June) and Orlando (September).

• Latam will fly from São Paulo to Los Angeles (August, 1st).

• LATAM will fly from São Paulo to Los Angeles (Aug/23).

• American Airlines will fly from Rio de Janeiro to New York in October.

• Delta will fly from Rio de Janeiro to Atlanta and New York (December).

Check these and other number and analysis, and the full lists of tour operators and destination representatives on our annual edition of Brazilian Overview.

Click here to read the publication.

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

Source: ANAC Flights May 2023