November/20
BRAZILIAN ECONOMY...........................................................................2 IMPORTANT DATA....................................................................................3 LATIN AMERICA MACRO DATA.................................................................3 CONFIDENCE INDEXES.............................................................................4
TRAVEL RESUMPTION..........................................................................5
MAIN FACTS The arrival of the second wave of coronavirus in Europe and the United States has brought a moment of instability and a lack of perspective on when the pandemic will be controlled. Although the news about the effectiveness of Pfizer’s vaccine has excited markets around the world, there will be no short-term solution. In Brazil, specifically, cases of contamination and hospitalizations are increasing, even if its number is lower compared to the first wave. And if it brings a restriction of economic activity, it may slow the country’s recovery. According to the Central Bank’s index, the IBC-Br, which serves as a preview of the GDP result, showed growth of 9.47% in the third quarter compared to the previous quarter and, consequently, taking the country out of the technical recession. The performance of the economy between July and September was largely driven by household consumption. Retail sales in September grew 7.4%, with emphasis on the sectors of building materials and furniture and household appliances, which registered an increase of 31.3% and 28.7%, respectively. Besides that, supermarkets and drugstores, sectors of essential goods, also contributed to overall performance with increases of 4.4% and 13.7%. However, it is important to highlight that part of the growth is taking place due to a negative effect: the price increase. While general inflation is at 2.2% accumulated from January to October, the group that includes rice and beans, for example, shows an increase of 47.6%. Products such as cement and brick had an increase of 16.2% and 28.8%, respectively. Even electronic devices, which tend to have lower prices due to technology advances, have advanced 9.6% in the year, influenced by the price increase of important inputs, such as steel and copper, due to a higher demand and devalued real. The great demand surprised the expectations that existed at the beginning of the pandemic. The emergency aid of R$ 600 (approx. US$ 110), injected by the federal government, has already benefited 67 million people and a total of R$ 182 billion (approx. US$ 33 billion) was spent until October. The benefit, however, had its value reduced to R$ 300 (approx. US$ 55) from September and ends in December. However, the Minister of Economy, Paulo Guedes, highlighted that if there is a second wave of Covid-19, there is the possibility of extending the emergency aid. With these resources entering the economy, there was an imbalance in the supply and demand relationship. In fact, according to a survey carried out by the National Confederation of Industry (CNI), 68% of businessmen reported problems in finding raw materials in October and 44% said that they are taking too long or not even serving customers due to the reduced stock. The problem includes the most diverse sectors, such as: electronics, textiles and plastic materials. Anyway, the industry had its first annual increase in September, after ten consecutive months of drops. In that month, there was growth of 3.4%, with 17 of the 26 segments analyzed presenting positive performance, such as the sectors of food and beverage, oil, machinery and electronic equipment.
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Services, on the other hand, are at odds with economic recovery. The most recent data, from September, showed a 7.2% decrease compared to the same period in 2019. And tourism, which accentuated the negative result, showed a 38.4% drop in accommodation and food services and the index for air transportation was -35.5%. According to a survey by Fecomercio-SP, the retail sector loss in the country has reached R$ 42 billion (approx. US$ 7.7 billion) since the beginning of the pandemic. There are still restrictions on accommodation operations and the number of seats offered by airlines is a little less than half compared to last year. While the economic sectors are recovering, even if asymmetrically, there is uncertainty about the second wave of contamination in the country. Unfortunately, Brazil’s fiscal situation is very fragile with the debt-to-GDP ratio exceeding 100%, more than 10 percentage points compared to a year ago. In addition, market distrusts the government will comply with public expenditure ceiling, so even though the SELIC, the basic interest rate, is at 2% per year, the long-term interest curves are much higher due to these uncertainties. Therefore, a huge effort for social and economic protection has already been made, resulting in a fiscal deficit of R$ 800 billion (approx. US$ 146 billion) in 2020. If there is a next situation of economic activity restriction, the government’s protection conditions will be more unfavorable. IMPORTANT DATA: According to the main companies and entities of electronic commerce, BlackFriday 2020, the most important date of the year for the segment, will hit a record level. And according to a study by Fecomercio-SP, e-commerce in the state of São Paulo grows six years in six months amid the pandemic.
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Official inflation was 0.86% in October, the highest increase for the month since 2002. In the 12-month period, the variation is 3.92%. Although it is still below the target set by the government, there are concerns that pressure on prices will continue, especially in the food and beverage group, which influences, on average, a quarter of the domestic budget of Brazilian families.
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According to CAGED (General Employed and Unemployed Register) data, 700,000 formal jobs were created between July and September. It is the third consecutive positive result and, despite the good news, the balance is still 560,000 negative. n
The Brazilian stock market has overcome 100,000 points again in mid-November, influenced by the end of the American election and news about the vaccine developed by Pfizer. The value of the dollar is still oscillating around R$ 5.50 (for each dollar). n
Latin America Macro Data
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Unemployment rate
13,10%
14,40%
12,30%
15,80%
3,50%
16,50%
Basic interest rate
36,00%
2,00%
0,50%
1,75%
4,25%
0,25%
Inflation (LTM - oct*)
37,20%
3,92%
2,95%
1,75%
4,09%
1,99%
*LTM - Last Twelve Months Until Sept 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) registered a slight decrease of 0.7% in October, but has 107.6 points, a level considered optimistic. In addition to the reduction in emergency aid, food inflation has been a concern for families’ daily lives. There is a delicate situation in the labor market that brings income limitations, and also a significant increase in the prices of the main food products of the Brazilian, so it is natural that there is a negative confidence adjustment. The Retail Businessmen Confidence Index (ICEC) had the fourth consecutive rise and reached 96 points in October, the highest score since April. The pace of retail sales is quite positive, which has recovered businessmen’s confidence. However, the projection of retail sector for the end of the year points to a weaker end of the year compared to what happened in the third quarter, which may limit the progress of the indicator. 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 RESUMPTION There is great expectation for the high summer season, between December and March, which promises to fill hotels and resorts, and also flights throughout Brazil. Some operators and resorts already claim to be fully booked for New Year’s Eve packages in Brazil, specially the highest standard accommodation. The airlines Gol, Azul and Latam expect to be operating between 60% and 80% of their domestic networks in this period. Regarding the international flights, while Latam has returned to operate several destinations, including the United States, Buenos Aires and Europe, Gol scheduled its return for the end of March 2021. And Azul said it is ready to resume flights to Orlando, but is focused on domestic flights. Despite confirming the good demand for the high season, the operators say that sales will be 50% below when compared to 2019, because the offer is still limited and there are many passengers who rescheduled their trips (therefore, there aren’t new sales). The third quarter recovered over the second, but sales remain well below the pre-pandemic levels: at Despegar, sales fell 86% in this period, at CVC Corp, 78%, and at Braztoa operators, between 50% and 80%. National charters are being seen as one of the in-things of the summer, but there is no forecast and charters for international flights. More than 100 countries are open to Brazilians around the world, with emphasis on the United Arab Emirates, Turkey, Mexico, Argentina, Chile, Colombia, Peru, Egypt and the Maldives, but the great expectation is the reopening of Europe and the United States borders, still not predicted.
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