AUGUST/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 From the past report to the current one, the scenario of the Brazilian economy had a relative deterioration, especially in terms of inflation. The country’s official index, the IPCA, increased from 8.35% to 8.99% in the last 12 months. In July alone, for example, it advanced almost 1% (0.96%), the biggest change in 19 years. The increase in prices has been driven basically by three consumer groups: food, transport and housing. The first group suffers from a structural issue, the increase in international prices of agricultural commodities, such as soy, corn, coffee, cattle, among others, in addition to climate problems that brought a long period of drought and, more recently, a strong frost hitting the Midwest of the country, the most important grain-producing region in Brazil. The reduction in the offer of various products, together with the increase in costs, puts pressure on prices for final consumers. Fuel has heavily influenced the transport prices. In the last 12 months, the average price of gasoline has increased 40%, ethanol 57% and diesel oil 36%. It is important to emphasize that fuels have a great impact on the production chain, especially in the food and truck logistics. The increase in prices is related to the international price of oil and the greater demand for other fuels as a substitute. Regarding housing, the average price of residential electricity increased 20%, and bottled gas increased almost 30%. Gas is also a matter of international price, but the energy price is related to the climate factor, the low water levels in the reservoirs of hydroelectric plants due to drought and, consequently, there is a need to produce more expensive ─ and more polluting ─ energy in thermoelectric plants. This detailed report about inflation is necessary because it indicates that the problem is not one-off, but structural. In other words, pressure on prices should continue for a longer period, until 2022. Problems with weather, crops and herds can’t be resolved in the short term. Faced with this reflection that inflation is stronger than expected, the Central Bank accelerated the increase in the SELIC, the basic rate of the economy. Before that, it had been taking decisions of 0.75 points at each meeting. In the last one, which took place in early August, it was decided to increase it by one point, from 4.25% to 5.25% per year. The tendency is that it ends the year close to 9%. And the increase in interest rates tends to reduce the pace of aggregate demand (consumption and investments) in the long term and puts the government in an even more delicate fiscal situation, as debt financing becomes more expensive. A challenging scenario when there is an unemployment rate of 14.6% for a total of 14.8 million people out of the workforce. Although the number of formal job creation has been very positive throughout this year, there is still a huge contingent of people looking for a professional opportunity. Despite the difficulties due to inflation and unemployment, with the reopening of the economy and reduction of restrictions for establishments and circulation, the sectors are recovering more easily. Trade, for example, grew 9% in June when compared to the same pre-pandemic period in 2019.
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The industry, in turn, advances 2.2% compared to two years before. And services grew 6.3% compared to June 2019, but, asymmetrically, with an emphasis on information technology services with a 39% increase and, on the other hand, a 27.3% decrease in accommodation and food services. And tourism has also been recovering, but far below pre-pandemic levels. According to a survey by FecomercioSP, national tourism revenue increased 47.3% in June compared to the same period in 2020, but dropped 26.3% when compared to 2019. Food, accommodation facilities and air transport groups struggle to recover from the coronavirus pandemic. The trend is undoubtedly positive. However, some points may limit growth in the second half. Inflation and unemployment have already been mentioned, but in the political area there are conflicts between the government and the market related to the tax reform and the PEC (Proposed Amendment to the Constitution) of the Judicial Bonds, the latter raising doubts about the compliance with the spending limit. The uncertainties increase the country risk and the consequent devaluation of the real, which once again fluctuates close to R$ 5.20, also implies pressure on prices. Therefore, Brazil will face great challenges ahead, but vaccination progressing faster each month also brings hope of returning to normality in the near future. IMPORTANT DATA: The preview of June GDP, the IBC-Br, increased 1.14% compared to May, above expectations, which were around 0.5%. n
E-commerce broke sales records in the first half of the year. According to E|Nielsen, the value in the period was R$ 53 billion, an increase of 31% compared to the same period last year. n
Indebtedness of Brazilian families reached a record in July (71.4%), according to a survey by the National Confederation of Commerce.
n
Latin America Macro Data
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Unemployment rate
10,20%
14,60%
9,50%
14,40%
4,10%
10,30%
Basic interest rate
38,00%
5,25%
0,75%
1,75%
4,25%
0,25%
Inflation (LTM - oct*)
51,80%
8,99%
4,50%
3,97%
5,81%
3,95%
*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 advanced again, registering the third consecutive increase. In July, the index reached 111 points, a variation of 3.4% compared to June, and 9.1% in the annual comparison. However, it is important to emphasize that the improvement in confidence is based on expectations that there will be an improvement for the country in the near future and not for everyday life. While the expectations sub-index increases 5.1%, the current economic conditions sub-index decreased 2.2%, a sign that inflation and unemployment still scare families in their daily lives. The Retail Businessmen Confidence Index (ICEC) accelerated the rise from 90.6 points in June to the current 98.9 points in July, an increase of 9.1%. In the annual comparison, the variation is expressive, 49.3%. Although the numbers are positive, the ICEC is still in the pessimistic zone, below 100 points. This relative recovery is due to the reduction of operating restrictions imposed on businessmen in the capital of São Paulo. This greater flexibility in easing restrictions is a relief for the trade, as it increases its sales potential. Consumer Confident IndexConfident (ICC) and Comerce (ICEC) Consumer Index Businessman (ICC) and Comerce
(ICEC)
Businessman
150 140 130 120 110 100 90 80
ICC
mai/21
fev/21
nov/20
ago/20
mai/20
fev/20
nov/19
ago/19
mai/19
fev/19
nov/18
ago/18
mai/18
fev/18
nov/17
ago/17
mai/17
fev/17
nov/16
ago/16
mai/16
60
fev/16
70
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 The largest tourism source market in Brazil, São Paulo has 70% of its population vaccinated with at least one dose of COVID-19 vaccine and started vaccinating teenagers between 12 and 17 years old on August 15th. The vaccination rate in the rest of Brazil is still at 50%. As a result, as CVC Corp attested in its balance sheet for the second quarter, sales and travel plans increased again, with perspectives for an excellent third and fourth quarter, especially for travel within Brazil. In July, according to the Omnibees reservation platform, which has 5,000 hotels in its national base, sales of resorts and hotels in Brazil were 9% higher than the best month of 2019 (October), in the pre-pandemic period. Considering only the hotels in the Northeastern Brazil, the sales increased 45%. It is expected an increase in hotel and airfare rates, which can be assured with Europe, the United States and South America opening their borders. Uruguay has already signaled a reopening for November and Gol will resume its flights there, and other South American countries will also reopen in November. In Europe, Spain, Germany, France and Switzerland are open to all Brazilian fully vaccinated. BRAZILIAN READY TO TRAVEL The answers from the second edition of the Insights for Tourism survey by TRVL LAB and ELO leave no doubt: Brazilians want and will travel at the end of 2021 and in the summer of 2022. See some indexes: - According to the survey, 61% of Brazilians are planning leisure trips in the six months after fully vaccinated. - 54% are planning to travel this year, in the second half. - 75% will not reject the national preference: sun and beach. - 38% will choose the Northeastern region as their destination, taking first place among travelers. - 81% indicate relaxing and resting as the main reason for the trip and 64% want to have fun. Leisure travel dominates, with international travel being planned for 2022. But if the borders open, we are also ready to go to the United States, Portugal and Argentina.
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BUSINESS TRAVEL Regarding business trips, according to the TRVL LAB and ELO survey, 84% of corporate travelers like to travel for business, but believe in a slowdown in favor of family relationships, as the situation provided more time with spouses and children. Another interesting revelation of the survey is that business trips will be more planned and will involve multiple activities, precisely to optimize transfers. 80% are betting on this change for a more judicious decision made by companies about which trips will be taken, while 82% expect that the adaptation to the online work model will continue in the post-pandemic, with brief meetings held virtually. Nearly half of respondents (49%) also see the benefits of reducing travel to improve their quality of life, with more time for family and leisure. 92% say mass vaccination is essential for the resumption of business travel, even if on a smaller budget compared with the past. In this second half of the year, more than half of respondents (55%) say they will make business trips within the next six months, which points to a scenario in which people are more confident to return to circulation as more and more people are vaccinated throughout the country. Access the complete survey, in Portuguese, at www.trvl.com.br.
LUXURY TRAVEL WITH US TRAVELERS’ CURRENT MINDSET IS CLEAR: HIGH-END, HIGH-SPEND. ARE BRAZILIANS FOLLOWING THE SAME PATTERN? US luxury travelers don’t always travel during a pandemic. But when they do, they want to go big. That’s one takeaway from North American travel advisors who completed an ILTM survey in late July on luxury travel trends. Nearly half of the 173 respondents said that luxury travel was more than 50% of their total 2019 travel sales. Fifty-five percent of respondents said that they were on track to sell about the same or more luxury trips this year than in 2019. Three-quarters said they had seen an increase in queries and bookings from new customers in the last six months, citing that their clients want customized vacations. Luxury all-inclusive. Multiple bookings. Longer trips. Private tours.
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Although many survey respondents said that their clients were still continuing to put off travel, 62% said that luxury clients were spending slightly or significantly more now than they were before the pandemic. “Travelers are interested in living large,” one advisor wrote in response to an open-ended question about pandemic-era travel patterns. “Big suites, in-room pools, private chef, private jet, etc.” “That ‘revenge travel’ thing is true (although I do not like the term),” wrote another.”People are upgrading everything, from flights (first class) to resorts/hotels (suites, butler service) to activities (private, bucket list).” The findings were further supported by the fact that ILTM North America, Riviera Maya, Mexico sold out two months ahead of its September date with two-thirds of the agents announced as new to the show. Event Director Simon Mayle said that “We have no doubt Q4 will be the busiest booking period to date, with many luxury agents already seeing booking equal to or greater than 2019.” With ILTM Latin America also around the corner (26 – 28 October), will Brazilian agents be reporting the same trends?
www.iltm.com/latin-america
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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