March/20
BRAZILIAN ECONOMY ............................................................................2 IMPORTANT DATA...................................................................................... 3 LATIN AMERICA MACRO DATA................................................................... 3 CONFIDENCE INDEXES................................................................................4
BRAZILIANS AND THE CORONAVIRUS .................................................4 FLIGHTS.............................................................................................................5 EVENTS.......................................................................................................5 COMPANIES...............................................................................................5 HOTELS..... ...............................................................................................5 GOVERNMENT...........................................................................................5 OUR RECOMMENDATION.........................................................................5 FORUM PANROTAS 2020........................................................................5
MAIN FACTS The Brazilian economy registered a growth of 1.1%
last year, as disclosed by IBGE, the country’s official statistics institute. It was the third year with a positive Gross Domestic Product around 1% and once again it frustrates the expectation of an increase close to 2.5% at the beginning of last year. Something positive seen in the 2019 GDP data is that the quarterly growth rate continued at an accelerating pace: in the first quarter the annual increase was 0.6% and in the last three months of the year, 1.7%. There was a more significant growth in the second half of the year because of the effects of lower interest rates for the availability of credit, the generation of jobs and the increase in consumer and business optimism related to the progress of the reform agenda, like the social security reform. There were perspectives for an even stronger economy this year. However, the global news at the beginning of 2020 were negative. The first fact, which had already been extending since last year, was the trade dispute between the USA and China, then came the conflict between the USA and Iran. Besides that, since January, the coronavirus have been affecting the second largest economy in the world (China) and spreading across all continents and isolating regions, interrupting important production chains, including Travel. And, finally, the oil price war between Russia and Saudi Arabia that made the value of this commodity decrease by 30% and brought down the global stock exchanges and the Brazilian one was no different, it melted by just over 10%, having to trigger the circuit breaker more than once in a week to momentarily calm negotiations. This increase in global tension also put pressure on the real, which depreciated to more than R$ 4.70 per dollar (it reached R$ 5 when coronavirus measures had to be taken by states and federal government). This was already the trend for the Brazilian currency due to the reduction in the basic interest rate, which caused outflow of foreign speculative resources from the country, given the decrease in the profitability x risk ratio. The most expensive dollar presents a concern for the domestic economy, which may be the impact on inflation in the medium and long term. However, the reduction in the prices of some commodities, such as oil, eases their final prices. In addition, the quotation must remain at this level for a longer period, so it can be spread in the domestic economy through imports of food, inputs for industry and agriculture, for example. It is true that the global economy is cooling down, but it is difficult to predict whether new events will happen to accelerate this process. The Federal Reserve, in the United States, lowered interest rates at an extraordinary meeting and other central banks followed suit, in order to avoid a recession and inject more money into the market.
P. 2
Brazil has the potential to stand out at this moment. Despite the deterioration between the executive and legislative branches, this is a government and a congress with a reformist profile, which are trying to contribute to debureacratization, simplification of taxes to create a more favorable economic environment. In addition, the country has an important consumer market for investments, with 210 million people, and there are many requests for proposal and public tenders being made for infrastructure works that can help the economy have greater traction in the coming years. It is time for Brazil to make efforts to protect itself, but in view of the serious international situation, (led by the pandemic crisis) it will certainly frustrate the initial expectations for 2020 once more. IMPORTANT DATA: February inflation (according to IPCA, the National Extended Consumer Price Index) was the lowest for the month in 20 years. The variation was 0.25% and in the 12-month period, the increase was 4.01%. The Education group (3.7%) was the sector that most influenced the month’s increase, due to the usual adjustments at the beginning of the year. The trend is that there will be no pressure on prices, which were below the target of 4% established by the government and contributed to the Central Bank to be able to reduce the basic interest rate again.
n
n Unemployment remains quite high in Brazil, with a rate of 11% in the last quarter of last year.
Compared to the immediately previous quarter, there was a reduction of 0.8 percentage point and was also below 11.6% in the same period in 2018. It is a relative improvement, but still below what the country needs to leverage consumption in a more substantial way. n Industrial production grew 0.9% in January compared to December, but has a record of 0.9%
decrease in the annual counterpoint. The lack of a stronger domestic consumer market and international demand, mainly from China and Argentina, leaves the industrial sector in a more fragile situation.
Latin America Macro Data
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Unemployment rate
9,70%
11,00%
7,40%
13,00%
3,70%
6,30%
Basic interest rate
40,00%
4,25%
1,75%
4,25%
7,00%
2,25%
Inflation (LTM - feb*)
52,90%
4,01%
3,89%
3,72%
3,24%
1,90%
*LTM - Last Twelve Months Until Febrary (except Argentina) Legend: Green, Red and Black The data get better, worth and equal than the previous month.
P. 3
CONFIDENCE INDEXES: The Consumer Confidence Index (ICC) of the city of São Paulo grew 8.7% in February and reached 131.8 points. However, in comparison with the same period last year, the current indicator presents a decrease of 5.4% . In any case, the ICC is at an optimistic level above 100 points and driven mainly by the current economic conditions in the country and by the families themselves. Indeed, seeing a more favorable scenario for the labor market, controlled inflation and easier access to credit are factors that increase consumer confidence and the consequence of this can be seen in the performance of retail sales. The Retail Businessmen Confidence Index (ICEC) of the city of São Paulo continues in a positive sequence with the sixth consecutive increase and reached 125 points in February, an increase of 1.4% in comparison with January and 1.9% in the annual counterpoint. Businessmen are increasing the level of confidence, especially in the current aspects, that is, they are seeing an improvement in the economy in general, in the retail sector and even in their own business. The subindex that assesses current conditions rose 30% in six months. 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.
BRAZILIANS AND THE CORONAVIRUS As in the whole world, the Brazilian Tourism market faces the coronavirus and sees its reflexes in sales, with decreases of more than 60%. Domestic tourism, which would be a safeguard, has also suffered, due to corporate travel restrictions, fear of flying by plane and recommendations to avoid agglomerations. Industry leaders talk to the government for a post-crisis strategy, including measures to encourage tourism companies and travel.
P. 4
FLIGHTS:
Brazil feels the reflex of restrictions in Europe and the United States and due to the fear of traveling and being “stuck” outside home, international travel has plummeted. Companies like American Airlines, Delta, Jet Smart, Turkish, and so many others, have reduced capacity. The forecast is that the offer will return only in the second semester and some believe that even the July season may be affected.
EVENTS: Big meetings such as the Forum PANROTAS 2020, Visit USA 2020, WTM Latin America and Aviesp Expo, and local events of companies, destinations and representatives for the trade, such as the Miami Mission or hotel launches in São Paulo, are being postponed to the second semester of the year or even canceled in 2020 (that’s the case of ILTM Latin America, which will return only in 2021). On Friday, 13th, the Ministry of Health recommended that crowds should be avoided.
COMPANIES: Tourism companies are creating crisis management centers and among the measures are the creation of promotions for the period of the pandemic post-peak; collective vacation; home office; cancellation of meetings and visits to company headquarters; ban on participation in events; flexible working hours; and postponement of projects and campaigns.
HOTELS: Especially corporate hotels have experienced the sharpest drop in reservations, as companies have canceled or postponed their events and only allow extremely necessary trips. Considering the leisure sector, resorts are still an option for family travel, as there are no travel restrictions in the country ( as of March, 15th)
GOVERNMENT:
The federal government released US$ 5 billion to combat the virus directly, among other measures, such as anticipating the 13th salary for retirees. Most cases are in São Paulo where there is a good work of coordination of prevention and care. The concern is with a possible peak in hospitals. Cities operate normally, but we already see fewer people going out at night and people rushing to supermarkets, as in other countries. There is still no restriction on flights to Europe and the USA, measures adopted by neighbors like Argentina, but the drop in capacity and supply is great.
OUR RECOMMENDATION:
Watch the opportunities during this low period (count on the news from the Portal PANROTAS or look for us for analyses), prepare for the post-crisis and bet on partnerships with the market.
FORUM PANROTAS 2020: September 9 and 10, at FecomercioSP. We are waiting for you.
P. 5