March/21
BRAZILIAN ECONOMY...........................................................................2 IMPORTANT DATA....................................................................................3 LATIN AMERICA MACRO DATA.................................................................3 CONFIDENCE INDEXES.............................................................................4
TRAVEL INDUSTRY................................................................................5
MAIN FACTS In 2020, the Brazilian economy recorded a 4.1% decrease in Gross Domestic Product. In fact, it was a significant decrease, being the biggest annual retraction since 1994. However, it can be analyzed in a less negative way: the result was below what the International Monetary Fund, for example, foresaw for Brazil at the beginning of the pandemic, a drop close to 9%. In addition, it is important to note that the country had just emerged from a serious crisis, between 2015 and 2016, in which the GDP retracted 7% in the period. In other words, as soon as Brazil was recovering from a strong recession, the coronavirus arrived to put the economy in the red again. And household consumption, on the demand side, was one of the essential factors so that the performance of GDP was no longer negative. The recovery from the second half of 2020 was driven by emergency aid, a cash transfer program for the most vulnerable people and which injected more than R$ 200 billion in the economy. And on the production side, the agricultural sector sustained its growth over the past year and the industry managed to recover in the second part of the year. Although the last months of last year were positive, recovery was losing speed. And the first data of 2021, from IBGE (Brazilian Institute of Geography and Statistics), confirm this trend, which was already expected in a certain way, mainly due to the end, in December, of emergency aid and the arrival of the second wave, bringing concerns to businessmen and consumers. The industry grew 2% in January in the annual comparison, below the 8.2% seen in December. The retail trade, in turn, showed a 2.9% decrease in January, interrupting the six-month sequence of growth. Vehicle sales plummeted 15.3%, the home appliances and furniture group went back to negative with a 5.4% decrease, and supermarkets, although showing annual growth of 1.4%, the pace is lower than seen in December, 3.5%. And the most preponderant sector in the Brazilian economy, services, continues in a negative sequence and went from the drop of 3.1% in December to -4.7% in January. And activities linked to tourism are pushing the numbers down. According to a survey by FecomercioSP, this segment dropped by almost a third (30.2%) of its revenue in January 2021 compared to the same month last year. In absolute numbers, the loss was around R$ 4.5 billion (approx. US$ 810 million), and the accumulated loss last year was R$ 55.6 billion (approx. US$ 10 billion), pulled by the sectors of accommodation, food and air transport. Not only companies are suffering at the moment, but so are consumers. Official inflation continues to pressure the household budget, with the cumulative 12-month increase, until February, of 5.20%. The January data looked like it was going to give a relief by the 0.25% variation compared to December’s 1.35%. However, in February, the IPCA (equivalent to the Consumer Price Index - CPI) rose 0.86%, with emphasis on the increase in fuel prices (7.09%) and the readjustments in regular education courses (3.08%). Although the variations in the food and beverage group have been relatively lower in recent months, the increase still reaches a high level, 15%, in the 12-month accumulated period. Therefore, consumers are having to resort to savings to maintain the same level of previous consumption. Last year, the balance between deposits and withdrawals was
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positive ─ R$ 166 billion (approx. US$ 30 billion) ─, and in the first bimester of this year the balance is already negative at 24 billion reais (approx. US$ 4.3 billion). Even with the more unfavorable general picture, there are some sectors that will be promising for 2021. The first of them is agribusiness, which, for example, should register a grain harvest 3.5% higher than last year. This result, considering the increase in supply, will contribute to easing the pressure of food prices. And the second segment, e-commerce, is expected to grow 26% this year, according to E-bit. However, these are not the trend. And to aggravate the scenario, now in March, some states imposed more severe restrictions on economic activity and circulation, in view of the overload of the health system, with several locations reaching 100% ICUs occupancy and with waiting lines. Therefore, unfortunately, as some countries engage with vaccination and begin to breathe from the pandemic, Brazil faces its worst moment with the second wave of the coronavirus and the economy should continue at its weak pace in the first half, in the hope of accelerating the vaccination process, one of the essential conditions for the return to normality.
IMPORTANT DATA: According to the IBGE, unemployment stood at 13.9% in the fourth quarter of last year, a slight decrease after registering 14.9% in the previous quarter. Currently, there are 13.4 million people looking for a job.
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In the absence of formal job opportunities, many people sought work on their own and started individual companies, the so-called MEIs, the Individual Micro Entrepreneurs. So much so that 2.7 million MEIs were opened last year, an increase of 8.4% compared to 2019. n
The percentage of defaulting families in the country, those who were unable to pay their debts by the due date, was 24.5% in February, the sixth consecutive fall, according to a survey by the National Confederation of Trade. Debts, on the other hand, reached 66.7%, a little above the 65.1% seen in the same period in 2020. n
Latin America Macro Data
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Unemployment rate
11,70%
13,90%
10,20%
17,30%
4,50%
13,00%
Basic interest rate
38,00%
2,00%
0,50%
1,75%
4,00%
0,25%
Inflation (LTM - oct*)
38,50%
5,20%
2,85%
1,56%
3,76%
2,79%
*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 (ICC) registered stability in February and remains at 116.2 points. However, there was a discrepancy between the two sub-indices, with a decrease of 1.5% for the assessment of current conditions and a slight increase of 0.7% for expectations. In relation to February 2020, the ICC recorded a retraction of 11.8%. With the fear of losing their jobs, the lack of job opportunities and food inflation still weighing on the budget, these are factors that should influence the reduction of consumer confidence in the coming months. The Retail Businessmen Confidence Index (ICEC) registered a decrease of 1.1% in February compared to January, the second consecutive, and reaches 97.1 points, increasing the pessimism of businessmen in the city of São Paulo. In the annual comparison, the retraction is 22.3%. The trend is negative for the coming months, given the new restrictions on opening non-essential activities and the circulation of people in the city of São Paulo. 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. 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.
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TRAVEL AND TOURISM: A YEAR LATER, THE PEAK OF THE PANDEMIC March 2021, a year after the WHO declared the pandemic, became the worst month of the Covid-19 crisis for Brazil. The numbers of cases and deaths have rocketed, cities have determined more severe measures of lockdown or quarantine, and, therefore, there have been an enormous number of canceled trips, especially domestic ones. The phenomenon of cancellations has been occurring since January, when companies also felt lower sales compared to the end of the year. The new wave of Covid-19 transferred the sector’s optimism to the second half. OPTIMISM FOR THE SECOND HALF Research carried out by Travel Consul and Interamerican with tourism professionals and entrepreneurs from around the world, showed that, among Brazilians, recovery is expected by the end of 2021 and the beginning of 2022. The poll was carried out in February. Domestic trips must resume first, as they were already being recovered at the end of 2021 and in the summer. The international trips, on the other hand, may have some specific recovery this year, depending on the speed of vaccination in Brazil, but most of them are focused in 2022. In the same survey, the most sought-after products by Brazilians are all-inclusive hotels and resorts. Travel insurance has also become a priority. For 81% of the respondents in Brazil, the requirement for a vaccination certificate or negative Covid-19 test will stimulate and make sales more secure. VACCINATION The first two months of vaccination in Brazil were very slow, presenting a lack of vaccines in several important cities, such as Rio de Janeiro and São Paulo, but the reaction of the population made the government accelerate the purchase of more doses, expected in the coming weeks. Considering this, it is likely that a good part of the population is vaccinated in the middle of the year, and studies show that vaccines applied in Brazil protect against new strains of the virus. AIRLINE COMPANIES The national airlines are a good thermometer to check the travel around the country. They all reduced their network from January to February and from February to March. But April will be the lowest month in terms of number of flights since mid-2020. Gol had 650 flights a day in late 2020, reduced to 350 flights a day in February and will have 200 flights a day in April (more than the 50 flights a day in April 2020, but a sharp drop in a curve that had only been growing until January 2021). Azul and Latam are also decreasing their domestic network. At the international level, flights are repatriation or humanitarian again, allowing only citizens and residents of the countries to fly. The new date for Gol’s international flights to resume is June 2021.
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There is a huge pent-up demand and, when the United States opens its borders, a stampede movement is expected. American consulates in Brazil are not open, but they do schedule appointment interviews for visas, all for the second half only. In Argentina, the Embassy in Buenos Aires has returned to process visa renewals (which do not require an individual interview). New visas are not being analyzed yet. Some destinations are opening all over the world again and include or not Brazilians, such as Dubai (for connections), Peru, the Maldives, the Seychelles, among others. Many already signal that they will accept vaccinated people without bureaucracy and will continue to demand a negative Covid-19 or quarantine test. ANOTHER YEAR OF CANCELLATIONS The big problem for companies in 2021 is the generation of new sales. The large number of changes and cancellations creates work, but not new revenue. And the first three months of 2021 saw the exponential growth of these cancellations and changes, due to the growth of cases of Covid-19 and closure of destinations in Brazil. Travel agencies and operators ask companies to maintain their flexible business policies and to highlight and publicize health and safety measures. CHANGES This new peak of Covid-19 will also increase the crisis in companies and more sales, mergers and end of companies, in addition to complementary business partnerships. The dismissed workers of Tourism continue the movement to open new companies to continue serving their customers. Many companies in the sector have already opened programs or departments to serve independent travel agents. OTAs continue to be the link with more difficulties in the recovery, as well as corporate travel and events. Business trips represent only 30% compared to the pre-pandemic period, with emphasis on sectors such as oil & gas, agribusiness and civil construction, in addition to the pharmaceutical, delivery and financial sectors. Major events are confirmed for the second half of 2021, as well as the resumption of some events in the entertainment area, but everyone knows that only in 2022 this type of business will return to resemble what it was in 2019.
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