SEPTEMBER/22
BRAZILIAN ECONOMY.........................................................................2 IMPORTANT DATA.................................................................................3 LATIN AMERICA MACRO DATA..............................................................3 CONFIDENCE INDEXES..........................................................................4
TRAVEL INDUSTRY ............................................................................5
MAIN FACTS Heading into the last quarter of the year, the global economy keeps facing challenges, especially with inflation being pressured. In Brazil, the situation has started to mitigate, but far from being solved. For two months in a row, the index that measures prices in Brazil, the IPCA, registered a deflation of 0.68% and 0.38% in the months of July and August, respectively. In the accumulated balance in the 12-month period, the variation decreased from two figures and is currently 8.73%. However, the average downfall in prices did not happen for the majority of product and service items, but very specific to fuel, like gas, diesel, and ethanol. The case is that the limitation measure of 17% in the state tax on fuels managed to lower the prices significantly to consumers in gas stations. In addition, the Brent oil, a reference to gas in Brazil, went below 120 dollars per barrel to range, currently, around 90 dollars. Thereby, it allowed Petrobrás to perform a sequence of reductions in the selling price of gas in the refineries. On the Other hand, seven out of nine groups analyzed by the Brazilian Institute of Geography and Statistics (IBGE) registered a raise in the last data collection in August. The prices of food, on average, have kept consecutive increases, being this group the one that presents the highest weight in families’ budgets. Job positions in the country have grown and contributed for the worker to restore, in part, the loss of income due to inflation. The unemployment rate measured by IBGE was 9.1% in the quarter that finished in July, the lowest threshold since the end of 2015. Nevertheless, as the ingress and regress in the job market have been happening, on average, with lower paychecks, that makes the available income gain difficult in families’ households. Besides that, according to data by the National Confederation of Commerce (CNC), the rate of indebted families and presenting overdue bills, the defaulting ones, are beating records, totaling 79% and 29.6% of families, respectively. Part of this increase is linked to the difficult consumption in face of higher prices. However, there’s another explanation; the expressive rise in interest to consumers, following the trajectory of rise in the economy’s basic rate, the SELIC. In a year, the rate has increased from 2% to almost 14% a year. Consequently, families with overdue bills in a record threshold, high interests and inflation still pressuring, it is natural to imagine the restraining impact on sales. So much so that the last data of the sector was negative, with sales retraction of 6.8% in July, increasing from the -3% seen in the previous month. From the 10 segments analyzed by IBGE, six presented a downturn, and the supermarkets presented stability. Considering the service sector, the scenario is more favorable, with the highlight to activities linked to tourism. In general, there was a 6.3% growth in July, compared to the same period last year. However, when the accommodation and food, and air transport sectors were analyzed, the variations are steep, of 22.3% and 15.4%, respectively. And FecomercioSP monthly survey proves the positive moment that the national tourism is at. The revenue in July was 18.3 billion reais, an increase of 32.1% in the annual turnover. The demand is heated, but it is important to highlight that part of this raise is due to the increase in prices, above all, flight tickets. According to the entity’s estimations, tourism’s inflation reached 31.3% in a year by August, against the 8.73% of the general average inflation in the country.
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As previously seen, the economic variables and sectors point in different directions, and this instability and unpredictability make the country’s stronger recovery difficult. What should be uplifting by the end of the year is the injection of the R$ 600 amounts from the Brazil Aid, besides the 13th-month salary at the end of the year. Recalling that with more people formally employed, the workers will have more resources available in November and December. Yet, again, with a record number of families with overdue bills, these resources should be destined, mostly, to paying debts. The problem is that there is an indication of a global recession in 2023, driven by the rise in interest this year. Expensive credit to companies and consumers entails fewer investments and expenses of families, in other words, a cooling down in demand. Therefore, the remedy to hold inflation back (increase interests) will have a negative collateral effect and Brazil, which couldn’t render a stronger traction to upturn, should follow with a positive pace, but a weak and limited one.
IMPORTANT DATA: The Gross Domestic Product in the 2nd quarter grew 1.2% and accumulated an increase of 2.6% in a year. All sectors had positive performances, agricultural (+0.55%), industry (+2.2%), and services (+1.3%). The investments also followed the positive trend, with an elevation of 4.8% in the quarter. Another index that pushed GDP up was families’ consumption, with an increase of 2.6%.
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The retailing trade decreased 6.8% in July. The negative highlights were caused by the sectors that are more sensible to credit, like furniture and household appliances (-14.6%), construction materials (-13.7%), and vehicles (-8.5%). On the other hand, drugstores have kept expanding since the beginning of the pandemic and registered an increase of 4% in July.
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The industry presented a downturn of 0.5% in July in the annual turnover. In a year period, the accumulated balance reached -3%, driven by the production of durable consumer goods, which presented a decrease of 10.2%. These are sectors that depend on credit to increase consumption, and consequently, demand in industry.
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The average interest rate charged from consumers was 51.5% a year in June, according to the Central Bank. A year before, the average percentage was 39.8% a year. This rise has a direct impact on consumption.
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Latin America Macro Data
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Unemployment rate
7,00%
9,10%
7,90%
11,00%
3,20%
6,80%
Basic interest rate
69,50%
13,75%
10,75%
9,00%
8,50%
6,75%
71,00%
8,73%
14,10%
10,84%
8,70%
8,80%
Inflation (LTM - Jun ) *
*
LTM - Last Twelve Months
Until June 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 was 106.8 points in August, a monthly increase of 1.1%, although it is 4.7% below the 112 points seen in the same month in 2021. Although optimistic, families in São Paulo are facing a hard time in their day-to-day lives, with inflation in food impacting their budgets, and also with having overdue bills. A more heated job market has helped in the trust, but it hasn’t been enough to counterbalance the negative points of the economy. The Trade Entrepreneur Confidence Index (ICEC) pointed to a downfall of 1.1%, going below 119.9 points in July and reaching the current 118.7 points. Despite this retraction, the threshold in August was 10.1% above the one seen last year. The weaker pace in sales has directly impacted the mood of business owners. As the scenario shouldn’t change throughout the 2nd semester, the tendency is to remain at a level close to the current one. Consumer Confident Index (ICC) and Comerce Businessman (ICEC)
Consumer Confident Index (ICC) and Comerce Businessman (ICEC) 150 140 130 120 110 100 90 80
ICC
Aug-22
May-22
Feb-22
Nov-21
Aug-21
May-21
Feb-21
Nov-20
Aug-20
May-20
Feb-20
Nov-19
Aug-19
May-19
Feb-19
Nov-18
Aug-18
May-18
Feb-18
Nov-17
Aug-17
May-17
Feb-17
Nov-16
Aug-16
May-16
60
Feb-16
70
ICEC
Note: The ICC and ICEC vary from 0 to 200. From a 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.
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TRAVEL INDUSTRY Next summer will be decisive to the real upturn of international trips in Brazil. So far, we’ve had full flights, skyrocketing prices, but the seat offer is still below the pre-pandemic one. For the end of the year, the airlines have already announced significant raises of flights, reaching levels that are very close to the ones before the crisis. American Airlines will reach 38 weekly flights, but during the highest season that goes from December to January, it’s reaching three daily flights between São Paulo and Miami. Unfortunately, it still doesn’t have plans of flying from Manaus to Miami or leaving from the Northeast. But its partner in Brazil, Gol, will provide this gap with more flights to the United States, and also to Argentina, leaving from the Northeast and the North of the country. Delta Air Lines, Aerolíneas Argentinas, Air Europa, Lufthansa/Swiss, Tap and Air FranceKLM are other companies that will increase their flights in Brazil or have already done so recently. The international summer will have the Brazilian resorts as competitors, and the cruises, along the Brazilian coast, resulting in the greatest season of the last ten years. Everything being paid in reais and installments. If the exchange rate helps, flying abroad will again be competitive. Still regarding international trips, it’s hoped the Caribbeans to have a boom of tourists. Many of them who would be traveling to Mexico, and don’t want the inconvenience of going to the consulate to get their visas. Skiing is also trendy, and American and European ski resorts are currently in Brazil, visiting and organizing events for travel agents. IRRF IN 2023 (THE BRAZILIAN WITHHELD INCOME TAX) If you are a foreigner supplier, especially from the United States, and your partner in Brazil is requesting to pay for your services only in January, don’t be frightened. The case is that from 2023 on, the tax on international remittances will be 6%, and the same index will be kept in 2024, then increasing one percentage point per year until it reaches 9%. Currently, this tax is 25% and has halted the remittances to countries without the bilateral agreement with Brazil regarding double taxation. The News was expected, and it was greatly celebrated, but it will only start counting in January 2023. ABAV EXPO This month, the Abav Expo took place in Recife, Northeast of Brazil, and indeed tourism in Brazil was the greatest highlight. But international tourism starts gaining force due to this increase in flights, and with an aggressive presence in Brazil of destinations
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like Argentina, France, Switzerland, Spain, and even the United States, with delegations and exclusive events each week. Keep betting in added value to products, payment convenience, and novelties. Disney’s and Universal’s trainings have filled up the rooms across Brazil, and are a demonstration that Brazilians want to keep traveling and visiting their favorite places. Lastly, the growth of domestic and international chartering of operators like CVC Corp and ViagensPromo is in the spotlight, and also the incentive campaigns to travel agents. This is the time to go beyond transaction, show partnership, and set some baits to attract sellers and the final client. Is everyone ready for the 2022/23 summer? It will be worthwhile. 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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