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Weak currency, cheaper flights aid Brazil Tourism market

Weak currency, cheaper flights aid Brazil Tourism market

Brazil’s tourism sector seems to be in a privileged position relative to other major tourist destinations worldwide. The relative weakness of Brazil’s currency, and the prospect of cheaper flights, has brought an increase in the number of visitors to the country over the last six months. These factors may also lead in particular to a larger number of US tourists
enjoying Brazil’s myriad attractions.

In the South American context, Brazil is still the main tourism destination, and is the second-most popular in Latin America after Mexico. The official statistics show that the country received more than five million visitors, and a return from external tourists of US$4.95m, in the year July 2007-June 2008. Although a smaller number of external tourists might be expected for 2009 - given international trends and global financial uncertainty - the current available information suggests the opposite. There has so far been an increase seen in the number of external tourists (from countries such as Argentina), as well as an increase in local tourism. Therefore, the scenario is quite optimistic. Nevertheless, in spite of this growth, the sector still needs to generate more income from tourism. Many tourists travel from countries which have low per capita budgets for leisure. The government is investing some R$11 million in tourism promotion in South America, with some 50% of this amount dedicated solely to the Argentinean market.

Indeed, the key appeal of the country is its astonishing array of spectacular places to visit - the Iguazu Falls on Brazil’s border with Argentina, and the Ipanema and Leblon beaches of Rio de Janeiro are just the start. Indeed, Brazil has the sixth largest number of world heritage sites of the 130 countries evaluated by the United Nations World Tourism Organization (UNWTO); it also has the same ranking for its human, cultural and natural resources. These positives are, however, seriously undermined by Brazil’s reputation for abysmal levels of safety and security - Brazil was ranked 128th out of 130 countries on safety and security by UNWTO; and its long-standing problems with ground transport infrastructure and information and communications technology (ICT) infrastructure.

Despite the global financial crisis, BMI remains confident in Brazil’s macroeconomic fundamentals, forecasting average real GDP growth of 4.4% over our five-year forecast period. However, we are increasingly cautious regarding Brazil’s economic outlook for 2009, with tighter international liquidity and still-rising interest rates likely to weigh on overall domestic consumption. We are therefore revising down our economic growth outlook to 3.5% for 2009, from a previous projection of 4.0%. In political news, Brazil’s recent local elections have played a vital role in shaping the political battlefield ahead of the presidential election in 2010. Despite a solid performance by the ruling Partido dos Trabalhadores (PT) party on October 5, the election outcome has been sufficient to improve the party’s chances of gaining another presidency after President Luiz Inácio Lula da Silva leaves office, due in 2011. BMI’s core scenario currently sees Lula’s chief of staff, Dilma Rouseff, as the PT’s candidate to run for president in October 2010, against São Paulo state governor José Serra, who faced off with Lula in 2002.