Brazil tourism report Q2 2010

Brazil’s tourism industry has benefited greatly from the announcement of several high profile events to be held in the country.

Brazil’s tourism industry has benefited greatly from the announcement of several high profile events to be held in the country. The 2014 FIFA World Cup is set to be a huge draw for visitors and the addition of the 2016 Olympics in Rio de Janeiro will further boost the sector. In January 2010, the government said it would invest BRL1mn to improve facilities throughout the country ahead of the World Cup.

Inbound visitor numbers had been growing but the industry could benefit from greater stability. While arrivals rose from 4.7mn in 2001 to 7.2mn in 2008, we estimate a fall in that number in 2009 because of the impact on developed countries of the global financial crisis. The recovery should be relatively quick, with us forecasting that the number of tourist arrivals will increase to 9.2mn by 2014. The size of Brazil means that the tourist industry can rely to a large degree on strong domestic demand. This has partly helped the sector weather the international economic difficulties. The number of Brazilians looking to travel within their own country and that can afford to do so is growing. According to Instituto Brasileiro de Turismo (Embratur) president Jeanine Pires, the revenue generated by tourism in 2008 was nearly 17% higher than in 2007, which was the best year on record.

Sector growth appears to be building up momentum as the global economy recovers. Brazilian airline Gol Transportes Aรƒยฉreos reported an increase in year-on-year (y-o-y) growth for January 2010. Compared with January 2009, Gol’s revenues were up by 32.1%.

In the hotel sector news has been positive too, with French corporation Accor planning to add nearly 5,000 rooms in Brazil with an investment of about EUR200mn. This will be achieved through expansion of their 20 Formule 1 and Ibis hotels in Brazil throughout 2010. In November 2009, Brazilian flag carrier TAM Linhas Aรƒยฉreas posted a profit for Q309, boosted by the Brazilian real strengthening against the US dollar and dropping fuel prices, Bloomberg reported.

In October 2009, the newly renovated Hotel das Cataratas at Iguacu Falls was reopened by Orient- Express Hotels. Renovations are a positive area for investment in Brazil’s tourism infrastructure. A lack of infrastructure has held the sector back to date but this looks set to change as investment increases over the coming years.

Political Outlook Over recent years, Brazil has been manoeuvring to develop its position as a regional power to rival the US in Latin America. Involvement in issues such as new governments in Haiti and Honduras have helped cement Brazil’s role as a powerbroker. Headline consumer price inflation in Brazil has fallen below 5.0% y-o-y, which is positive for the country’s social stability rating, which has risen to 70.0.

Long-Term Outlook Still Bright While acknowledging the impact of the recession, we remain bullish in the long term regarding the Brazilian economy. We believe the Brazilian economy has a lot going for it, from an enviable array of commodity resources, such as soy, sugar, iron ore, steel and hydrocarbons (we expect Brazil to be a net exporter of oil by 2011), to a highly promising consumer segment. We expect the Brazilian consumer to continue to grow in prominence over the coming decade and bank lending will continue to be a driving force behind the country’s economic performance, offering more sophisticated financial instruments to different sectors of the economy, where loans for housing and agricultural are still a relatively new phenomenon.

Business Environment Brazil’s business environment scores well within the region thanks to strong government stimulus and an abundance of agricultural and mineral resources. The government’s growth acceleration programme and the potential for another programme from 2011 help boost the country’s outlook for future growth. We expect the transport and energy industries to grow the most as President Luiz Inรƒยกcio Lula da Silva’s government invests in infrastructure upgrades. On the downside, overregulation, corruption and gang crime remain threats to the business environment in Brazil.

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Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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