Brazilian Overview Monthly Report - APR 2020

april/20

BRAZILIAN ECONOMY .............................................................................2 OTHER IMPORTANT DAT............................................................................. 3 LATIN AMERICA MACRO DATA................................................................... 3 CONFIDENCE INDEXES................................................................................4

IN TOURISM.............................................................................................4 INTERNATIONAL DESTINATIONS ..........................................................5 RESEARCH AND ANALYSIS....................................................................5 PANROTAS DURING THE CRISIS ...........................................................7

MAIN FACTS The impacts of Covid-19 are not different in Brazil than in the rest of the world. The difference is the period in which the country is being hit, in the midst of an economic recovery, with great fiscal fragility and when the government is trying rigorously to adjust the accounts through an extensive reform agenda.

As a result, the Real, was the most depreciated currency against the dollar, surpassing the R$ 5 mark for the first time in history. Part of this is due to the outflow of R$ 24.2 billion (about US$ 5 billion) from foreign investors on the Brazilian stock exchange, a record for the month since 1996. The stock exchange had to trigger the circuit breaker several times, when it momentarily suspended negotiations to calm investors. However, after reaching 63 thousand points, the index recovered again, but not returning to the previous level, which was above 100 thousand points.

And following the world trend, the Central Bank of Brazil decided to reduce the basic interest rate from 4.25% to 3.75% per year, renewing the record low. As the Brazilian inflation is low, at 3.3% in the previous 12-month period and with the expectation of closing the year below 3%, it makes room to further reduce interest rates in an attempt to mitigate the impacts of the coronavirus on the economy.

Even with an unfavorable fiscal situation, the government’s role in helping families and businesses will be essential. As a reference, April’s primary deficit is expected to overcome the entire last year’s deficit of R$ 95 billion. The sum of the measures adopted reaches R$ 800 billion (approximately US$ 160 billion).

Regarding social protection, an emergency aid measure was developed: unemployed people or those with a family income of up to R$ 3,135 can withdraw R$ 600 for three months. The FGTS (Guarantee Fund for Length of Service) will withdraw the limit amount of R$ 1,045 per worker.

At the same time, two Provisional Measures were issued to make labor relations more flexible, in an attempt to maintain jobs, such as the anticipation of vacations, use of banked hours and possible reduction of wages, up to 70%, with reduced working hours. The government is committed to completing the rest of the payment with the Unemployment Insurance program, however, to achieve the maximum percentage, the company’s annual turnover must be up to R$ 4.8 million.

The Central Bank reduced the percentage of compulsory deposits, which are the resources that banks need to leave in the Central Bank, to provide more liquidity in the financial system in almost R$ 70 billion and to stimulate the supply of credit to companies and individuals.

But the strong increase in the risk of default, in addition to a market concentrated in five large institutions, has limited this money to reach them. For this reason, public banks have been an important instrument to offer more credit and, among several lines, payroll financing has now an interest rate equal to the basic rate, 3.75% per year, which mainly benefits micro and small businesses.

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Brazil and the world are going through a moment of extreme complexity and there are no simple solutions. Some states and cities have adopted quarantine, closing non-essential shops and services. Although positive measures have been taken to stimulate credit, postpone tax payments, “unpredictability” is the key word of the moment, because it prevents entrepreneurs and consumers from planning and making decisions, such as taking on debt to keep the company.

According to the Ministry of Health, the month of May should be the peak of contamination in Brazil, which will require patience and strategy of economic agents to survive the current crisis.

OTHER IMPORTANT DATA: n

The GDP expected to grow by 2% should retract at least 2%. In addition to the exchange rate

that should continue to be pressured due to the risks and fiscal fragility of Brazil. n

According to calculations by FecomercioSP, non-essential trade in the state of São Paulo

moves R$ 35 billion in a month like April, which should be in quarantine, and there are about 1.3 million formal workers. Therefore, there is the concern to take urgent measures to preserve companies and jobs. n

The official inflation (IPCA) of March was the lowest for the month since the creation of the

Real Plan, in 1994. With the change of 0.07%, the accumulated in 12 months falls from 4% to 3.3%. Despite the increase of 1.13% in the food and beverage group, overall, the trend is inflation to remain low due to the drop in demand and income as a result of Covid-19. The expectation is to end the year close to 2.8%.

The industry registered a slight decrease of 0.4% in February in the annual comparison.

Some sectors were already suffering from the reduction in world demand. Other sectors, such as electronics, began to suffer from a lack of inputs for production, mainly from China, due to the quarantine adopted in that country.

n

February data from the retail and service sectors have not felt the effects of coronavirus on the economy yet because social isolation began in the second half of March. For the retail sector, the annual growth was 3.3%, with emphasis on the furniture and decoration sector, with an increase of 11.7%. The variation in the service sector was 0.7% over the same period last year. n

Latin America Macro Data

Argentina

Brazil

Chile

Colombia

Mexico

Peru

Unemployment rate

8,90%

11,00%

7,80%

12,20%

3,70%

7,10%

Basic interest rate

38,00%

3,75%

0,50%

3,75%

6,50%

0,25%

Inflation (LTM - feb*)

50,30%

3,30%

3,74%

3,72%

3,25%

1,81%

*LTM - Last Twelve Months Until March (except Argentina) 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) of the city of São Paulo decreased 5.5% from February to March and reached 124.6 points. The sub-index that assesses current consumer conditions decreased even further, by 10%. The negative data for March breaks the sequence of four months of increase and will be the beginning of the cycle of retreats due to the strong impact of the coronavirus on employment and household income.

The Retail Businessmen Confidence Index (ICEC) of the city of São Paulo, in turn, remained stable in March and remains at 125.2 points. It is worth mentioning that the collection of research data was carried out in a period prior to the beginning of restrictive policies to contain Covid-19. Therefore, the data are still favorable, however, as of April, there will certainly be an inversion of the curve for a sequence of retractions.

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.

IN TOURISM The impact of the crisis caused by the new coronavirus pandemic was devastating for Brazilian tourism.

At the beginning of April, only 10% of the domestic airline network (only essential flights connecting the country’s capitals) and less than 30% of the hotels were operating. All resorts in Brazil were closed, as well as theme parks and tourist attractions, with an estimated loss of R$ 14 billion (almost US$ 3 billion) in March alone, and April will be a month in which several companies will have no revenue, such as travel agencies, travel management companies and tour operators.

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The policy to encourage the postponement of travel is being successful in Brazil and the government has established measures authorizing the prioritization of the offer of travel credits and rebookings, with no penalty for customers. If the passenger wants a refund, from airlines, tourism and events companies, concerts, theaters and other players in the Tourism and Culture segments, companies may pay this refund within one year after purchase (in the case of airlines) or one year from the end of the state of public calamity.

Most companies chose to keep employees, cutting work hours and wages, but there were also dismissals, especially in the second half of April. Few companies, especially OTAs and international airlines, are offering travel deals for the end of the year or 2021.

In April, international airline network are operating only repatriation flights, and most companies believe that they will return to operate more flights from May or June.

INTERNATIONAL DESTINATIONS A report made by the Portal PANROTAS with representatives and DMOs shows that most of them remain in Brazil, reducing their monthly fees and activations, and few have decided to cancel contracts, promising to return soon.

To read the article, in Portuguese, click here.

RESEARCH AND ANALYSIS PANROTAS and MAPIE consulting company launched, in early April, the TRVL LAB - Laboratory of Market Intelligence in Travel, and the first survey heard 300 travelers and 325 tourism companies about the impact of Covid-19 on travel.

The result of the PULSO Turismo and Covid-19 survey, carried out by TRVL LAB, shows that people need to assure the disease is controlled before returning to travel. International travel tends to remain affected for a longer time, as 60.48% of the 300 respondents say that they do not intend to return to international travel until there is confidence in the control of the pandemic. This number decreases to 45.36% when it comes to domestic travel.

A preliminary trend points to the resumption of regional tourism at first, with the Northeastern region leading the answers of consumers (just over 26%) as the most desired destination for the post-crisis, followed by regional beaches, region of Serra Gaúcha (Rio Grande do Sul) and Rio de Janeiro.

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The first international destination, Europe, has only 7.9% of the intentions. Asia and Africa did not receive any vote from those who answered the survey, showing that Brazilians cannot even cogitate such long journeys, at the moment.

On business, 21.99% don’t mind traveling for work when the isolation is over. But 21.31% totally disagree with this statement. And 16.15% know that they will have to travel for work when the isolation is over, but they would not like to do it.

On the arrival of the pandemic, 55% of respondents said they had planned and/or purchased trips that were impacted by travel restrictions, and 45.45% are still waiting for the next developments to make a decision on what to do. When there is a decision, the preference is for the change to a future date (31.82%).

This is also a delicate moment for brands, as consumers are attentive to the actions taken and the care shown by them in relation to customers and employees. And, despite the difficult times, 36.30% are still keeping an eye on bargains and opportunities. However, on the other hand, 27.74% considered it was inappropriate to receive bargains and commercial actions in this period and 31.62% are unable to decide about future trips at this time.

Of the 325 Tourism professionals who answered the second part of the survey, 80% were distributors: travel agencies (60%), operators, freelancers, OTAs and consolidators. The others were suppliers of the production chain or representatives of national and international destinations.

Almost 77% said that managing customer travels was the priority that took the most time, followed by taking care of the health of the team and organizing new working conditions (34.50%) and analyzing cost and cash flow in the coming months (33.87%).

The survey was carried out at the end of March and tourism companies were optimistic about the resumption, which must have changed with the progress of the disease. Most believe that the resumption will start in May and June. But few have plans in this regard. There is a yearning for the most immediate solutions.

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“It is a delicate and difficult time for everyone, and the Tourism has been hit hard. TRVL LAB would be launched at the Fórum PANROTAS 2020, postponed to September 9th and 10th, and we decided to keep the research we had prepared (on Corporate and Leisure sectors, which will be TRVL LAB’s two series of proprietary researches) for the new event date, with updates, of course. Now is the time to act, guarantee the sustainability of the business, the jobs of the employees and, above all, the health of all of us. TRVL LAB was born at a time of enormous challenges for the industry and we hope to help each of you with this information”, explains PANROTAS CEO, José Guilherme Alcorta.

TRVL LAB has a portfolio of personalized research and analyses, which can range from punctual to sectorial, for tourism companies and destinations. The results are disclosed, in part or in full, in a strategy for brand positioning and content production on PANROTAS platforms.

Find out more about TRVL LAB and download, free of charge, the entire PULSO Turismo and Covid-19 survey at www.trvl.com.br.

PANROTAS DURING THE CRISIS PANROTAS team is working at home during the crisis, and has created several actions and opportunities to continue presenting the best coverage in the Travel and Tourism industry: Portal PANROTAS created an exclusive Tourism and Covid-19 section, where the reader can access all the news about the pandemic.

A section on positive news and crisis recovery was also created.

Portal PANROTAS’s audience in March and April grew an average of 50%, reaching peaks of 30 thousand unique visitors per day in more than 12 days in both months, which accumulated an average of 24 thousand unique visitors a day.

PANROTAS magazine (the only weekly magazine in the industry) continues to be distributed every week, but the printed version was suspended until the end of the crisis. In total, about 10,000 professionals receive and read the magazine via WhatsApp (+55 11 95609-1507 to request it, free of charge) or on Portal PANROTAS (in the Digital Editions section).

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PANROTAS, in partnership with Imaginadora and R1, created the Check-Point series of live streaming sessions, which, at this moment, invites authorities, such as the Minister of Tourism, Marcelo Álvaro Antônio, and businessmen, so that our readers can ask questions about measures to combat Covid-19 crisis.

We are also developing webinars for clients to maintain the relationship with the trade during the crisis.

Our daily newsletter continues to be distributed with the main news of the day, reaching 18,000 industry names daily.

The chief editor of PANROTAS, Artur Luiz Andrade, and the CEO, José Guilherme Alcorta, have participated in live streaming sessions, interviews and actions to support the tourism market at this moment. PANROTAS also supported the “Postpone, don’t cancel” campaign, to encourage the rescheduling of trips.

We (Editorial, Commercial and Management teams) are in daily contact with our customers, to support them and for us to recover together after this crisis.

We also support the recommendations of the health authorities in Brazil and the WHO, encouraging social isolation and health measures at this time.

We have also intensified the use of the hashtag #SomosTodosTurismo (#WeAreAllTourism), encouraging the union of the industry at this moment.

New projects, events, coverage and products will come after the crisis, and we know that Tourism will return different, but also stronger and stronger.

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