Brazilian Overview Monthly Report - JUL 2019

July / 19

BRAZIL IMPORTANT INFORMATION.............................................................................................2 CONFIDENCE INDEX........................................................................................................2 BRAZILIAN TOURISM......................................................................................................3 BRAZILIAN COMMERCIAL AVIATION - DEMAND...............................................................3 CONSUMER CONFIDENCE INDEX (ICC) - SÃO PAULO..............................................................4

AVIATION HIGHLIGHTS 1ST SEMESTER..........................................................................................4 NEW INTERNATIONAL FLIGHTS.......................................................................................5

UNITED STATES TRAVELS UNITED STATES IN 2019......................................................................................5

PANROTAS PORTAL HIGHLIGHTS.........................................................................5

BRAZIL

Brazil, with its continental size and complexity, has a market dynamics that must be monitored periodically. With its 208 million inhabitants and being one of the largest producers of raw materials in the world, its results and projections are constantly changing, affected by global issues such as: international agreements, trade disputes between countries and regions or signs of attacks on oil areas.

Brazilian political-economic conjuncture improved, especially at this time, when the pension reform, the main pillar of economic restructuring, was approved by the Chamber of Deputies, but there are still other very important reforms, such as political and tax reforms, which must be approved by the end of the year.

The last four years were atypical, as the president-elect Dilma Rousseff was impeached in her second year of office and her vice president Michel Temer governed the country until the 2018 election. Because he was not the president-elect, it was difficult for him to get approvals for course correction in the National Congress.

We went through the first six months of a new president-elect and a fairly renewed National Congress with the movement started by the people voting for candidates who had never had a participation in politics, trying to leave behind the “old politics”.

GDP, the sum of all that is produced in Brazil, increased 0.5% compared with the same period of last year and had a slight decrease of 0.2% compared with the last quarter of 2018. Growth projection for the end of the year is 0.8%. See the table comparing the GDP evolution in the main Latin American countries.

IMPORTANT INFORMATION: Retail sales in Brazil grew 3.1% in April compared to the same month of 2018. In the four-month period, the balance is positive by 2.5%.

Industrial production decreased 3.9% in April in the annual comparison. In the accumulated of the 12 months period, the balance is negative by 1.1%.

The official inflation in Brazil (IPCA) in the last 12 months is at 3.37%, below the target of 4.25% defined by the government for this year. This result was mainly due to the fall in prices of the “Food and beverages” and “Transportation” groups, which together account for about 43% of household expenses.

The unemployment rate in Brazil fell 3.14% compared to the same period last year, remaining at 12.3%. In January the rate was at 12%, reached 12.7% in March and decreased again according to the last data of May. Brazil’s benchmark interest rate, SELIC, is at 6.5% ─ its lowest level since March 2018 ─, presenting a downward bias towards the next decision of the country’s Monetary Policy Committee (COPOM).

Latin America Macro Data Resume

Argentina

Brazil

Chile

Colombia

Mexico

Peru

Inflation (LTM - jun*)

55,80%

3,37%

2,60%

3,43%

3,95%

1,60%

Unemployment rate (may)

10,10%

12,30%

7,10%

10,50%

3,50%

6,70%

Basic interest rate (jun)

58%

6,50%

2,50%

4,25%

8,25%

2,75%

Industrial Production (LTM - may*)

(-6,9%)

7,10%

(-0,9%)

3,20%

(-3,3%)

1,00%

*LTM - jun - Last Twelve Months Untill June *LTM - may - Last Twelve Months Untill May

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CONFIDENCE INDEX: The Consumer Confidence Index (ICC) in the city of São Paulo reached 117 points, which represents an increase of 3.1% over the same period last year, but a decrease of 3.9% compared to April.

On the other hand, the Retail Businessmen Confidence Index (ICEC) in the City of São Paulo is more optimistic, reaching 120.6 points, which means an increase of 5.41% compared to the previous year, but a decrease of 2.6% compared to April.

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.

BRAZILIAN TOURISM In April, the volume of specific services from the Tourism sector registered stability in the annual comparison. And from January to April the performance was also 2.7%. This industry is experiencing much more of a respite than a recovery, because when compared to the pre-crisis period, in the beginning of 2014, for example, the current volume of tourism activity is 9% below, already discounting inflation.

More expensive dollar and weaker economy make consumers with financial conditions to choose a domestic destination rather than an international one.

BRAZILIAN COMMERCIAL AVIATION - DEMAND The aviation market in Brazil presents a positive result between January and May, with an increase of 2.4% in passenger demand.

However, the reduction of Avianca’s operations caused a sharp drop in the supply of plane seats (-8% in May), and its demand decreased 2.1% in the month compared to the previous year.

In the short term, the data must be negative because of the Avianca effect. However, in the medium and long terms, as the gaps left by this company are filled and also due the opening of airlines’ foreign capital, figures will probably rise again.

Airline Demand - Domestic Market

RY RY UA UA R N B JA FE

CH

M

AR

L

RI

AP

M

AY

NE

JU

LY

JU

T US

G AU

R

BE

M

SE

E PT

R

ER

B TO OC

2018 Sources: ANAC

Passengers (in thousands)

R

BE

M

VE NO

BE

M

D

E EC

RY RY UA UA R N B JA FE

CH

M

AR

L

RI

AP

2019

Annual variation

Latest data

April Year to date

-2,1% 2,4%

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CONSUMER CONFIDENCE INDEX (ICC) - SÃO PAULO The Consumer Confidence Index in the city of São Paulo reached 117 points, a decrease of 3.9% compared to April, the third consecutive decline. However, it still remains in an optimistic level, above 100 points.

Although the indicator is from the city of São Paulo, it follows the trend of what is happening in the rest of the country. Besides that, the city participates with 11% of the national GDP. The latest negative figures from the ICC show an alignment of expectation, because, as imagined, the country would be in a much more favorable situation after the election period.

Retail Businessmen Confidence Index - ICEC

may/18

jun/18

jul/18

aug/18

sep/18

oct/18

nov/18

dec/18

jan/19

feb/19

mar/19

apr/19

may/19

Sources: FECOMERCIOSP

Latest data

May Monthly variation Annual variation

117 points -3,9% 3,1%

AVIATION

HIGHLIGHTS 1ST SEMESTER Avianca Brasil, fourth largest Brazilian airline, stops flying. As a member of Star Alliance, it had already flown to Santiago, Miami and New York. It had about 13% of the market Gol and Latam Airlines bought Avianca Brazil assets, especially slots at the main airports, such as Congonhas, Brasília and Guarulhos Azul Linhas Aéreas breaks with Gol and Latam and leaves Abear, an airline association.

The company launches a campaign to fly from Rio to São Paulo and vice-versa (Rio-São Paulo air shuttle service) Abracorp – Brazilian Association of Corporate Travel Agencies – presented data from its 29 associates, the largest TMCs (Travel Management Companies) in the country, showing that the domestic air fare in the 1st semester of 2019 rose 17.3% compared to the 1st semester of 2018. Sales of international air tickets dropped 1.7% in the first 6 months of 2019.

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NEW INTERNATIONAL FLIGHTS

Recife » Madrid,

Fortaleza » Madrid,

one additional frequency (total of 3 weekly)

two new frequencies

with Air Europa (MAY 2019) -

with Air Europa (NOV 2019) -

São Paulo » Porto,

São Paulo » Munich,

one additional frequency (total of 3 weekly)

three new frequencies

with Tap (JUN 2019) -

with Lufthansa (DEC 2019) -

São Paulo » Porto,

São Paulo » Montreal,

three new frequencies

three new frequencies

with Azul (JUN 2019) -

with Air Canada (DEC 2019) -

Recife » Santiago,

Rio » Paris,

one new frequency

three additional frequencies (10 weekly)

with Gol (JUL 2019) -

Rio » Madrid,

with Air France (DEC 2019) -

Rio » New York,

with Delta Air Lines (DEC 2019 to MARCH 2020), Brasília-Cancun, with Gol (JUL 2019) 7 new seasonal flights – four new frequencies with Iberia (JUL 2019) -

two additional frequencies (total of 7 weekly)

Natal » Amsterdam,

Charter flights with Corendon (NOV 2019) – two new frequencies

São Paulo » London,

with Virgin Atlantic (JAN 2020), started in Brazil with 7 flights per week..

UNITED STATES

TRAVELS TO THE UNITED STATES IN 2019 After very promising figures in sending tourists to the United States in 2018 (2.2 million Brazilian travelers), an increase of almost 10%, and US$ 11.5 billion in expenses, these figures continue to be good in Brazil in 2019.

From January to May 2019, 898 thousand tourists went to the U.S., - 2.1%.

Other markets presented a higher decrease during the same period: Canada (-3,6%), Mexico (-7%), China (-3,1%), South Korea (-4.4%), Germany (-0,9%), Argentina (-23,3%), Venezuela (-11%) and Sweden (-11,4%)

PANROTAS PORTAL HIGHLIGHTS.

Magda Nassar, from Trade Tours, is the new president of Abav Nacional. The president Geraldo Rocha requested leave due to health problems. The travel agents entity holds its annual fair in partnership with Braztoa, the operators’ association, from September 25th to 27th, in São Paulo. The fair will have a day dedicated to B2C. The high rate of the U.S. dollar has made the operators and OTAs (Online Travel Agencies) to increase the options of payment in installments for the trips. decolar.com / Despegar.com, the largest OTA in Latin America, started offering the option for customers to pay using 12 bank billing barcode invoices (12 installments).

Visit USA, a training event on U.S. destinations and products, will take place in São Paulo (August 5th), Campinas (7th) and Curitiba (9th), with seminars and workshops. The presence of the following companies is confirmed: Visit Orlando, Disney, Miami, Kissimmee, Tampa, Philadelphia, Chicago, Hertz, United Airlines and operators like, Orinter, Flytour Viagens and Abreutur.

Since June 17th, travelers from the United States, Canada, Australia and Japan no longer need a visa to enter Brazil. It is worth for travelling for leisure, business, transit, artistic and sporting activities and exceptional situations related to national interest. Each visitor can stay for 90 days, extendable for a further 90 days, in a period of one year.

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