Page 44 - TFWA World Exhibit 2024 Special Edition

INSIDER

Uncertain economic outlook for Latin America

Brazil and Argentina account stronger consumer spending. While Has travel retail been affected?
for more than 65% of the total Gross the government has posted record tax What does the current economic
Domestic Product in Latin America. revenues, it still has to rein in spending. uncertainty mean for the travel retail
Clearly, if both economies are fine But the economy seems to be heading in business? The December devaluation in
tuned and growing it benefits the whole the right direction and if the government Argentina didn’t affect travel numbers in
continent – positive business and is able to control spending and the fiscal Q1, as many had confirmed reservations
consumer sentiment is a major factor in deficit, growth should continue for the several months prior to the elections. But
ensuring that things go well. So far this rest of the year. it appears that Argentine shoppers were
year the story in both countries has been spending less in duty free in the country’s
mixed. Argentina airports and in border shops in Argentina,
The short term economic outlook Argentina’s macro economic Brazil and Uruguay.
for the two biggest economies in Latin situation is slightly better than at the start By Q2, the economic crisis was
America continues to be uncertain. of the year, but still quite distant from having a negative effect on domestic air
With almost three quarters of 2024 the objectives of the Milei government. traffic. For the first seven months of the
already gone, both Brazil and Argentina President Javier Milei and Economics year, the number of passengers using
are struggling to make life easier for Minister Luis Caputo have managed to the Argentine domestic network reached
consumers and businesses. stop inflation rising -- the latest monthly 8.87 million, down 8.3% on the same
rate is slightly below 4%. But the annual period the previous year. Internationally,
Brazil inflation rate for the last 12 months is however, total passengers increased by
In the first half of 2024, the Real still in excess of 200%. The forecast is 15.7% to 7.6 million.
fell by 17% against the US dollar, that inflation will continue to fall, and the The situation in Brazil was a little
although it has stabilized somewhat government is hoping to bring the rate more stable with domestic traffic at Sao
over the last couple of months. During down to 130-135% by the end of this year. Paulo Guarulhos increasing from 15.46
the same period shares in the Sao Paulo High inflation has led to lower million to 15.76 million (+ 2.16%). At
stock market lost around 10% of their consumption and many businesses and the same time, international traffic at
total value. Initially there was worry consumers are struggling. Although Brazil’s most important international
that President Lula’s government would restrictions to exchange foreign currency gateway increased from 7.84 million
be unable to reach a fiscal surplus, and are still in place, the exchange rate has to 8.99 million (+14.71%). Traffic
that fiscal imbalances could still lead to been much less volatile over the last few at Rio De Janeiro Galeão is slightly
higher interest rates which would damage months. As we write, the official rate for more difficult to analyze. Domestic
growth. the USD is 975-780 with the grey market passengers increased by 161.37% to 5.33
However, since the end of June the rate being around 1250-1300. The gap million as Brazilian authorities sought
stock market recovered its losses after between the official and the grey market to reduce congestion at Santos Dumont
the government confirmed GDP Q2 had rate is one of the lowest in recent times. domestic downtown airport. But Galeão
grown by 2.5%, resulting in an optimistic Milei and Caputo have continued experienced a solid 30.14% increase in
business outlook for the rest of the year. their war on excessive government international travelers to 2.64 million.
Inflation remains in a band between spending and subsidies and they continue The Brazilian government is actively
4.1% and 4.3% with most analysts to send messages that the only way engaging with airlines to ensure they are
forecasting a fall below 4% at the forward for the country is to spend less financially strong and is supplying soft
beginning of 2025. Brazil’s Central Bank than they collect in taxes. loans to new airlines looking to operate
has hinted at possible interest rates hikes With inflation still high, business new routes.
if inflation increases. Some analysts investment is almost nonexistent and In Chile, total traffic increased by
are also praising Finance Minister personal consumption is suffering. The 14.8% to 16.22 million. International
Fernando Haddad for providing efficient Milei government seems to be a long way traffic grew by an impressive 23.2% to
fiscal legislation and acting as a strong from easing government spending and 6.71 million and domestic passengers
counterweight to President Lula and his kick starting the economy. Surprisingly, increased by 9.5% to 9.51 million.
free spending habits. his approval ratings are still high and John Gallagher
There are signs that local and foreign in line with his share of the vote at the
investment are increasing and the labor Presidential elections and observers say
market is strong with unemployment he will not introduce any incentives to
at a ten year low at 6.9%. A strong grow the economy until closer to the
labor market means higher wages and midterm elections in 2025.

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