Page 26 - TFWA World Exhibition and Conference 2025
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INSIDER



          Resilient first half economic performance in Argentina and Brazil; high
          U.S. tariffs could jeopardize Brazil in 2H




          Buenos Aires based John Gallagher looks at the Latin America economy in the first half of 2025 and assesses
          how it has affected the duty free business.





              A resilient performance from the   as Trump has sought to punish Lula’s   well in the first half of 2025. Inflation has
          leading Latin American economies has led   government for what he claims to be   continued to slow with the latest 12-month
          to a buoyant first half of 2025 for the duty   mistreatment of former president Bolsonaro   figure at 36.6% (Aug 24 – Jul 25) and the
          free industry.                    who is on trial for an attempted coup d’etat   forecast for the full year around 30%. The
              Brazil and Argentina, the two biggest   following the last presidential election.   36.6% figure is the best since December
          economies in the continent, have performed   Instead of forcing the hand of Brazilian   2020. President Javier Milei and Finance
          well in the first half of the year. Both   President Luiz Inácio Lula da Silva, the   Minister Luis Caputo say that inflation will
          countries have recorded economic growth,   opposite has in fact occurred – Lula has   virtually disappear in 2026. GDP growth is
          inflation has fallen in Argentina and has   publicly condemned the tariff hike as an   forecast at 5% for the full year.
          remained steady in Brazil, exchange rates   unacceptable form of economic blackmail   The new foreign exchange framework
          have been relatively stable, and poverty   and interference in Brazil’s sovereignty and   introduced in April has brought a surprising
          levels have fallen.               his popular support has increased. Indeed,   degree of stability: despite a wobble in
              Both nations have recorded solid   many center right observers have called   July, the USD has remained stable at
          passenger numbers throughout their   out Trump’s measure and demanding that   around 1300/1320 Pesos and market
          airport network, and Avolta, which   Brazil’s right as a sovereign nation with an   analysts expect the stability to remain
          dominates airport duty free retailing in   independent judiciary be respected.   until the mid-term elections at the end
          Latin America, reported an 8.1% increase   The U.S. tariffs have been imposed   of the third quarter. The exchange rate
          in sales throughout the continent in its H1   even though the U.S. runs a trade surplus   gap between the official rate and the grey
          financial results. Avolta also announced a   with Brazil. Brazilian economists estimate   market rate has virtually disappeared and
          major concession renewal at Santiago de   that Trump’s 50% tariff could reduce   ARS/USD parity is predicted to reach
          Chile and concession extensions at several   Brazil’s GDP growth by between 0.5 and   1,400 by the end of the year.
          Mexican airports.                 0.8 percentage points in 2025, depending   Argentina’s GDP is expected to grow
              Border stores in Uruguay and   on Brazil’s response and ability to redirect   by around 5.5% this year, although retail
          Paraguay are also reporting strong   exports to other markets.       sales are still suffering as salaries continue
          business. Top Brands-Luryx and Avolta   The country’s economic output   to lag inflation. Economic activity is
          will open new stores in Foz do Iguacu.   regained momentum in the first three   expanding but performance is uneven from
          Shopping China will shortly open a   months of this year, as a boom in   sector to sector. Mining, energy production,
          100,000 sqm store in Ciudad del Este and   agricultural production, paired with   and agriculture have all performed well.
          Cellshop, one of the most dynamic retailers   higher household consumption and   Manufacturing, construction, and the retail
          in Paraguay, is planning to finish a new   industrial investment, increased the total   trade have performed below expectations
          shopping mall for Q4 in 2026, also in   value of goods and services produced.   and as a result job creation has been
          Ciudad del Este.                  Unemployment is at a record low, at just   significantly lower than desired.
              Looking ahead to the second half of   over 6%.                      The midterm elections at the end of
          the year, will the intermittent protectionist   But most observers now await the   October may bring some measures from
          actions and selective trade retaliation   actual imposition of the Trump tariffs   the government to encourage further
          from the Trump government affect air   before trying to predict how the economy   growth, but these are likely to be modest
          traffic and the travel retail business? The   will be affected and whether business and   and carefully targeted as the government
          global environment remains volatile, and   consumer confidence will be negatively   is intent on keeping to the fiscal discipline
          a great deal of uncertainty remains. Latin   affected.               objectives agreed with the IMF. The
          American countries have followed Trump’s                             government continues to insist on zero
          actions closely and most have benefitted   Argentina                 monetary emission and fiscal surplus to
          from beneficial tariffs of around 10%.  As the Milei government approaches   reach their economic goals agreed with the
              The big exception of course has been   the halfway point of its 4 year tenure,   IMF.
          Brazil, which has received a 50% penalty   Argentina has performed moderately









          October 2025                                                                             26
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