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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
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