ECONOMY-BRAZIL: Crisis Gives Tourism a Boost

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Feb 18 1999 (IPS) - Tourism is flourishing in the midst of Brazil’s economic stagnation, coming out practically unscathed by the crisis and raking in immediate benefits from the falling real.

Experts are forecasting a drop of between two and seven percent in Gross Domestic Product this year as a consequence of turbulence in exchange rates which began on January 13, but authorities expect a boom of between 10 and 12 percent in the tourist sector.

Recession and unemployment will cut the buying power of nationals and their chances of taking pleasure trips within the country, but the influx of foreigners is expected to more than make up for the shortfall here.

Furthermore, the increase in value of the dollar for those earning in reals – 57 percent up to now – will encourage many Brazilians to substitute planned holidays abroad for something nearer to home.

Consequently, tourism is expected to swell 15 percent this year, becoming a “powerhouse of the economy,” according to Minister of Sport and Tourism, Rafael Greca.

Depreciation of the real will cause a 30 percent reduction in trips abroad, predicted the Brazilian Travel Agents’ Association (ABAV).

Julio Camille, a 17 year-old secondary student, suspended a visit to Germany planned for July to participate in a youth meeting. “I’ll leave that for the future, when the dollar is not so expensive.”

Meanwhile, the number of people arriving in Brazil this year increased by 20 percent in relation to 1998 figures. The Brazilian Tourism Company, a state entity responsible for promoting the sector estimated some 5.5 million people visited the country last year.

Carnival, the great four day bonanza of samba music, dancing and revelry, proved the soundness of this prediction.

Tourism is the first sector to show a good performance in the countries foreign accounts, although these were running at a deficit of some 35 billion dollars last year, contributing to a lack of investor confidence in the Brazilian economy contributing heavily to the crisis.

And the 4.4 million Brazilians travelling abroad in 1998 were responsible for nearly 12 percent of this imbalance, as the previously overvalued real encouraged people to go abroad, spending large sums of money in foreign countries.

Brazilians topped the ramking of tourist consumption in leading destinations in the United States – New York and Miami, for example – and their absence is already being felt in Florida, where the authorities are looking into strategies to draw these generous visitors back.

The suspension of trips abroad and heavy spending by foreigners during carnival confirmed the swift upswing in tourism.

In trade, however, reflexes are slower. Financial turbulence drastically reduced credit, slamming the brakes on export growth which will take several months to recover.

And this issue has not yet become a discussion point in the Southern Cone Common Market (Mercosur) – a trade bloc made up of Brazil, as the main partner, Argentina, Paraguay and Uruguay.

One of the first effects of the depreciation of the real in Uruguay was a 24 percent reduction in the number of Brazilian tourists visiting the country in the first week of February compared with the previous year, stated the National Migrations Department.

In Argentina the absence of Brazilians will mainly be felt in the winter, but in the bilateral balance, the great amount of Argentinians taking advantage of low-cost holidays in Brazil has already made itself felt.

Demand for tickets from Buenos Aires to Brazilian cities tripled in recent weeks, according to Varig, Brazil’s leading air company.

In Florianopolis, capital of Santa Catarina state, a favourite destination for Argentinians, hotel occupation topped 80 percent in recent weeks, against 62 percent last summer, according to the local hotel owners’ association.

Municipal tourism secretary, Joao Eduardo Amaral Moritz, estimated this city in southern Brazil already received more than 600,000 tourists this summer, 50 percent more than last year.

“The Argentinian invasion has just started,” stated one travel agency owner.

In previous waves of mass arrivals, before the overvaluation of the real in 1994, Argentinians bought up a large number of houses and apartments in southern Brazil, especially in Camboriu, a beach resort in Santa Catarina.

Prolonged imbalance in the exchange rate could produce a new wave of Argentinian investments in construction in Brazil, stimulated by the high value of the peso – pegged as it is to the US dollar – in relation to the real.

This has already started to occur in the automobile and food industries, in a process which, added to the commercial tourist imbalance, puts the Mercosur itself at risk.