Brazil Tourism Report Q1 2009

Brazil remains the principal tourism destination in South America, and the second-most popular in Latin America after Mexico. According to the most recent data from the United Nations World Tourism Organization (UNWTO), it attracted more than five million visitors and US$4.95 in external tourist revenue for the year to June 2008. One expects that 2009 will bring a smaller number of external tourists, in line with international trends resulting from global financial instability; however, at this stage there is little reason to think that Brazil will be particularly hard hit by this slowdown. Moreover, the relative weakness of its currency, and the prospect of cheaper flights, may well lead to an increase in the number of US tourists enjoying Brazil’s myriad attractions.

Indeed, the key appeal of the country is its astonishing surfeit of spectacular places to visit; the Iguazu Falls on Brazil’s border with Argentina, and the Ipanema and Leblon beaches of Rio de Janeiro are just the beginning. In fact, Brazil has the sixth most world heritage sites of the 130 countries evaluated by the UNWTO, and achieves the same ranking for its human, cultural and natural resources. These positives are, however, seriously undermined by Brazil’s reputation for abysmal levels of safety and security (it was ranked 128th out of 130 countries on safety and security by UNWTO), as well as long-standing problems with its ground transport infrastructure and information and communications technology infrastructure.

Despite the Global Financial Crisis, BMI remains confident in Brazil's macroeconomic fundamentals, forecasting average real GDP growth of 4.4% over our five-year forecast period. However, we are increasingly cautious regarding Brazil's economic outlook in 2009, with tighter international liquidity and still rising interest rates likely to weigh on overall domestic consumption. We are therefore revising down our economic growth outlook to 3.5% for 2009, from a previous projection of 4.0%.

In political news, Brazil's recent local elections have played a vital role in shaping the political battlefield ahead of the presidential election in 2010. Despite a solid performance by the ruling Partido dos Trabalhadores (PT) party on October 5, the election outcome has not produced the necessary results to improve the party's chances for another presidency after President Luiz Inácio Lula da Silva leaves office in 2011. BMI’s core scenario currently sees Lula's chief of staff Dilma Rouseff running for the PT in 2010, against São Paulo state governor José Serra, who faced off with Lula in 2002.