Wide Range of Issues are Creating a Difficult Climate for Business Travel in Latin Americas Biggest Market
Brazilian business travel will continue to face a difficult climate for the remainder of the year. This is one of the key findings from the GBTA BTI™ Outlook – Brazil 2016 H1, a report by the GBTA Foundation, the education and research arm of the Global Business Travel Association (GBTA), sponsored by Visa, Inc.
The new report has downgraded business travel in Brazil for the fourth consecutive time, with total business spending in Brazil forecast to decline by 8.5 percent this year. While the latest GBTA BTI™ Outlook – Brazil report cited multiple factors that are negatively affecting business travel throughout the country, there is also cautious optimism that 2016 will be the nadir of business travel before a modest recovery in 2017.
“The business travel market in Brazil reflects the broader sentiment of the overall Brazilian economy,” said Wellington Costa, regional director for GBTA Brazil. “In a time of domestic recession, slow global growth, lower commodity prices and a host of other concerns affecting the Brazilian economy, the business travel climate is feeling all of these pressures as well. Despite the country’s short-term difficulties, we are optimistic that 2016 will be the low water mark for business travel, and we will start to see gains – albeit modest ones – in the near future.”
Brazil’s economic prospects continue to worsen as the country attempts to weather the perfect storm of freefalling domestic activity, weak global growth, high inflation, deteriorating fiscal conditions and an uncertain political climate. Fourth quarter GDP continued its string of negative outturns producing the worst annual result since 1991, yet Brazil remains in the top ten of global business travel markets, though it may not remain there for much longer.
Some other key findings from the GBTA BTI™ Outlook – Brazil 2016 H1 include:
- Brazilian GDP is expected to decline by -3.0 percent this year followed by an anemic increase of 1.3 percent in 2017.
- Domestic business travel in Brazil continues to be hit the hardest by the Brazilian recession. The recession has been punctuated by recent political turmoil. Further, failing infrastructure, high levels of public debt and a hefty tax burden all cloud the longer-term prospect for domestic business travel in Brazil.
- The Brazilian economy continues to suffer from longer term issues as well, specifically, extremely high levels of public debt and red tape, an overly-burdensome tax structure and poor infrastructure that have led to competitiveness woes.
- Brazil continues to rank last among the top 15 business travel markets in the quality of overall infrastructure.
- Given the country’s economic and political challenges, business confidence rests at record lows. The Business Confidence Index reported by the Confederacao Nacional da Industria (CNI) came in at 36.2 in April, a clear sign of business pessimism (50 represents neutrality).
In terms of business travel within Brazil, spending on Brazil-originated business travel totaled $30.5 billion USD in 2015, down -4.1% from 2014 levels. The downgraded forecast coincides with Brazil plunging into recession as the economy contracted -3.8% last year – its largest contraction in 25 years. While these numbers paint a pessimistic picture of the state of the Brazilian economy generally and business travel specifically, resolution of the current political situation, a rise in commodity prices, and/or a successful summer Olympics could help the forecast improve, though these factors all remain unknown at this point. With respect to business travel, the latest BTI report indicates that the Olympics will have little to no effect on the business travel forecast.
The GBTA BTI™ Outlook – Brazil 2016 H1 report is available exclusively to GBTA members by clicking here and non-members may purchase the report through the GBTA Foundation by emailing firstname.lastname@example.org.