Brazil Tourism Industry

Brazil Tourism Industry

1.0 Introduction to Brazil Tourism Industry
In Brazil, tourism is a key to the economy development of several regions of the country. This statement was further supported by Slob B. & Wilde J. (2006), in their published journal entitled ‘Tourism and Sustainability in Brazil’, regardless of anywhere in the world, tourism, indeed; is the fastest growing industry and it contributes the world economy with a gross output of over US$7 trillion, employing 11% of globe’s workforce, forming 11.5% of global GDP. While in Brazil, White (2006) found that the industry contributes 3.2% of the total country revenue in year 2005.
According to World Tourism Organization (WTO), due to the devaluation of American Dollar against the Brazilian Real has made a favorable trend in International tourist arrival to Brazil to grow dramatically in 2007 and in early 2008. In spite of this, statistic in Table 1 shows that revenue had risen from USD 4.3 billion in 2006 to USD 5.7 billion in 2008.
Table 1 Brazil International Tourism Arrivals 1995-2011
Year | International
tourist
arrivals
(x1000) | Annual
growth
(%) | Total
revenue
(millions
USD) | Annual
growth
(%) |
1995 | 1,991 | - | 972 | - |
2000 | 5,313 | - | 1,810 | - |
2003 | 4,133 | - | 2,479 | - |
2004 | 4,794 | 16.0 | 3,222 | 30.0 |
2005 | 5,358 | 11.8 | 3,861 | 19.8 |
2006 | 5,019 | -6.3 | 4,316 | 1.1 |
2007 | 5,025 | 0.1 | 4,953 | 14.8 |
2008 | 5,050 | 0.5 | 5,780 | 16.7 |
2009 | 4,802 | -4.9 | 5,305 | -8.2 |
2010 | 5,161 | 7.5 | 5,919 | 11.6 |
2011 | 5,400 | 4.6 | 6,775 | 14 |
(Source:World Tourism Organization 2011)
However this favorable trend changed in late 2008 and 2009 when both visitors and revenues fell as a result of the global financial crisis and economic recession that has made tourism industry severely affected globally. This economy recession fact is further supported by the citation from the United Nation World Tourism Organization (UNWTO) data by Papatheodoro A. et al. (2010) in the ‘Journal of Travel Research’ that international tourism started to decline in the second semester of 2008, making this industry to feel the intensified effects of the global recession while the world financial institution intensity of the economy crisis through several indicators – lower unemployment rate, oil prices fluctuation, and bank credit facilities restrictions, rising food prices have made the negative international tourist arrival trend become intensified during the first semester of 2009 in line with prevailing financial situation.
The global financial crisis and economy recession obviously does not leave the tourism industry in Brazil exceptional from the global crisis effect. However, the industry has started to recover in 2010, achieving the international tourism arrivals ranking as the second main destination in South America and third in Latin America after Mexico and Argentina when it received 5.1 million visitors shown in the same table in the previous page (UNWTO, 2011).
2.0 Brazil Tourism Recession Analysis
Tourism sector in Brazil fell into recession during the period when the global economy recession and global financial crisis strike in year 2008 and 2009. However, the tourism recession also was caused other factors out of the economical aspect such as safety and security as well as the transport infrastructure development in the country. Below is the detailed analysis of the factors stated.
2.1 Macro Economy Factors
Brazil economy was not exceptional from the global economy crisis in year 2008 and 2009. Tourism sector, especially; was affected in the same year, receiving less tourist arrivals compared to previous years as shown in Table 1 in the previous page.
2.1.1 Oil Price Fluctuation
According to the National Bureau of Economic Research in United States, the economy recession was caused by the fluctuation of oil prices which easily surpassing the US$ 100 a barrel, driven by geopolitical uncertainties, the collapse of stock markets and subsequent diversion of speculative investment market and the expected oil production cuts by the Organization of Petroleum Exporting Countries (OPEC) in order to avoid the falling prices and demand of oil followed by the global financial crisis in mid 2007 (Goldman and Musante, 2008).
2.1.2 Escalation of Staple Food Price
As a result, this action caused another problem in the global macro economy when the prices of staple food continued to escalate up to 15% due to the effect called "second round". According to the 8th edition of “Economics”, Arnold is his book defined “second round” as the increased costs of crude oil and raw materials along with wage increases the prices of manufactured products; abusive margins of companies and brokers and a totally inefficient administration and lack of mechanisms to control the ceaseless factors with consequent rises in inflation and subsequent contraction of consumption. Thus, the rise of staple food can be associated with the cut of the oil production that subsequently increase the price of oil because when the oil production is cut, the unchanged demand of oil in the global market will be comparatively more than its supply that eventually causes the rise of the oil price. This theory is proven in economic study of its demand and supply law, when demand remains, supply is cut, supply will either surplus the demand or equally same to the demand quantity; if supply is more than demand, price other hand will then be suppressed, Ceteris Paribus (Fisher, 2007).
Not only staple food prices were affected by the increased oil price, tourism in Brazil was also affected by this macro economical factor. Becken (2010) found in her research that the price of oil is intimately linked to the Brazil economy and as a result to Brazil tourism industry. She further explained that tourism in itself relies heavily on oil, not only for its transportation components but also for many other parts of the tourism product, for example, accommodation, recreational activities and hospitality. Thus, the increased oil price affect the tourism in Brazil substantially, not only in terms of a reduced propensity to travel but also indirectly influence the choice of destination based on the cost of traveling (Dritsakis, 2004).
2.1.4 Currency Exchange Rate Fluctuation
Another macro economy factor is the fluctuating currency exchange rate. By the end of the year of 2008, American tourists stop flowing into Brazil (UNWTO, 2009). According to the same report, the reasons to the problem occurs was due to the currency exchange rate, the expenditure of the tourist from countries, the changes of target market in demand and changing travel trends. Many tourists from Europe, America and other rich continent could not cope with the rapid change in the currency exchange rate, which is fluctuating. The trends of devaluation of United States dollar have the most impact toward the exchange rate of Real in Brazil. In fact as the dollar weakens, the currency for Real strengthen, in result Brazil has to cope with the reduce number of incoming tourist because as comparison before the devaluation trend, foreign tourists now have less spending power and hence travel lesser as compare to previous because of the increase in value of Real. In other words, the devaluation of dollar trend means the increased of traveling cost to foreign tourists visiting Brazil. When the Brazilian Real became stronger in year 2008, Brazilian tend to fancy in traveling to overseas. This ultimately causes a net negative in foreign exchange balance because of more Brazilian Real are spent overseas as compared with incoming tourist visiting Brazil, (http://www.embratur.gov.br).
2.2 Safety & Security
Not only economy that impacts the Brazil tourism industry, in fact; safety and security likewise plays a rather imperative role in determining the level of development of the industry. Johnrose (n.d.) found that safety and security was a key factor in delivering quality for the tourism industry in his study. The same author in his same research further explained that the nature of tourism, although is vulnerable to global deceases outbreak, warfare and epidemics, economy recession and financial crisis, on the other hand; this intensely competitive industry is highly sensitive to the perception of global safety and security because consumers perceive their expenditure of the tourism products in a subjective and experiential manner.
2.2.1 Criminal Activities
The role of safety and security in tourism industry was further emphasized by Rampersad (2011) that World Economic Forum (WEF) takes crime into account in assessing countries tourism competitiveness for the Travel and Tourism Competitiveness Index (TTCI). In the same research, the author stated that crime has the potential to significantly damage a country’s travel and tourism industry. This statements is further supported by the Bureau of Consular Affair (CA) in United States though their embassy notice for American citizen that street crimes happen in most urban centers and are growing in rural areas. In additional, CA also emphasized that street crimes are especially a concerning issue in Brazil and often foreign tourist are the victim of the criminal activities that can seriously impact the tourism industry negatively. Based on the crime rate statistics, Brazil achieved the highest crime index in year 2008 shown in Table 2 in the following page. The crime index was calculated based on the United States average index that equals to 304.2; the higher the index rate is, the higher the crime rate happens in yearly basis. Among all type of criminal activities, thefts was the type of criminal that ranked to be the highest crime index in the year of 2008.
Table 2. Crime in Brazil by Year
Type(per 100,000) | Year |
| 2005 | 2006 | 2008 | 2009 | 2010 |
Murders | 0(0.0) | 0(0.0) | 0(0.0) | 0(0.0) | 0(0.0) |
Rapes | 0(0.0) | 0(0.0) | 0(0.0) | 0(0.0) | 4(48.4) |
Robberies | 1(12.1) | 1(12.1) | 2(24.4) | 1(12.1) | 0(0.0) |
Assaults | 3(36.2) | 2(24.4) | 75(913.3) | 9(108.5) | 46(556.5) |
Burglaries | 37(446.4) | 36(435.4) | 54(657.6) | 30(361.6) | 23(278.2) |
Thefts | 121(1459.8) | 161(1947.3) | 211(2569.4) | 141(1699.6) | 167(2020.3) |
Auto Thefts | 15(181.0) | 17(205.6) | 13(158.3) | 3(36.2) | 8(96.8) |
Arson | 1(12.1) | 0(0.0) | 2(24.4) | 0(0.0) | 0(0.0) |
Crime Index | 119.3 | 138.3 | 364.7 | 126.1 | 267.8 |
(Source:City-data.com2011)
2.2.2 Inefficient Law Enforcement and Corrupted Judicial System
As there are always reasons behind the fact, the Brazilian concerning criminal activities was mainly caused by ineffective law enforcement by Brazilian police and corrupted cum unreliable judicial system. Making reference to ‘Crime and Crime Control’ edited by Barak (2000), the number of policemen are comparatively smaller than its huge territorial area. In the same book, it also stated the reasons the law enforcement was not effective due to these limited number of law enforcement personnel that have to deal with everything ranging from immigration to drug trafficking. Besides, the ineffective law enforcement was also due to the extralegal methods of punishment and justice in Brazilian police culture that often administer in the form of a death penalty through the power abuse of the regarded authority. The worst, this criminal justice belief is shared by the functionary judicial system as well as large sections of population regardless of social status (Adorno, 1992). Consequently, the extralegal enforcement used as crime control that beyond the objective of the justice’s system role as an integral part of education, prevention and treatment become unthinkable in Brazil.
2.3 Transport Infrastructure Development
Proper transport infrastructure plays a role in tourism industry to ensure the easy access from one destination to another as well as increasing the tourist mobility from one place to another (Grubler, 1990). In Brazil, the transport infrastructure development is described to be beyond proper. Approximately 20% of Brazilians spend more than one hour to go from home to work (http://thebrazilbusiness.com). According to Institute of Applied Economic Research (Ipea) from the citation of the same online article, public transportation had a loss of 30% of demand in the last year, while the demand for cars and motorcycles had increased. This research shows that both Brazilians and foreign tourist are not comfortable with the infrastructure provided by the government to alternative transportation options. It is also further elaborated that the major problems behind the decreased demand of public transport in Brazil were mainly due to the overestimated prices and lack of interest from the government in investing in public transportation.
According Stanley (2010), the federal government in almost all the states invests mostly in individual locomotion, cities like Sao Paulo, Rio de Janeiro and Brasília are severely suffer from traffic congestion for the past decades. The same author further elaborated that not only tourist, the working class in Brazil is the one that suffers with it, relying on buses in very bad conditions, few subway lines and terrible areas access for pedestrians. The worst, the Brazilian public transportation is definitely not made to support disabled people, causing inconvenient to this group of people who needs extra attention on the use of the public infrastructure. As a result, it gives an opportunity to Brazil tourism industry to go on the recession track since in the year of late 2008 that substantially affected by the global economy recession trend and global financial crisis.
The recent Brazil Tourism Report Q1 released in year 2011, the transportation, roads and rail networks are the poorest in the world (www.ibtimes.com). According to the report, these infrastructures have been ranked by the United Nation World Tourism Organization to be 95th out of 130 countries. Such situation may cause inconvenience to the local as well as tourist that ultimately can take a heavy toll on the tourism sector in Brazil. The poor infrastructure, not only challenging the tourism industry in Brazil, but it also affect other industries namely cargo, logistic as well as the foreign investor to Brazil. According to Latin Business Chronicle (LBC), roads in Brazil are dangerously unpaved, potholed and need resurfacing. In the same article, report released by The World Bank Doing Business stated what foreign investor concern to invest in Brazil is the improper infrastructure in the country such as congested airport, cargo, and inefficient transport network can maximize the cost of operation or business.
3.0 Brazil Tourism Rebound Analysis
Followed by the global economy recession and global financial crisis 2008-2009, tourism sector in Brazil had also been affected during the period and fell into recession by then. However, Brazilian government had put effort in facing this challenge to rejuvenate the affected sector. Below is the detailed analysis of Brazil tourism rebound.
3.1 Media
Regardless forms of media, it is crucial in promoting tourism in anywhere in world. This statement was further supported by Singh (2008) that media is a communication channel aim at persuading prospective buyers through paid-for advertising, brochures, sales promotion technique, public relation activity and the Internet. Tourism especially, is highly dependent on media reporting because the vast majority of travel decisions are made by people who are planning to travel to a new destination for the first time in their lives (UN News Center, 2007).
Realizing the importance of media role in tourism, Embratur Press Office (2010) stated that the Brazil Tourism Ministry had invested USD 4.5 million in an advertising campaign on international tourism promotion- ‘Brazil is calling you. Celebrate life here.’ According to the same source, the campaign is made of films, advertising materials and actions in different medias, aimed at attracting more tourists to Brazil, taking advantage of the sports events to be hosted by the Country in the forthcoming years: the 2014 FIFA World Cup and the 2016 Olympic and Para-Olympic Games. The purpose is to touch, impact and encourage foreign tourist to visit Brazil. Citation from Embratur Press Office, the Brazilian Minister of Tourism, Luiz Barreto, this campaign through media is also aiming at breaking the old stereotypes that defined Brazil and reconstruct the positive image of Brazil to the world, clearing the uncertainty of the world towards Brazil in order to increase the number of foreign visitor.
In addition, the Brazilian Tourism Board also develop The Brazil Brand Channel website through the partnership with Google, assisting the travelers in planning their trips to the country via interactive tools, images and detailed information about traveling to Brazil. According to United Business Media (2010) this strategy is mainly to develop a unique and exhilarating travel experience in their target potential tourist as this tool provides a one-stop destination for trip planning and makes the process fun, informative and interactive.
3.2 Projects
Brazil has increasingly attracted the attention of investors from all over the world after its economy proved resilient to the 2008-2009 global economic crisis and recorded positive growth in 2010 in its tourism sector. This growth has acted as a major magnet to international tourists, which led to positive growth in arrivals in 2010 and more dynamic domestic tourism (UNWTO, 2011).
Duval (2007) stated that air transportation is increasingly favored by Brazil’s growing number of middle class domestic tourists. This is only likely to increase as the country prepares to host the future global sporting events such as the 2014 FIFA World Cup and the 2016 Olympic Games. For these events to be successful, however, currently inadequate infrastructure must be remedied.
Considering this factor, Brazil has booted up its physical infrastructure expansion and development to response to the tourism sector recession in 2008-2009 as well as for the long run benefit. Citation from ‘Brazil Development in A Land of Contrast’ stated that the natural gas resources and massive hydro-electric capabilities help make the Brazil one of the most energy self-sufficient countries in Latin America. The further elaboration of the book stated that the focus on power generation is likely to remain on hydro but with a strong possibility of longer term expansion to the country’s modest nuclear sector. Brazil is also in the forefront of renewable power projects such as biomass and wind power. Further supported by Carcamo-Diaz & Goddard (2011) with the investment figure that between year 2008 and 2010, USD 80 billionn had been invested in the country’s energy sector. Around 78% of this went towards generating capacity, the bulk of which is for hydropower projects, adding 54,000MW to installed capacity and transmission projects had been added 36,387km of lines. As a result of putting the effort to implement this project, in April 2010, the government awarded a contract to build the 11.4GW Belo Monte hydropower project to a consortium formed by a group of Brazilian engineering firms and state-owned corporations (Lako et al, 2011). According to the same source, the followed the Rio Madeira hydro power project awarded in 2008 and currently under construction which will add 6.22 GW to the grid, in a USD 16.67 billion investment.
3.2.1 Land Transport Infrastructure
According to the citation from ‘The Challenge of an Urban World’, Brazil’s land transport infrastructure has historically suffered from inadequate funding and a lack of focus. Poor road infrastructure has held back the distribution of goods in the country. The article further stated that under the proposed 2nd phase of the Growth Acceleration Program, roads and railways are due to account for the largest investments in transportation infrastructure.
In a journal publication, ‘Brazil, Infrastructure and Environment’ (2012), Brazil has fewer than 30,000km of railways, of which only about 1,600km are electrified. More than 6,000km of railway are currently under construction in the country. Reference to the same journal, the flagship project is the 520km high-speed railway – bullet train that cost USD 15 billion was planned to link Rio de Janeiro, São Paulo and Campina under a Public-Private Partnership (PPP) model. Other significant projects include the Oeste-Leste railway between Ilhéus and Barreiras, the expansion of Sao Paulo’s Metro Line 5, and the construction of the Transnordestina railway in Brazil’s northeast.
3.2.2 Airport
Airports operating at overcapacity, a precarious port infrastructure and the lack of hotel rooms in major cities represent the main concerns for Brazil’s travel and tourism stakeholders in the long run as well as to cater the future tourism demand for the 2014 FIFA World Cup and the 2016 Olympic Games. Therefore, government authorities are prioritizing infrastructure development in transportation and travel accommodation so as to be able to increase tourist arrivals and to handle the expected massive increase in tourism flows for these two events ever since Brazil fell into recession in its tourism sector in the period of 2008-2009. Realizing that the airports are overcrowded, investments have been highlighted as priorities for the 2014 World Cup and 2016 Olympics. The average real growth for the sector is forecast at 11.7% between 2010 and 2014. Brazil’s PAC program, which is also known as the Growth Acceleration Program Introduced in year 2007 (The Rio Times, 2011), envisages an investment of USD 1.4 billion for the upgrade and expansion of 20 Brazilian airports.
Meanwhile, in an attempt to liberalize its air transportation policy and attract more international tourists into the country, the Brazilian authorities signed a number of open skies agreements during 2009/2010 (McKinsey, 2010). The most important was signed with the US, which will be fully operational by October 2015. The elimination of government interference in the commercial decisions of airlines with regards to routes, capacity and pricing is expected to result in more affordable and efficient air transportation services in Brazil for both domestic and inbound air passengers (Nellis, 2009), . Nevertheless, future capacity growth will be limited by infrastructure constraints.
3.2.3 Medical Tourism
Another project that the Brazilian government invested on to boost tourist arrival is medical tourism. According to Connell (2011), medical tourism represents a great opportunity for Brazil to boost travel and tourism activity and further diversify its travel and tourism appeal. Therefore, the country offers nationally and internationally accredited hospitals, highly qualified health professionals and modern technology, among other attractions for potential medical tourists.
Nevertheless, capitalizing on such a profitable travel and tourism segment will not be an easy task as Brazil will need to tap into demand for medical tourism currently being met by other well-established medical tourism destinations in the Asia Pacific region such as Thailand, India and Singapore (Todd, 2012). According this author, one way of achieving gains in medical tourism would be to focus primarily on what the country does best: the ‘humanization’ of its services and creating greater synergies amongst all involved in travel and tourism in order to promote Brazilian excellence in medicine and healthcare.
3.3 Partnership
Partnership is defined by Nottonson (2007) as an arrangement where parties agree to cooperate to advance their mutual interests and relationships to achieve the respective benefits in a win-win situation. This author further stated that since humans are social beings, partnerships between individuals, businesses, interest-based organizations, schools, governments, and varied combinations thereof, have always been and remain commonplace.
According to Travel Daily New, on 14th May 2010, Brazil and United Kingdom has signed an agreement took place in Rio during an Olympic tourism summit held by Brazil Tourism Board (Embratur) to learn from Australia's experience of Sydney 2000 and the UK's preparations for London 2012. The objective was to share the privilege and challenge of hosting the two major events in London and Brazil. Other than this, the potential areas for collaboration include joint lobbying for increased air capacity between the UK and Brazil, introductions to key contacts, promotional swaps and reciprocal support in the run-up to both the 2012 and 2016 Games. The European Commission recently announced it would start open skies talks with Brazil, South America’s biggest air transport market. It is also stated from the same source that a liberalization deal between Brazil and United Kingdom could generate up to USD 460 million in consumer benefits annually, with potential traffic growth of 335,000 additional tourist arrivals in the first year to Brazil.
In a move to attract more foreign visitors to the country and to give a boost to its tourism, Brazil´s Tourist Board (Embratur) has developed a partnership with Google (http://www.google.com/press/pressrel/uol.html). According to the online news that the partnership is aiming is to produce a Google and YouTube brand channel, combining videos and Google maps, to provide an interactive online Brazilian tourism experience. Americans are the main target behind the reason of this partnership establishment with Google (Lashinsky, 2010). According to Lashinsky (2010), nearly 100 videos from the most amazing places in Brazil are available for search in the Google search engine. The author further stated that though the country has an enormous touristic potential, the trend in the number of inbound tourists has been erratic, but unquestionably upwards. According to UNWTO report, arrivals have risen from 4.3 million in 2006 to 5.9 million in 2010. The decision by the International Olympic Committee (IOC) to award the 2016 games to Rio de Janeiro is the latest positive development for the Brazilian tourism industry. Brazil is also going to host the 2014 World Cup. The country´s authorities expect that, by then, the number of tourists will have increased to around 10 million.
4.0 Conclusion
Brazil has it all to become a leading destination. Although this country faces recession in tourism industry due to the world economy recession and world financial crisis, however; Brazil is able to cope with it to rebound its tourism sector through Brazilian government efforts and intelligence. The increased number of tourist arrival is the result after all the effort that had been put. Furthermore, its developing nation status is fading away each year, as Brazil astonishes the world with strong economic development and growing international importance. This growth acted as a major magnet to international tourists, leading to a positive performance in terms of arrivals, and enhanced tourism flows within the country in 2011. Air transportation and road infrastructure were the main beneficiaries, with continuous investment to further capitalize on such good momentum in aiding the development of Brazil’s tourism industry.

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