Thursday, 2 July 2020

Coronavirus exposes Latin American tourism to an economic earthquake

The expansion of the pandemic in Latin America causes a wave of cancellations, as the sector prepares for millionaire losses for Semana Santa

The llamas of Machu Picchu will be able to graze freely and without fear of selfies for at least 15 days. The coronavirus crisis has reached the heights of the busy Inca citadel, which this week has hung the closed sign.

The tranquility of animals is the fear of the sector.

The emergence of the pandemic on the continent has alerted the tourism industry in Latin America, where nervousness grows due to the wave of cancellations and millionaire losses shortly after Semana Santa (Easter Week) begins, when travelers fill beaches and museums and breathe life to a shaky regional economy.

The sector is sandwiched between two forces.

- paying the bills -

On the one hand, the measures adopted in Europe and the United States to restrict internal mobility and the consequent decrease in departures. On the other, the prohibitions imposed by a good number of Latin American countries to prevent tourist arrivals from certain hot spots.

In the south, Argentina, Colombia and Peru, three major markets, have already announced entry restrictions.

Two tourists with masks, in the Christ the Redeemer in Rio de Janeiro, closed from Tuesday. Photo Antonio Lacerda / EFE

Latin America, which closed 2019 with a minimum growth of 0.1%, has lost weight as a destination in recent years due to the emergence of Asia and the recovery of Europe. In 2018, it registered the entry of 114 million international tourists who left behind about US$97 billion dollars, according to figures from the World Tourism Organization (UNWTO). South America grew just 1% in 2018 and the Caribbean fell 1%, compared to 7% in Asia and 5% in Europe. To this decline the coronavirus is now added.

Mexico, the main destination in Latin America and seventh in the world, is the one that can lose the most. In 2018, it received 41 million international travelers, 35% of the regional total, which left behind US$22 billion. The weight of the sector is considerable and represented 8.7% of GDP in 2018, the latest for which figures are available. In 2019, arrivals grew to 49 million, an increase of 9%, according to official figures.

- paying the bills -

These numbers give a dimension of the threat that hangs over the country’s already faltering economy, which fell 0.1% in 2019. The cost of the crisis will oscillate between 1% and 5% of tourism GDP and the flow of International travelers can reduce up to 10% if the number of contagion cases multiplies, according to a study by the Center for Tourism Research and Competitiveness of the Anahuac University, published on Friday and coordinated by the academic Francisco Madrid.

The closest past is the 2009 H1N1 epidemic, when international tourist arrivals in Mexico plummeted 53% in May compared to the same period of the previous year – the outbreak of the economic crisis worsened the situation. Francisco Madrid points to the differences with the current epidemic, mainly due to the role of social networks. “The enormous contagion capacity and the way the information flow is managed make it different,” he says.

Although the Mexican government has not yet considered drastic containment measures, the effects are already being felt. 30% of reservations for Easter have been canceled, according to the Confederation of National Chambers of Commerce, Services and Tourism (Concanaco).

Mexico President, José Manuel López, points out that it may still get worse. “The impact may be even greater, because contact restrictions are also going to apply to compatriots,” he says. Aeroméxico reduced its flights to Spain on Monday to less than half. The cruise industry, which has grown rapidly in recent years, is one of the most vulnerable. The Princess Cruises company canceled five cruises that were to arrive on the island of Cozumel in the next month and a half.

The rest of the main tourist destinations in the region have chosen the path of restrictions. In Peru, which in 2018 received more than four million foreign visitors, the Government decreed the national emergency and, with it, the closure for 15 days of Machu Picchu, the jewel of the Andean country.

“We are staying with a minimum team, and the rest of the staff, to their quarantined home,” says the coordinator of the archaeological area, Miguel Zamora. Between tickets and transportation, the approximate loss per day, in a conservative estimate that does not take into account spending on restaurants and hotels, will be US$700,000.

- paying the bills --

Without Machu Picchu, the Cusco region, center of the Inca civilization and Peruvian tourism, has begun to gasp for lack of air. The president of the Association of Tourism Agencies of Cusco, Silvia Uscamayta, assures that 60% of the packages have been canceled.

“You feel a sea of ​​cancellations for the entry ban on flights from Europe and Asia,” says Uscamayta. “We have been through the time of terrorism, cholera, but we have never had a blocking problem.”

Like Peru, Colombia has also closed entry to foreigners from all countries and suspended the transit and disembarkation of cruise ships. The upward trend in the sector, which generated 1.9 million jobs in 2019, has run into the epidemic. “Don’t cancel your dreams, put them off,” is the desperate mantra that companies promote to try to mitigate damage.

Losses between March 8 and 12 reach 45 billion pesos, about US$11 million dollars, according to the Colombian Hotel and Tourism Association (Cotelco). “The national hotel occupancy has contracted 2.3 percentage points. If the crisis lasts longer there could be a catastrophe. There are hotels that are thinking of closing or reducing the operation ”, explains Gustavo Toro, president of Cotelco.

Airlines are in the front row of those affected. Latam and Avianca announced a plan to decrease their capacity by 30-40% from Saturday.

In Argentina, the coronavirus will slow down the recovery of a sector badly hit by the economic crisis in which the country is immersed. The 32% tax on the purchase of dollars had put the sector on alert late last year. Travel agencies compensated it with local tourism and were waiting for the March sales to definitively stabilize the business. Everything has changed with the epidemic.

“We are not afraid, we are terrified,” sums up a Buenos Aires operator who prefers not to give his name and who is now making contingency plans to at least keep his business structure standing.

The travel agencies occupy their days attending to the claim of those who cannot travel due to air and immigration restrictions. “For international trips, nobody asks anymore and the national one has collapsed. What we ask customers is not to cancel, to postpone. Firm purchases for April and May are falling, because people do not know what will happen,” says the same operator.

The closure of national parks such as the Iguazú waterfalls and the Perito Moreno glacier predict that the months to come will still be difficult.

The expansion of the epidemic in Brazil, the country that contributes the most tourists to Argentina and that has tourist incomes worth 8.1% of GDP, is another open front. The Brazilian Association of Airlines (Abear)  reported this Monday a reduction of 30% in domestic flights and 50% in international travel compared to the same period last year.

The Brazilian Association of Travel Agencies (Abav) paints an even bleaker picture. A partial balance of the entity points to a travel cancellation rate of 85% in March, projecting that the “greatest crisis experienced by the sector” will generate a high level of bankruptcy among companies.

Recovery uncertain

With the fall of international tourism, the industry begins to turn towards the domestic, the bulk of the business. In Mexico, 73% of the hotel capacity was occupied by national travelers in 2019 and the remaining 27%, international, according to government data.

The president of the Confederation of Tourist Associations of Latin America,  businessman Armando Bojórquez, trusts that lifesaver. “National tourism is the one that has always saved the sector from crisis. There are going to be better rates and offers and that can incentivize it ”, he explains.

But that rebound in domestic tourism will be a question mark as restrictions extend into the interior of the country. Also, they don’t spend the same.

The spending of the international traveler in Mexico, of about US$1,000 on average, is twice that of nationals, according to Bojórquez himself.

The depreciation of local currencies against the dollar makes the region an attractive destination, although the extent of this advantage remains to be seen in the context of global health crisis.

The Mexican peso has lost 24% of its value in the last month and the Colombian peso, 34% in 10 days.

“It could have a competitive advantage but if they are not interested in traveling because it has other priorities, it may not matter,” says Francisco Madrid. The World Travel and Tourism Council (WTTC) estimates that the average recovery time from an epidemic is 19 months.

Some governments have taken a step forward.

Colombia and Argentina have announced support packages for affected companies, including the opening of a line of credit. At the moment, Mexican President Andrés Manuel López Obrador has ruled out rescue actions.

“We continue to have a tourist influx, there is still no relapse, perhaps there will be, but we are not going ahead,” he said Monday.  A patience that contrasts with the claims of the sector. The Concanaco will shortly send a series of proposals to the Government, including the extension of the payment of taxes.

“It is necessary to activate strategies so that the recovery occurs as quickly as possible,” says its president, José Manuel López. “It is going to be a year with very bad numbers.”

This article was translated from El Pais. Read the original article (in Spanish) here.

Q Costa Rica
Q Costa Rica
Reports by QCR staff

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