Tourist Redeemer: The impacts of COVID-19 on the tourism sector in Brazil

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This article is part of a series in which OECD experts and thought leaders – from around the world and all parts of society – address the COVID-19 crisis, discussing and developing solutions now and for the future. It aims to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge. Opinions expressed do not necessarily represent the views of the OECD.

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Tackling Coronavirus (COVID-19): Contributing to a global effort

At the start of 2020, the tourism sector faced good prospects with an expectation of growth in demand for travel and an increase in the revenue of companies in the sector. However, in the first quarter, the sector suffered from a virtually complete shutdown of its activities due to the COVID-19 pandemic. The interruption of international travel – with the travel restrictions in most countries of the world, and the adoption of social isolation measures to curb the contagion of the new coronavirus – led to the paralysis of the industry, making its operations unviable during this phase when only essential activities remained possible.

Practically without activity since March, the tourism sector will probably show a slow recovery even though the economy has already started reopening in several parts of Brazil. The drop in income of the population due to the economic crisis, combined with the lack of consumer confidence in the health situation of destinations, will further reduce the demand for their services. Thus, the resumption of tourism must take place in different ways and periods for the distinct economic activities linked to the sector.

Read the OECD policy brief: Tourism Policy Responses to the coronavirus (COVID-19)

Read the OECD policy brief: Tourism Policy Responses to the coronavirus (COVID-19)
Image: Shutterstock/triocean

What is the impact of the COVID-19 crisis on the tourism sector?

Brazil has experienced a growth trajectory in tourism. Brazilian government data indicate that tourism directly contributes to about 3.7% of the national GDP (BRL 270.8 billion) and 3% of the total jobs in the country (2,69 MM formal jobs). These data refer only to the formal market; however, tourism, in addition to impacting and sustaining other sectors, also impacts a chain of informal workers.

Even with the relaxation of isolation measures, the economic crisis in tourism will continue, and its recovery may take longer than other activities since the resumption of economic activities will occur in phases.

With the advance of the COVID-19 pandemic, a large loss of jobs in the sector is expected. According to data from the Ministry of Economy, in the months of March and April 2020, considering only the “accommodation and food” segment 211,722 jobs were lost.

The forecast for subsequent months is increased layoffs that, without government protection measures, will worsen the country's economic crisis. The adoption of these measures by the Federal Government softened the economic impact at first, and their extension would lead to a much smaller crisis in the labour market. In the graph below, two job loss scenarios are estimated: (1, red line) without lengthening protection measures (-1,114,182 jobs) and (2, blue line) with extended protection measures (-669,831 jobs).

Curve in the level of employment and production
Graph 1 - Curve in the level of employment and productionSource: Ministry of Economy - May, 2020

The economic losses in the sector, compared to GDP in 2019, will also be significant. Comparing the production volumes of 2019, the sector's GDP will be BRL 143.8 billion 2020 (a 46.9% reduction in relation to 2019) and BRL 236.5 billion in 2021 (12.6% lower than the Sector GDP in 2019). Thus, the total losses of the Brazilian tourism sector are expected to be BRL 161.3 billion in the 2020-2021 biennium (which represents a 29.8% loss in total production for the period).

What will the sector’s recovery look like?

Even with the relaxation of isolation measures, the economic crisis in tourism will continue, and its recovery may take longer than other activities since the resumption of economic activities will occur in phases.

Domestic activities are expected to gain momentum in the short and medium term, while international activities will require still more time to recover, as shown in Graph 2: 

Trends in variation of activities in the tourism sector
Graph 2 - Trends in variation of activities in the tourism sector
Source: Prepared by FGV.

Thus, the resumption of tourism must happen at four different moments:

First, essential short-haul domestic travel, using mainly transportation by road. Increased control over the pandemic and the adoption of health protocols by companies in the hotel and transport sector is expected to bring more confidence and security to consumers;

Second, resumption of domestic long-distance travel, using air transportation, which should already be better structured with airport protocols;

Third, business trips and events but still at a slow pace, since the tourism model only tends to return to a normal after the adaptation of events to new protocols;

Fourth, and lastly, resumption of international tourism as this will depend on regulations and standards from other countries that for the most part remain closed. The way in which re-openings take place, as well as the granting of visas and the adopted health protocols, will have a great influence on the resumption of international tourism. The broader global economic crisis will also contribute negatively to its recovery.

Read Toward a European network of “green zones" to avoid summer collapse, by Miquel Oliu-Barton & Bary Pradelski, Associate Professor of Mathematics & Associate Professor of Economics/Associate Member of the Oxford-Man Institute, Université Paris Dauphine & CNRS/University of Oxford

Read Toward a European network of “green zones" to avoid summer collapse, by Miquel Oliu-Barton & Bary Pradelski, Associate Professor of Mathematics & Associate Professor of Economics/Associate Member of the Oxford-Man Institute, Université Paris Dauphine & CNRS/University of Oxford

Food service activities, such as bars and restaurants, will be less impacted by the COVID-19 crisis than other tourism activities as they can continue to operate with delivery and take away services. Sectors such as car rental will have a higher level of recovery with the gradual return of demand.

Recreational, cultural and sporting activities, on the other hand, will be more affected and take more time to recover, since they may have more difficulties in reconciling their activities with the social distancing measures that will still be necessary. Firms’ innovation capacity and the arrival of a vaccine or effective treatment will be decisive for tourism’s recovery, which depends greatly on the gathering of people.

To learn more, visit our website at FGV Europe.

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Luiz Gustavo Medeiros Barbosa

Executive Manager, Fundação Getulio Vargas (FGV)

Luiz Gustavo Medeiros Barbosa holds a Ph.D. in Business from the University of Nottingham, United Kingdom. He is a Professor at Brazilian School for Public and Private Administration (FGV EBAPE) and Executive Manager at Fundação Getulio Vargas (FGV).

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