Argentina crisis affects tourism across Latin America

02 October 2018 Authored by Consultancy.lat

The economic crisis in Argentina has put an undue strain on its neighbouring countries – whilst not in the same manner as Venezuela, where the population continues to evacuate in droves, but perhaps in an opposite sense; Argentina was once the largest source of tourists in Latin America, and the fall in value of the Argentinian Peso has meant that many can no longer afford to travel, leaving a dent in the regional tourism market.

A new report by ForwardKeys, a travel and big data analyst consulting firm, has identified a pattern since the drop in the peso. “As Argentina made up the largest share of travel in South America, a decrease in travel demand in Argentina means fewer travellers in the entire region,” states the firm. 

The country has been struggling in and out of recession for the past two decades since the great Argentine depression from 1998 to 2001. Caused by a financial crisis which pushed the government to default on the country’s foreign debts, Argentina has been dancing a fine line between recession and growth ever since. 

Argentinian Arrivals in Brazil also collapsed along with the exchange rate dip

With insular fiscal policies and isolation from the International Monetary Fund, the country has also since struggled with a steady exchange. The official exchange rate differed greatly from the blue market exchange, seeing many tourists exchanging their dollars for pesos and Argentinians buying dollars at a cheaper rate for international travel themselves. 

Officially, the exchange rate ten years ago was 3 pesos per US$1. That number rose to 12 pesos per US$1 in late 2015 and has been creeping gradually upwards. Between May 2018 and September 2018, the rate doubled from 20 pesos per US$1 to 40 per US$1. The drop in May may have sparked President Macri to ask the IMF for a bailout, but the rise in the peso has already done significant damage to the savings of Argentinians. 

Weak demand from Argentina drags down Chile’s inbound performance

Of particular consequence is the hit to the tourism markets which saw the greatest numbers of Argentine travellers. These destinations include Brazil, Paraguay, Uruguay and Chile, followed by Bolivia, Peru, Cuba and Colombia. Whilst Brazil currently leads the pack in terms of Latin American tourism levels – with an 8% increase forecast for the second half of 2018 over the same period last year – Colombia and Peru are expected to experience dips of 2-3% year-on-year. 

Chile has suffered the greatest setback in absolute terms with a drop in 9% in international arrivals. This is due to the the fact that Argentinian arrivals – as one of Chile’s largest source markets for tourists –  are falling dramatically and the drop is predicted to continue beyond 50% by years end. “This collapse in one of Chile’s most important source markets has transformed a 9% positive overall performance in the first four months of 2018 to a 9% negative outlook for the last four months of 2018,” states the report. 

Argentinian Arrivals in Brazil also collapsed along with the exchange rate dip

One of the major trends which the report highlights encompasses inbound Brazil travellers. Outbound travel from Argentina “which collapsed following the dive of the Argentine peso”, has heavily impacted the market downturn. During the first quarter of 2018, travel to Brazil from Argentina was up 31% year-on-year, whilst now that trend has gone into recession, it’s down 1% compared to the same period last year.

“The Argentine debt crisis has played a very influential role in South American travel trends,” said the CEO of ForwardKeys, Olivier Jager, commenting on the phenomenon. “With the collapse in the value of the peso, it immediately became much more expensive for Argentinians to travel abroad and local destinations such a Chile and Brazil suffered dramatic declines in visitors from Argentina. However, at the same time, Argentina, and by extension South America, became more attractive to lower-volume but higher-value long-haul markets.”

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