Brazil is fast becoming the consumer product cash cow for major brand owners with an overheating demand for “produtos importados”, or branded consumer products, in our speak.
Brazil’s domestic retail prices for consumer goods are far higher than in Europe, The USA and neighbouring Paraguay or Bolivia, so “shopping tourism” is now a major business from Brazil. Duty Free Shopping Centres have become a high priority target for shopping tourists, especially for Fragrances, Beauty and Cosmetics products.
In an attempt to dampen exploding consumer demand and to protect local manufacturing, Brazil’s President Dilma Rousseff has recently introduced a range of protectionist import tariffs whilst disregarding the price of some locally produced products, which may already be up to 25% more expensive than branded imports.
The paradox is that Dilma’s protectionist policies are helping to drive up prices of all consumer products and this has precipitated an outbound Tax Free Shopping tourism boom. Their currency, the $Reais is also at its highest level for years against the Dollar, Pound and Euro, so not only are overseas products cheaper, but cheaper still with an estimated 20% overvalued currency. Take this equation into a Duty Free Store and Brazilians have become like the proverbial “kids in a sweetshop” when passing through border stores or airports.
Yahoo Brazil’s InfoMoney Report recently enlisted the advice from Braztoa (Brazil Association of Tour Operatos) Magda Nassar and Julio Serson of the Brazilian Hotel Operators Forum (FOHB) to suggest the best shopping locations for outbound tourists.
The USA came out as the top recommendation, especially during the department store liquidation sale periods according to Julio Serson. The Duty Free Special Territory Panama, where the price for electronics is the lowest in the Latin continent, came a close second. Add to that an expanding COPA Airlines network to Brazil with a large regional airline hub at Panama Tocumen airport and you have a recipe for Tax Free shopping success. Magda Nassar was quoted as saying “As a Tax Free shopping country, prices in Panama are super competitive”.
Nassar also mentioned some interesting travel shopping ideas not normally associated with Brazil, Cruises to Panama and shopping in Dubai and other Middle Eastern States such as Lebanon. With Emirates Airlines now flying from both Rio de Janeiro and Sao Paulo to The UAE, it is fascinating to note how the Brazilian spending tentacles are spreading further afield and how gold and jewellery savings were highlighted.
But there is caution in the air too. An excellent report by Ambrose Evans-Pritchard, International Business Editor for Britain’s Daily Telegraph, highlights the risks and statistics quoting influential sources in his report ………
The Latin Tiger may have overtaken France, Italy, and Britain to become the world’s fifth largest economy on some measures but it has also been relegated to 126th place by the World Bank for 'ease of doing business', behind much of Africa. Cyclical warning signs are flashing amber across the board.
Knight Frank’s global survey shows that Brazil’s house prices rose 26pc last year, leading the world by far. The global average was 0.5pc. "Prices are crazy," said Eduardo Paes, Rio’s mayor. Even 'favelas' are frothy as developers close in. A good slum is worth a four-bedroom house in Arizona - if you can prove ownership.
Brazil’s economy ground to halt late last year. It has since rebounded, but may struggle to repeat the great leap forward of the Lula years given the headwinds of a super-strong real (20pc overvalued says Goldman Sachs). Labour productivity has not remotely kept pace with China or the Asian tigers, which is why industrial output has almost halved to 14.6pc of GDP, a level last seen before the great industrialization drive of the of late 1950s. The country is becoming 'post-industrial' before it is rich.
But, Brazilians are feeling rich already, especially now they travel abroad en masse and search the world for Duty Free bargains.
