Brazil: Lack of Tourists Makes Rio’s Shops Sing the Blues This Carnaval

New York City Center shopping mall in Rio, Brazil The Brazilian airports' crisis, which reduced the number of domestic tourists in Brazil, is reflecting negatively in the financial performance of Rio's shopping malls these first weeks of the year. The Rio de Janeiro's  Aloserj (Shopping Malls' Shopkeepers Association) reported a 7.5% contraction in sales from January 1st through last week.

Gilberto Catran, the Association's executive director said that despite the increase in the number of foreign tourist cruise ships, which should mean an increase in international tourism, there was no corresponding sales increase.

"The same has been happening to the national tourism, which has been well below expectation due to the airports trouble. Many people just gave up traveling," said the director.

An Aloserj's survey among Rio's main shopping malls revealed that a reduction in domestic and international tourists has been decisive in determining a negative result at the beginning of the year, informed Catran.

According to the Aloserj director, traditional expenditures by Brazilian families at this time of the year should be added as a factor causing this situation.

These start-of-the-year expenses include taxes as IPTU (Imposto Predial e Territorial Urbano – Urban Building and Land Tax) and IPVA (Imposto sobre Propriedade de Veí­culos Automotores – Tax on Motor Vehicles Ownership), "which affect especially the middle class", and  the purchase of school material, "which affects all population's classes."

The Carnaval festivities apparently are not helping to invigorate the retailing sector. "There was a big  expectation concerning the tourist activity, which considerably increases the flow of potential consumers in the shopping malls. This is not occurring, however", said Catran.

Another clue that things are not going well is the fact that companies let go of temporary workers hired for the Christmas season right after the year's end. In years past, shopkeepers had waited till Carnaval before they started firing personnel and going back to their basic staff. "They had these dismissals earlier this year," Catran explained. "This is a sign that the activity is not good."

The 2007 growth outlook is not encouraging. Retailers in Rio are not expecting to increase their sales by more than 2% to 3%. "There are no structural or macroeconomic conditions that would allow an increase bigger than that," explained the director.

Last year, shopkeepers affiliated to Aloserj reported an increase of about 2.5% in their sales. This has been the same percentage for the last four years, which is in tune with workers' purchasing power, as well as unemployment and economy restrictions," Catran said.

He also reminded that nowadays the middle class has new expenses that weight on income, like cellular phone and Internet. "There was more money available for the consumption of products but not of services. That's what has determined the small levels of growth these latest four to five years," he concluded.



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