MAIN FACTS
An economic bomb is approaching Brazil. Since the beginning of the tariff war in April this year, initiated by U.S. President Donald Trump, the country was in a relatively more comfortable position. While the United States implemented tariffs exceeding 50% for some countries, for Brazil the percentage remained at 10%, which at the time was considered a victory. However, three months later, in early July, Brazil came into the crosshairs and a 50% increase in tariffs on Brazilian product imports was decided. An important point that complicates this negotiation is the lack of clarity in the proposals. In the letter sent by the American government, there is mention of an alleged trade deficit with Brazil — which does not match reality. The United States has historically maintained a significant surplus in the trade balance with the country, meaning they profit from this relationship. Additionally, there is an evident political-ideological component in the decision, without clearly defined Brazilian actions that would be violating trade agreements. There is great apprehension among Brazilian entrepreneurs, not only due to direct impacts on exporting sectors, but also due to medium and long-term consequences for the dynamics of the national economy — such as disinvestment and potential layoffs. The new 50% tariff will take effect starting August 1st and, until the conclusion of this analysis in mid-July, there has been no sign of revocation or postponement.
The impact is already beginning to be felt in the exchange rate, which had been on a downward trajectory — with the dollar fluctuating around R5.40—andhasstartedtoriseagain,reachingR 5.40 — and has started to rise again, reaching R5.40— andhasstartedtoriseagain,reachingR 5.50. The apprehension continues and, should the measure
materialize in early August, even greater pressure on the real is expected, with reduced trade relations. This scenario is also detrimental to interest rates. The Central Bank, which increased the basic rate (Selic) from 14.75% to 15% per year at the June meeting, will continue monitoring exchange rate fluctuations and their possible effects on inflation. Should there be a more pronounced devaluation of the Brazilian currency, the chance of new upward adjustments in interest rates increases, which would bring an even stronger brake to the economy. At least the inflation index has shown positive results so far. In June, according to IBGE, average prices rose 0.24%, accumulating 5.35% over the last 12 months. The expectation is that this accumulation will rise until September, then begin a cooling cycle, possibly falling below 4.5% in the first half of next year. This scenario would be quite favorable for the Central Bank to begin envisioning the possibility of Selic reduction still this year. However, the ongoing trade war complicates these forecasts.
With higher interest rates, the Brazilian economy is already showing signs of deceleration — which, to some extent, was expected. According to IBGE, retail sales grew 1.1% in May, industry advanced 1.8% in the same month, and the services sector had a 2.5% increase. However, tourism — according to FecomercioSP — continues on a different trajectory, demonstrating resilience. In May, the sector grew 7.9%, accumulating a 7% increase for the year, with all activities showing positive results. Traditional destinations like Bahia, Rio de Janeiro, and Ceará continue in good momentum, but in May, the highlight was Rio Grande do Sul, which grew almost 50%, driven by a weak comparison base, since in May 2024, the region had been severely affected by a catastrophic flood. The scenario is not more negative only due to the maintenance of a heated job market. The unemployment
rate in Brazil is at 6.2% in the quarter ending in May — the lowest level in the historical series for this period. Additionally, the average income of workers is also at its highest point. With inflation less volatile than at the beginning of the year, this has ensured the sustainability of families’ purchasing power in commerce, services, and especially in tourism. Thus, the Brazilian economy continues in line with forecasts: growing, but with clear signs of deceleration for the second half — still without imminent recession risk. In addition to global conflicts — such as those between Israel and Iran, and Russia and Ukraine — which increase uncertainty, the trade war between Brazil and the United States represents a critical factor. Since the U.S. is the country’s second-largest trading partner, there are risks of deeper deceleration, as it
IMPORTANT DATA:
1
Inflation: Brazilian inflation was 0.24% in June, ending the first half with an accumulated increase of 2.99%. A highlight of the month was deflation in the main consumption group for families, food and beverages, which fell -0.18%. Inflationary pressures are now specific, and no longer broad as observed at the end of last year and beginning of this year, which contributes to relieving consumers’ wallets.
is not simple to find alternative markets with the same purchasing capacity.
There may even be, in the short term, a dumping of inventories in the domestic market, relieving prices. However, in the medium and long term, the trend is toward reduction in planted areas, decreased purchases of machinery and equipment, fewer hires — which could lead to a more prolonged cooling of economic activity. Therefore, it is essential to observe the scenario as a whole.
Therefore, Brazil will continue, in the coming weeks, living with the uncertainty of negotiations with the United States. Common sense and a diplomatic solution are expected to mitigate or cancel the tariff proposal. Until then, it’s time to tighten belts and face the turbulence.
2
Record International Tourists: Brazil reached a record 5.3 million international tourists in the first half, representing 48.2% growth compared to the same period last year. However, most entries are concentrated in tourists from neighboring countries, especially Argentina. With the return of visa requirements for Americans, Canadians, and Australians in April, a drop in arrivals from these tourists was recorded in the second quarter.
3
IOF: The government decided to increase the IOF rate, which will impact international travel costs. Foreign currency purchases, for example, which previously had a 1.1% rate, now have 3.5%, a value that will also be applied uniformly to credit card, debit card, prepaid card expenses, and remittances abroad.
CONFIDENCE INDEXES:
Consumer Confidence (ICC): The index showed a slight 1% increase in June compared to the previous month, reaching 112.9 points. However, the current level is 11.1% below the same level last year. This recent gradual improvement is related to less tight inflation, which brings some relief to consumers’ wallets.
Business Confidence in Commerce (ICEC): In June, the indicator returned above 100 points, in the optimistic range, growing 1.6% and reaching 101 points. In the annual comparison, however, there is a 5.6% decline. Consumer and entrepreneur confidence have moved together and are recovering month by month in a slow manner. Despite the interest rate increase, more moderate inflation has been fundamental to restore families’ purchasing power and, consequently, maintain positive sales momentum in commerce.
Consumer Confident Index (ICC) and Comerce Businessman (ICEC)
Consumer Confident Index (ICC) and Comerce Businessman (ICEC)
Note: The ICC and ICEC range from 0 to 200. A score between 100 and 200 is considered optimistic, while below 100 is pessimistic. Although these indicators are from São Paulo, they reflect national trends, as the city—Brazil’s largest—accounts for 11% of the country’s GDP.
ICC ICEC
TRAVEL AND TOURISM
Brazil solidified its position as a global tourism powerhouse in 2025, with impressive numbers that exceeded all expectations. July’s data confirmed a trajectory of strong and consistent growth, driven by historic records in revenue, international arrivals, and foreign exchange earnings.
Domestic tourism hit a record high in May, generating over R$17 billion (approx. $3.4 billion USD). From January to May, the sector accumulated R$90.4 billion (approx. $18 billion USD) in revenue—the highest ever recorded since the historical series began in 2012—representing 7% year-over-year growth.
Meanwhile, Brazil saw a record inflow of foreign currency in the first half of the year: international visitors injected $4.187 billion USD (over R$23 billion) into the national economy, a 12.9% increase compared to the same period in 2024.
From January to June, the country welcomed 5,332,111 foreign visitors, a 48.2% jump from the previous year and the best first-half performance in history. This figure represents 77.3% of the target set in the 20242027 National Tourism Plan for this year. If this pace continues, Brazil could surpass its original 2027 goal of 8.1 million tourists as early as 2025.
BRAZILIAN AVIATION SOARS
June was the busiest month of 2025, with 200,132 takeoffs and landings across the country’s 50 major airports. The daily average exceeded 6,670 flights, with an upward trend already visible in early July, pointing toward over 7,000 daily flights.
EXPANDING INTERNATIONAL ROUTES
Airlines are betting big on international expansion. LATAM announced in July a 20% increase in international flights from Brazil by January 2026, boosting weekly direct international flights from 370 to 440. The expansion includes five new routes and increased capacity on seven existing ones, connecting Brazil to 25 international destinations.
Gol, recently out of Chapter 11 bankruptcy, set an ambitious goal: 25% of its network to be international by 2029. In July, the airline saw its highest-ever international traffic, up 57% year-over-year. It currently serves 83 destinations in 12 countries, with 188 routes (43 international).
MACROECONOMIC CH ALLENGES
Despite the positive numbers, the sector faces significant hurdles. Brazil has the second-highest real interest rate among the world’s 40 largest economies, with the Selic rate at 15% annually. According to Fabio Godinho, CEO of CVC Corp, “We can’t expect the market to keep growing with interest rates at 15%,” predicting a tough second half with slowing consumption. The IOF tax hike to 3.5% on foreign exchange transactions poses another obstacle for international tourism, making overseas trips more expensive and raising costs for travel agencies. This has sparked concerns about the competitiveness of Brazilian companies.
NEW PROJECTS & INVESTMENTS
July brought transformative news for domestic tourism: Rio’s City Hall approved Complementary Law No. 284, authorizing the concession of the Olympic Legacy Park for the construction of Project Imagine. This 1.18-million-square-
-meter entertainment complex—set to be Latin America’s largest—will see R$2.7 billion (approx. $540 million USD) in investments, generating 143,000 jobs and moving R$274 billion (approx. $55 billion USD) over its 30-year concession.
TRENDS & OUTLOOK
The July vacation season confirmed key trends:
•A Locomotiva Institute survey found 53% of Brazilians planned vacations, with a 12% surge in accommodation demand.
•Searches for bus tickets doubled in early July, signaling strong domestic travel demand.
•Tourism to Morocco grew 36% among Brazilians, showing diversification in international destinations.
•Traditional spots like Gramado, Rio de Janeiro, and Maceió remained top winter vacation picks. What Could Impact Brazilian Tourism in Coming Months?
1.Restrictive Monetary Policy: With interest at 15%, pressure on leisure and corporate travel may rise.
2.Higher IOF Tax: The 3.5% rate makes international trips costlier, potentially reducing demand.
3.New Dividend Taxation: Bill PL 1.087/2025, taxing profits/dividends above R$50,000 monthly, could hit travel agencies using this payment model.
4.Global Geopolitical Instability: Conflicts and trade tensions may disrupt international travel routes and costs.
SECOND-HALF PROJECTIONS
• Domestic Tourism: Higher IOF and interest rates may boost local destinations, favoring the Northeast, South, and inland São Paulo.
• Regional Aviation: Airports like Belém (+43.6% vs. 2019), Salvador (+24.6%), and Porto Seguro (+38.7%) show strong growth potential.
• Business Travel: Events like COP30 in Belém will drive corporate tourism in the North.
• Cruises: Remain a cost-effective option, especially for families.
• Experiential Tourism: A 42% increase in flexible destination choices indicates traveler adaptability.
EXPECTATIONS FOR THE COMING MONTHS
Brazil’s tourism sector remains resilient. Despite macroeconomic challenges, fundamentals stay strong:
• Low unemployment (6.2%)
• Rising real wages
• Better-controlled inflation
The recovery of Rio Grande do Sul (+48.6% in May) after the 2024 floods symbolizes the industry’s resilience. States like Bahia (+12.7%), Rio de Janeiro (+12%), and Amazonas (+10.8%) continue positive trends.
For the second half, growth is expected to consolidate, with a focus on domestic travel and corporate events. COP30 in Belém presents a unique opportunity to position Brazil as a global sustainable destination.
This report is produced by PANROTAS and FECOMERCIOSP to support your business decisions. The contents are valuable assets to Destinations and Travel Organizations, both domestic as well as international. For further information please contact ri@fecomercio.com.br redacao@panrotas.com.br
