Brazilian Overview Monthly Report - SEPTEMBER 2025

MAIN FACTS

The Brazilian economy continues to slow down. This is reflected in the IBGE’s most recent GDP release, which recorded a 0.4% increase in the second quarter compared to the previous period, following a 1.3% increase in the first quarter. This result was partly expected, mainly due to the strong performance of agriculture, concentrated in the first three months of the year. Corroborating this scenario, the IBC-Br, which serves as a preview of GDP, showed its third consecutive decline, falling 0.5% in July.

A positive development for the economy was announced in September: inflation fell by an average of 0.11%, driven by a 0.46% decline in the food and beverage group, the most significant indicator. It is true that in August, the reduction in electricity bills—due to the Itaipu bonus granted to consumers—played a significant role. However, from a broader perspective, no significant pressures are observed from food, housing, or transportation prices, which make up the three main groups of the IPCA. Therefore, the trend is for milder inflation in the coming months. With future inflation converging more quickly toward the center of the target, or at least below the 4.5% ceiling, the Central Bank, despite having decided at the last Copom meeting to maintain the interest rate at 15% per year, may already signal some movement toward bringing forward the Selic rate reduction cycle—perhaps as early as the first meetings of 2026, rather than just mid-year. This reduction will be crucial not only to give the economy new traction but also to help reorganize household finances. This is because, according to the National Confederation of Commerce (CNC), the default rate recorded in August, at 30.4% of

households, was the highest in the historical series that began in 2010. This certainly has an impact on consumption: although many families choose to postpone solving the problem, a significant portion of them are skipping spending on commerce and services to accumulate funds and pay off outstanding debts.

This scenario is already reflected in the performance of retail, which has been experiencing a slower pace of sales. In July, there was a 2.5% decline compared to the same period last year, according to the IBGE, driven primarily by a 9% drop in vehicle sales. What has helped offset this decline are basic consumer sectors, such as supermarkets and pharmacies, which, although showing a relatively small increase, provided some impetus for sales in the latest available data.

In industry, the July result was practically stable, with a slight increase of 0.2%. This performance, however, was strongly influenced by the extractive industry, which grew 6.3%, while the manufacturing industry declined 0.9% compared to July 2024. Services, meanwhile, registered growth of 2.8% in the same month. Specifically, tourism, according to a survey by FecomercioSP, expanded 4.3% yearover-year in the first month of the second half of the year. Although this growth is lower than in previous months, a slowdown was expected given the economic slowdown and the strong comparison base from the second half of last year. Even so, the sector has been excelling, demonstrating significant resilience for economic activity.

Despite high interest rates, what has prevented a more rapid deterioration of the economy is the labor market, which, according to the IBGE, remains at a historic low for unemployment. This guarantees significant disposable income for families, which,

combined with lower inflation, tends to allow for a gradual recovery in consumption, the repayment of outstanding debts, and even the creation of space for spending on leisure and entertainment. The outlook, therefore, is one of caution, but not alarm. What we are observing is a slower pace of growth, not a recession. According to the Central Bank’s Focus Bulletin, GDP is expected to grow around 2% both this year and next, without major changes compared to previous projections. Thus, the country continues to advance, albeit at a modest pace.

Externally, the trade conflict with the United States remains on the radar. Despite a significant

IMPORTANT DATA:

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Tourism: A survey by FecomercioSP shows a 9.7% increase in air passenger transportation in July, the best performance among sectors. ANAC confirmed a historic record for passengers transported in the month.

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improvement since the announcement in mid-July, the risk of escalation still exists and could have more severe impacts on the Brazilian economy. So far, however, the effects have been minimized by measures such as the reallocation of exports to other markets, the removal of items from the initial 50% tariff list, and government credit to help affected companies.

Overall, Brazil continues to grow, albeit more slowly, but with many challenges ahead, both externally and domestically. Among the main points of concern are the increase in public debt and the fiscal deficit, which are expected to widen this year and next, also under pressure from the electoral calendar.

Unemployment: The unemployment rate was 5.2% in the second quarter, with workers’ disposable income reaching R$353 billion—a record high.

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Exchange Rate: The real returned to R$5.30 per dollar. Although the market projects R$5.60 by the end of the year, the trend is downward, driven by the combination of a weaker dollar (with expected interest rate cuts in the US) and the appreciation of the real, attracting foreign capital due to high interest rates in Brazil.

CONFIDENCE INDEXES:

Consumer Confidence (ICC): The index regained its momentum and grew 2.7% in August, reaching 111.9 points, a level similar to that seen throughout the second quarter. However, the current level is 12.1% lower than the same month in 2024. Lower inflation may provide some breathing room for household budgets, but high interest rates continue to put pressure on debt payments and hinder a more solid recovery in confidence.

Business Confidence in Commerce (ICEC): In August, it fell 2.9%, from 102.8 points to 99.8 points. Compared to the previous year, it fell 8%. Business owners remain wary of the economy, which is clearly showing signs of slowdown. And with high interest rates, this further complicates household purchases.

Note: The ICC and ICEC range from 0 to 200. A level of 100 to 200 points is considered optimistic, and a level below 100 points is pessimistic. Although the indicators are from the city of São Paulo, they follow the trend of what is happening in the rest of the country since the city, the largest in Brazil, represents 11% of the national GDP.

TRAVEL AND TOURISM

Braztoa – the Brazilian Association of Tour Operators – conducted a survey of its members on sales and traveler behavior in the first half of this year. It’s an important indicator of how leisure travel is performing in Brazil amid the economic and political challenges facing the country and the world. “This survey highlights a scenario of regulatory, economic, and geopolitical instability that has directly impacted the sector. It’s important to emphasize that even with the increase in the IOF (for international purchases) and significant changes in major international destinations, Brazilian tourism remains strong and strategic to the economy. Operators have been responding with innovation and product diversification, but it’s essential that we move toward a stable and predictable regulatory environment,” analyzed Fabiano Camargo, Chairman of the Braztoa Board.

IOF: BETWEE N RETRACTION, LOSSES, AND CAUTION, THE SECTOR FEELS THE EFFECTS OF THE TAX HIKE

In the first half of the year, the increase in the IOF (Tax on International Purchases) increased the cost of packages, created uncertainty, and drove away some consumers:

• 19% of tour operators reported that the increase significantly increased travel costs, frightening and discouraging consumers.

• 32% pointed to even more severe impacts, with financial losses already recorded.

• For 23%, there were changes in customer behavior, such as budget reductions, shortened stays, or changing destinations, but without significant impact on sales. Today, most believe that the impact of the IOF increase was more specific and that travelers absorbed this new additional cost.

UNITED STATES: BETWEEN CONCERNS AND FOCUS ADJUSTMENTS

Recent changes involving travel to the United States, especially additional fees and visa requirements, as well as insecurity upon entering the country, in addition to geopolitical issues, are already reflecting on the behavior of the Brazilian market. Although only 3% reported cancellations of previously purchased trips, 45% of tour operators reported a decline in future sales to the destination. Furthermore, 24% have not yet seen a direct impact on sales but report growing customer concern, while 21% say they have not noticed any change so far.

The good news is that the US Travel Association, in negotiations with the Trump administration, managed to postpone the start of the $250 surcharge, which was scheduled to begin in October. Now, there is no set date for this implementation, and US Travel is fighting to ensure it is implemented. Everyone is anxious, but already relieved that the start of the charge has been postponed. When asked if the tour operator has noticed any impact on new travel purchases, considering only geopolitical issues, not directly related to tourism:

• 48% indicated a reduction in sales,

• 24% highlighted that customers are attentive and concerned, but without any effective changes,

• and 21% said they have not seen any impact. This context is already beginning to prompt adjustments:

• 10% of tour operators have begun to direct efforts to promote other destinations – that is, alternatives to the United States –

• and 38% report that their customers themselves have been spontaneously seeking alternatives. Still, 38% say they remain focused on the US, while 14% continue to evaluate how to handle possible reroutes.

According to Visit Orlando, the average stay of foreign tourists in the city fell from 14 to 11 nights, with Brazil, the United Kingdom, and Mexico maintaining growth rates compared to 2024. At CVC Corp, the average visit fell to 8 days in the destination. In other words, Brazilians are staying shorter and having to choose which parks to visit. The average ticket price fell 15% for leisure travels. Airline ticket sales increased 49% this year, mainly due to the FIFA Club World Cup and the increase in business travel and homeownership in Florida. Work is needed to demonstrate added value, cost-benefit, and convenience for Brazilian travelers to spend longer in the United States in general. Brazilians will continue traveling to the US, a priority destination for various groups and generations, especially families. High costs (without the perception of added value) and obstacles to entry or visa acquisition are the main deterrents for Brazilians to travel to any country, as are security issues and regional conflicts.

SNOW SEASON: REPERCUSSIONS AND ADJUSTMENTS

Another point of attention in the first half of the year was the snow and ski season, which featured Chile as a highlight. After the high volume of Brazilians and the negative repercussions of 2024, marked by overcrowding, long lines, and infrastructure issues at ski resorts, the market is already signaling impacts. For 12% of operators, there was a decrease in demand directly due to these incidents, while 15% stated that customers mentioned the incident, but without a significant impact on sales. The majority, 46%, did not perceive any impact and 27% highlighted that demand remains high, despite criticism. Still, the issue has led to strategic changes. When asked about adjustments for 2025, 27%

of operators stated that they have diversified their offerings, expanding options beyond the most traditional destinations, while still promoting them.

The same percentage indicated that customers themselves have been spontaneously seeking alternatives and lesser-known destinations. On the other hand, 38% continue to focus on established destinations, such as Chile and Bariloche, without significant changes to their strategy.

EUROPEAN SUMMER: HIGH TEMPERATURES AND OVERCROWDING UNDER OBSERVATION

The European summer season was also analyzed, considering the impacts of negative experiences recorded in 2024 and again in 2025, such as extreme temperatures, overcrowding, and reports of discomfort.

The impact on sales was minimal and very limited: only 7% of operators reported a drop in demand, while 13% stated that it was still too early to measure the real impact.

Although these concerns did not directly influence sales, they were reflected in travelers’ perceptions:

• 27% of operators reported comments or complaints about conditions last season, • and 20% have already received complaints from customers traveling this year.

When analyzing possible changes in behavior, even without an actual drop in demand, the scenario reveals nuances. Only 7% of operators identified customers choosing alternative destinations within Europe or nearby regions, while the same percentage indicated adjustments to their travel dates to avoid warmer months. Another 17% observed both changes in destination and travel time. The majority, however, 63%, did not notice any significant changes.

ARGENTINA: VALUE FOR MONEY PERCEPTION IN FOCUS

Argentina continues to be a destination that historically experiences fluctuations in demand, closely linked to travelers’ value for money perception, influenced by factors such as exchange rate fluctuations, local inflation, and the appreciation of the currency against the Brazilian real. In the first half of 2025, these variables were highlighted, impacting the country’s attractiveness. During this period, 53% of operators rated Argentina as unattractive from a value for money perspective (the destination is expensive for Brazilians), while 23% still considered it attractive, meaning it was interesting despite price increases and some uncertainty. Another 23% rated the country neutrally, with no significant positive or negative highlights.

Given the fluctuating nature of the destination, 32% of operators believe that traveler perceptions may change throughout the second half of the year, while 48% say it is still too early to draw definitive conclusions.

BRAZIL – PARÁ: BELÉM IN FOCUS WITH COP 30

Belém, named a top emerging destination in

the 2024 Braztoa Yearbook, is now being closely monitored and gaining special attention in 2025, a key year for assessing how the visibility of COP 30, to be held in November, could impact interest and sales in the city.

In the first half of the year, tour operators’ perceptions indicate that the direct impact on tourism travel sales to the city is still limited: 38.7% said they had not noticed any significant changes, while only 12.9% saw a clear increase in interest or sales related to the event’s visibility. Another 3.2% indicated growth limited to specific niches. On the other hand, there are signs of caution: 22.6% of tour operators noted a decline in interest, influenced by factors such as price increases, logistical challenges, or event-related uncertainties, even for trips that did not take place during the event (COP30). 41.9% expressed concern that potential organizational failures or negative impacts during COP30 could harm the destination’s image in the future. Despite this, a smaller portion is already preparing to seize the opportunity, with 6.45% selling specific packages and another 6.45% considering the event a major opportunity for the post-COP30 period.

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