Much is at stake for both the inbound, outbound and domestic Argentine tourism industry in LATAM’s biggest economy says Civitatis, the world’s biggest Spanish-speaking tours & activities online seller
This week free-market candidate Javier Milei won the Presidency in Argentina in a sweeping 55% of the vote victory and his core election promises were to abolish the Peso and introduce the Dollar, slash public spending and generally liberalize the economy.
If he proceeds with this agenda what will that mean for the tourism sector – inbound, outbound and domestic – in what is Latin America’s biggest economy? How quickly could we see changes? How relevant is this to international tourism sector?
Nicolás Posse, Country Manager for Argentina, from Civitatis, the world’s biggest online seller of tours & activities and a company with a big presence in Argentina, comments:
“It is important to note that any changes won’t come for some time, Milei doesn’t even take office for several weeks and such big changes would take time to introduce. He will also need legislative approval for such changes, and his party doesn’t have a majority. So things could be watered down or even not happen.
“Nonetheless, despite being early days the international investment sentiment certainly seems to be high, stocks & shares bounced very quickly. That signals that perhaps soon travel businesses in Argentina are likely to get more attention from investors, meaning cheaper loans and easier access to investment – and that is great news for many travel businesses in great need of money to innovate and grow.”
With respect to the potential dollarization of the economy, Posse points out that currently in some cases for Argentina-based travel providers (such as the bigger hotels or tours & activities operators) that are targeting international arrivals, they are already able to sell in dollars online. “However, those are a minority and limited more to hotel chains and certainly not the small providers of tours and activities. But regardless of someone’s ability to sell online in dollars, once that money hits their Argentine bank account it is automatically converted into pesos and at the official state price, which is currency controlled and far off what you’d get for dollars if you bought for cash on the street.”
For this reason and also due to some other regulatory measures which often act as a drag on businesses or distort the free economy, the reality is that a significant part of the Argentine tourism economy functions in cash and therefore largely offline.
Posse from Civitatis comments that, looked at from a purely business perspective and not from a political one, the potential for lifting currency controls and deregulating the travel sector generally could look to be positive for the medium to long-term: “Removing currency challenges and lifting regulations would free up travel businesses to do what they do best, which is providing travel services; this whilst also removing risks that aren’t essential to what they do, in particular currency exposure – but more generally simply the risk that next week you’ve suddenly some new obligation or cost you weren’t planning for.
“Meanwhile a move from cash to digital payments benefits the whole travel ecosystem, including sellers, providers and of course the end traveller themelves too: travellers can pay online, refunds can be automated, how many people will come tomorrow can be predicted, and so on, everyone benefits from an evolution towards a digital economy that right now doesn’t really exist in travel in Argentina.
“And evidently international travellers are more likely to visit a country where being able to pay for things easily and cost effectively is normal – and you can book and pay online easily. Opening up the air routes to international competition would also create more inbound flights at more affordable prices too, attracting more tourists. Very importantly all of this would encourage more Argentines to travel abroad for holiday again, something that has virtually stopped – one of the world’s top 20 biggest economies has been absent internationally as a source market for a long time.”
Nonetheless, Civitatis recognises that if the new government does introduce the reforms they promised on the campaign trail, that in the short-term there will be challenges for the tourism sector. Posse points out that there’s uncertainty about when, whether and to what degree these campaign promises will or will not happen, or indeed that they might happen and then be reversed: “If we do move to the dollar, then new payment processing systems will be needed and as people take advantage of that to start selling and then operating their businesses digitally, there will be a long adaption period. This would be a big cultural and technological shift, requiring investment and training and customer communications and more.
“There will be losers too, travel companies that were previously dependent on government contracts or benefited from economic and regulatory policies that distorted the travel ecosystem will find themselves needing to adapt, very quickly as their core market disappears.”
As is often the case with companies, as a rule Civitatis does not directly comment on or endorse political policies or views, instead preferring to work with existing frameworks and respect the right of citizens to choose their own governments. Nonetheless Civitatis as a company does believe that whatever path the Milei government finally decides to go down with respect for the economy, “businesses in Argentina require, like anywhere in the world, a stable operating environment and whatever is decided needs to be implemented in a clear, consistent and lasting way so that travel companies can plan for the long-term future. This would be to the benefit of the whole travel ecosystem globally and for travellers domestic and international enjoying the beautiful country of Argentina.”