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Brazil cuts duty free allowance, increases airport tax
Impact International / December 1, 1997

By Larry Luxner

A five-fold increase in Brazil's airport departure tax announced by President Fernando Henrique Cardoso in early November could severely hurt companies that depend on tourism -- both by Brazilians traveling overseas and foreign tourists returning home.

The decision hikes the tax from $18 to $90, giving Brazil the dubious distinction of having the highest international departure tax in the world.

In addition to boosting the tax, a move expected to generate $500 million in government revenues, Brazil has slashed the duty-free allowance from $500 to $300 per person. This is expected to raise another $20 million. Both measures, which are to last until Jan. 1, are aimed at discouraging Brazilians from going on expensive shopping trips and vacations abroad. They're part of Cardoso's austerity package designed to reassure foreign investors and prevent a devaluation of the Brazilian real (now worth about 90 cents) in the wake of Southeast Asia's currency crisis.

"The business class will continue to travel, but I foresee a dramatic reduction in international travel by the middle class and families," said financial analyst Ricardo Beher of Banco Garantia. He added that "these measures will definitely affect the tourism sector and import companies like Brasif which depend on arrival duty-free sales."

Antonio Glustak, finance manager at Transbrasil Airlines in Miami, says the new austerity package won't cut down on the number of people who travel, but will slash the amount of money they spend during their trips.

"If you've already planned your vacation, you're not going to cancel it because of a $72 increase in the departure tax," he said. "It's going to make your life a little miserable, but you're still going to go."

Glustak, whose airline offers 26 flights a week between the United States and Brazil, said duty-free airport sales would likely suffer as a result of the lower allowances.

Another casualty of the austerity package is Brazilian beer producer Kaiser. The brewer has decided to postpone construction of a facility in Pacatuba, in the northeastern state of Ceará. The $90 million plant began taking shape last month and was scheduled to be in operation by September 1998, at which time it was to have a monthly production capacity of 12 million liters.

The São Paulo newspaper Gazeta Mercantil reports that Kaiser will also postpone feasibility studies on construction of a $100 million brewery in Pernambuco, Brazil.

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