The past few years have been a tough go for the Brazilian economy and particularly for tourism. A double whammy of medical risks – Zika and Yellow Fever – combined to put a damper on visitor numbers that even hosting the Olympics and relaxing some visa restrictions couldn’t completely overcome. The country is poised to take more permanent actions in hopes of reversing the decline.
A visit to Brazil costs US passport holders both time and money. Up until this month the cost of a visa was $160, plus the waiting in line at a local consulate/embassy or service fees for an agency to stand in line on your behalf. Yes, that’s still better than what the US makes Brazilians go through to visit, but it remained an impediment to travel. Last week Brazil eased the process dramatically, shifting to a significantly cheaper, online application. The United States joins Japan, Australia and Canada in the new e-Visa scheme.
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The new application process requires 5 business days and produces a visa valid for 2 years, up to 90 days per visit. The cost is $40, plus $4.24 in fees. While the total cash outlay increases versus a $160 fee for a 10-year/180-day visa assuming it is used regularly over the full 10 years the vast majority of visitors will save money with this new approach. And everyone will save time as well.
It is worth noting that Argentina suspended its reciprocity fee for American visitors in 2016 to boost the influx of US dollars. Chile also killed off its reciprocity fee completely in 2014 when its nationals received access to the Visa Waiver Program from US officials.
Getting more visitors into the country will deliver a boost to the economy. Getting those people to Brazil will require either an increase in flights or a more stable financial outlook for the local aviation industry. By signing an Open Skies pact with the United States Brazil hopes to realize both of those goals.
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Debate around Open Skies between Brazil and the USA dates back to the beginning of the decade but only late in 2017 did the lower house of Brazil’s government approve the deal. The upper house is scheduled to vote in February and expected to clear the deal, over the objections of Azul, the number 3 carrier in Brazil. Specifically, Azul is opposed to changes in the foreign ownership limits currently in place, presumably as that would bring an infusion of cash to bolster its competition.
Brazilian officials expect a 30% increase in flights to the US as a result of the deal. GOL, partially owned by Delta Air Lines, is already planning to add flights to the United States and other routes and carriers are expected to follow as limits on particular routes and city pairs are dropped. That increase in capacity should be a boon to travelers as fares are likely to drop to fill all those new seats.
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At the same time, however, LATAM and American Airlines will finally be able to implement the coordinated pricing and scheduling (i.e. collusion) in the market, binging their joint venture to life. Those two airlines represent the largest block of traffic between the two countries and the price/schedule coordination is undoubtedly designed to support the airlines, not to drop fares. Presumably Delta and GOL could pursue a similar arrangement, as could United Airlines and Azul, in which the Chicago-based carrier holds a 5% stake.
While Azul’s concerns about 100% foreign ownership levels are not completely unreasonable it appears that Brazil is ready to open its skies to all comers, passengers and operators alike. It is a trade-off and something of a gamble, of course. Opening that access comes with the hope that tourism increases and the market sees stability and growth. There is also a very real risk of massive instability for a period of years while investors and airlines figure out what will make money in the new environment. At least US tourists get a slightly cheaper way to watch the developments up close.
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