Latin America still a-go for bizav
Latin America has long been viewed as a key emerging market for business aviation, led by two major countries in the region, Brazil and Mexico. Political and economic pressures, however, intensified in the region in 2015, driven mostly by the slowdown of Brazil’s $2.2 trillion economy, which is now moving from recession to depression. Once a powerhouse of the region, Brazil’s economy contracted sharply last year, while inflation soared and its currency plummeted. Although Mexico also experienced currency challenges of its own, the market for business aviation in Mexico has grown considerably in the past few years, unlike its southern neighbor.
While Mexico’s business jet market is in ascension, Brazil has taken a backseat in the region, due to recent political and economic turmoil that was intensified by a collapse in the oil and gas sector. Nonetheless, Brazil still offers a significant opportunity for business jet transactions, particularly for those seeking to divest their aircraft investments.
Also read: Latin America’s bizav show
One major reason for this is that in the past two years, the Brazilian Real has declined 41% against the US Dollar. This is bad news for Brazilians acquiring aircraft in US Dollars, but good news for Brazilian aircraft owners looking to sell. Importing an aircraft into Brazil is subject to a 20% government tax. Today, given the Real’s devaluation, a Brazilian owner selling their business jet to an international buyer in US Dollars will be able to offset that tax loss due to the drop in value of the Real. Jetcraft has helped several Brazilian aircraft owners find non-Brazilian buyers for large-cabin aircraft, predominately from North America.
As for Mexico, the US is its largest export market and the economies of the neighboring nations have long been closely linked. Currently, overall economic indicators in both countries are pointing up, but growth is uneven within each of the two nations. Though Mexico ranks as Latin America’s second-biggest economy (behind Brazil), the Mexican Peso has declined about 39% in the last two years against the US Dollar. This has affected Mexico’s private aviation market, although optimism remains around prospects for buyers in Mexico for the future, due primarily to the prevailing upward economic trend in the country.
It is clear that currently, the economies of Latin America are subdued but as economic cycles play out over the next few years in Brazil, more clarity will be gained about prospects for the country’s business aviation market. Further, with Mexico leading the region to more stable ground, we view Latin America on the whole as a region with great promise in the longer term.
This article was originally published on Jetstream, a Jetcraft blog.