Read this Monday’s edition of the FolhaMercado newsletter (22) – 01/22/2024 – Market

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Why didn’t low costs take off in Brazil?

Low cost airlines have even arrived in Brazil in recent years, but their presence is still timid and is characterized by international routes, especially to Latin America.

Understand: Low cost is a term created by the market to characterize companies that try to minimize their operating costs as much as possible – charging for food and baggage check-in, for example – and, thus, reduce ticket prices.

• With a lower profit margin, the model needs a high volume of passengers to make ends meet.

Why haven’t they become popular in Brazil yet? High interest rates, judicialization and fuel costs are the main factors, point out experts and sector agents.

↳ Selic increases the debt of companies, which have to fund their operations and pay for aircraft leasing.

↳ Companies also complain about the high level of legal compensation and the price of QAV (aviation kerosene), which is adjusted taking into account international oil prices and represents around a third of airline costs.

Low cost companies operating in Brazilaccording to Anac:

• Air Europa: It is the only one that offers routes to the European continent. There are two routes that connect Guarulhos and Salvador to Adolfo Suárez airport, in Madrid.

• Arajet: newly arrived in the country, she has flights from Guarulhos to the Dominican Republic and said that Brazil was her best market in the last months of 2023.

• Flybondi: its routes depart from Rio, São Paulo and Florianópolis to Buenos Aires, in Argentina.

• JetSmart: takes passengers from Foz do Iguaçu, Rio, São Paulo and Florianópolis to Santiago, Chile. It also operates flights from here to Montevideo, Uruguay.

• Sky Airline: it has routes to Santiago, Montevideo and Lima, in Peru.

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Thinking about ‘touring’ in Argentina?

You may have seen or heard reports from Brazilians who recently went to Argentina and that everything was not “as cheap” as in the winter months, which were extremely advantageous for foreigners.

This is because in December, with the arrival of the ultra-liberal Javier Milei to the Presidency, the peso was mega devalued by the government and the official dollar exchange rate approached that of the parallel, called “blue”.

In January, however, the difference appeared again, and Argentina became relatively cheaper for Brazilians again.

Which explains: the parallel price rose again due to a series of internal factors — among them a possible return of Argentines’ demand for dollars to escape the pesos, in the face of inflation that doubled and the drop in income from investments in the local currency.

In numbers:

• R$ 1 it was exchanged for 190 pesos, and US$1 was worth 1,000 pesos on December 29;

• R$ 1 was worth 240 pesos, while whoever exchanged $1 I received 1,200 pesos last Thursday (18).

In addition to devaluing the weightMilei also put an end to the price freeze adopted by his predecessor, the Peronist Alberto Fernández.

↳ This ended up making even ice cream a luxury item, says an Argentine channel.

↳ These actions are part of a package of a thousand measures from the Milei government. Another management priority to face the crisis in the country is cost cutting.

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Progressive or regressive?

A long-awaited change in the private pension taxation regime was adopted by the government and is now taking effect. It refers to investors’ decision on when to choose between the progressive and regressive model.

Understand:

↳ Regressive: the IR (Income Tax) charged regresses according to the contribution time. If withdrawn before two years, the maximum rate of 35% applies.

• Every two years, it drops five percentage points, down to a minimum of 10% after ten years.

• It is more advantageous for those who are not going to touch their private pension anytime soon.

↳ Progressive: the greater the value of the benefit received upon retirement, the higher the IR rate charged (see this table).

• It’s worth it for those who will earn less than R$2,826.65 per month according to the 2024 table, considering the sum of all earnings, such as salary, rent, private pension and INSS.

– How was: the investor had to decide between the regressive or progressive model when joining the pension plan.

– How it looks: The choice can be made when contracting the plan or at the first redemption – whether in advance or at the beginning of receiving the benefit.

• The investor can only exchange options once. Therefore, experts advise that it only occurs at the time of the first rescue.

Which is more advantageous? It depends.

• For those who contribute a low amount or may need to redeem the amounts in the short term, the progressive regime is more worthwhile.

Still in doubt? See here simulations of what progressive and regressive taxation would be in some examples.

More about investments:

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Startup of the Week: Turbi

On Mondays, the panel features an x-ray of a startup that recently announced funding.

The startup: Founded in 2016, Turbi works with car rentals 100% digitally. The vehicles are located in parking lots in greater São Paulo and are unlocked by the consumer using the app on their cell phone.

In numbers: the startup announced that it had received funding from R$150 million. It is the company’s third fundraising in a period of a year and a half.

• In October 2022, it raised R$106 million via debentures;

Who invested: the round that was led by Arc Capital also had participation from Reag Investimentos and Clave Capital.

What problem does it solve: Turbi cars can be rented month by month, via a subscription model, and also by the hour, day or week. The value becomes proportionally lower as the loan period increases. The difference lies in the fully digitalized process.

Why it’s featured: The investment helps Turbi compete with large car rental companies. The resources were allocated to the purchase of 1,625 new cars at a discount level similar to that offered to large companies in the sector, says the startup.

• It has a fleet of 5,200 vehicles, an increase of 45% compared to the previous quarter and which makes it the fifth largest company in the vehicle rental market for individuals.

• This is the second investment over R$100 million announced by Brazilian startups this year. As we showed last week, fintech Conta Simples received an investment of US$41.5 million (around R$200 million) in a series B round.