The Brazilian Senate recently approved a bill designed to increase the individual allowance for duty free purchases made upon arrival at Brazilian airports. The proposed increase is from the current US$500 to US$1,200.
The move is seen as a step towards an ongoing investment in developing the travel infrastructure after Brazil’s airports were privatized. The bill is expected to become law before the end of 2013 once it is approved by the Chamber of Deputies.
According to the bill’s author, Senator Cyro Miranda, duty free stores are key commercial locations for travelers. He describes the current US$500 limit as “modest.” The increased duty free allowance will be welcomed news for international travelers arriving in Brazil. The current US$500 allowance can be used for:
- 24 bottles of alcoholic beverages, with a maximum of 12 bottles per category
- 10 units of perfume or cosmetics
- 20 packs of cigarettes manufactured abroad
- Plus other related duty free items
Foreign investment in Brazil’s transportation infrastructure
Airports across Brazil are undergoing massive upgrades to enable them to accommodate the huge increase in visitors expected to attend the 2014 World Cup and the 2016 Summer Olympics. The companies upgrading the airports expect to earn profits by leasing gates to airlines, space to retailers and restaurants, and property surrounding the airports to developers of hotels and office buildings.
All of these investments are being made possible by joint ventures between Brazilian and foreign investors. For instance, Inframerica is now managing Juscelino Kubitschek International Airport in Brasilia. Inframerica is a joint venture between Brazil engineering company Grupo Engevix and Argentine holding company Corporación América.
Ongoing financial impact of airport privatization
Currently, more than 30 of the world’s largest airports are either partially or fully owned by private investors. Typically, privatization has the impact of funneling private investment into the economy while saving the government money through the elimination of inefficiencies. The government also benefits by charging annual rent while requiring enormous financial investment in the properties.
Additionally, some of the biggest winners will be retailers. Shortly after the Senate’s approval of the duty free allowance increase, Dufry announced that it won new 10-year contracts to run duty-free shops in five Brazilian airports, including in São Paulo’s third terminal. Switzerland-based Dufry is a travel retailer that operates more than 1,400 duty-free shops in airports, cruise lines, railway stations, and tourist areas in 47 countries throughout the world. The contracts make Dufry Brazil’s largest travel retailer.
