Stormy economic weather in Argentina and Brazil, which account for 70% of total passengers, is the leading factor behind the fall, Navigation Centre says
Argentina’s cruise industry is seen declining this year and the next after the bubble of six years of steady growth is blowing up, the Navigation Centre’s Santiago Díaz Mathé told the Herald in an interview.
Turbulent economic times in Argentina and Brazil are the leading reason for the sector’s decline as the two countries account for 70 percent of passengers. US and Canadian nationals account for 20 percent of the total, and Europeans for 10 percent.
Among other factors behind the steep fall in passenger numbers, Díaz Mathé listed the cost of tickets, taxes, and the “credit card dollar” (the exchange rate for foreign purchases on credit), and, for the companies, high costs of services in pesos, general costs in dollars and a poor real exchange rate.
Meanwhile, the Argentina-Chile-Argentina circuits more frequently chosen by US, Canadian and European nationals is declining although at a slower pace.
As Chairman of the Navigation Centre, what’s your assessment of the Argentine 2014-2015 cruise season?
The present season (2014-2015) proves what we have been warning about since the previous season. The cruising bubble, the steady growth that we had seen over six years, is over. Seventy percent of passengers are Argentine and Brazilian, 20 percent are US and Canadian nationals, and 10 percent are Europeans. What had really grown recent years was the number of Argentine and Brazilian passengers rather than the US, Canada and Europe. And now the number of Argentine and Brazilian passengers is declining.
The scheduled calls have suffered a decline of around 30 percent. The economic growth of Brazil and Argentina was a bubble, and it’s now blowing up. The onboard rate you pay is no longer 8.40 pesos per US dollar, but 11 pesos instead.
Could you provide some figures?
In Buenos Aires, in the 2013-2014 season, there have been 161 calls and 497,000 passengers, while for 2014-2015 about 111 calls and 331,000 passengers are expected.
In Puerto Madryn, there were 29 calls and 31,900 passengers, while now 24 calls and 25,000 passengers are expected, and in Ushuaia, there were 299 calls and 90,670 passengers last season. For the current season, 298 calls and about 90,000 passengers are expected.
What are the reasons for the fall?
The main impact in the number of calls and passengers is seen on the Argentina-Brazil circuit, as the two countries are going though tough economic times. During the present season, 160,000 fewer passengers (80,000 from Argentina and 80,000 from Brazil) will go through Buenos Aires’ Quinquela Martín passenger terminal than in the previous season.
The foreign exchange restrictions linked to the cost of sending funds abroad are a serious problem for traditional cruise companies, which sell a lot of tickets in Argentina. However, in my opinion, this is not the cause of the volume decline. The cost of tickets, taxes, the “credit card dollar,” etc., have a much more direct impact on passengers, and the high cost of services in pesos, costs in dollars, and a poor real exchange rate have a more important impact on the cruising companies.
Meanwhile, the Argentina-Chile line (Madryn, Malvinas, Ushuaia, Punta Arenas, Valparaíso), the one more frequently chosen by US and Canadian and European nationals, is declining just a little.
What about migration fees?
Increases in migration fees and waterway tolls, among others, do not help.
Under migration rules any time passengers go out of the country they must pay a fee. Cruisers have a very particular itinerary because they go from Buenos Aires to Montevideo (which means leaving Argentina and, hence, paying a fee). From Montevideo they go to Madryn (entering Argentina again), from Madryn they go to Malvinas, but that is considered Argentine territorial waters. Then they head for Cape Horn, Chile, so, when leaving Madryn, they have to pay a migration fee a second time. Finally, they go to Ushuaia (Argentina) and from there to Punta Arenas (Chile), which means paying a fee for the third time before continuing the journey to Valparaíso.
In past seasons, we convinced the authorities to charge the migration fee only once, when leaving the last Argentine port. But this season they decided to charge the fee three times once again. Besides, as from March, the fee is rising to US$14 from US$10, an increase of 120 percent for the Argentina-Chile-Argentina circuit. Passengers who have been paying US$10 will now have to pay US$14 three times, that is, a total of 42 dollars. It is important to highlight that this applies only to circuits to and from Chile, calling in several Argentine ports. For cruises between Argentina and Brazil, passengers only pay a migration fee when departing from Buenos Aires.
What is the influence of Customs regulations?
Customs regulations have not changed. Restrictions for supplies and spare parts and the impossibility of receiving cargo in transit from abroad are still a huge impediment. Slackening some regulations could result in relevant advantages with a strong impact on local suppliers of goods and services.
In this regard, what’s the situation like in other countries?
In other regional countries, the costs of several cruise services is more competitive. Cruisers have the possibility of receiving merchandise and spare parts in transit, which is not permitted here.
What actions would be necessary to contribute to a recovery?
In general terms, fees and costs should be more predictable. This industry works with a lot of anticipation and therefore fees and costs must not suffer variations over the following two years.
The government should relax some Customs regulations. For instance, having cruisers enjoy the same privileges as aircraft would suffice. In the final analysis, ships and aircraft are both means of passenger transport.
The Customs code establishes that spare parts can enter the country only when they are indispensable to continue the trip. Nothing else. No goods produced out of the country can go be in transit either. In this case, an import procedure should be started, loading the goods on the ship on a later phase. If produced locally, the export procedure must be started to avoid the value-added tax (IVA). However, at the international airport of Ezeiza, aircraft are exempt from these requirements. It simply doesn’t make sense. Why shouldn’t ships enjoy similar benefits?
What about the near future?
The prospect for the 2015-2016 season is not bright. As I have said, cruiser scheduling demands an anticipation of at least two years. We foresee a recovery of the sector only in 2016-17. Most cruise passengers travelling around the world (including Argentina) are US pensioners. When their pension funds are doing well, they are eager to spend. And after some tough times, the economy of the US and other central economies are now recovering.
What influence could the fall in oil prices have on the sector?
If we consider that cruisers sail at fast speeds and on the basis of strong fuel consumption, the oil price downturn will surely have a very strong positive impact on the ships’ running costs. This will allow the cruise industry to recover at a faster pace.
What about security?
Cruise lines have adopted the necessary measures by stepping controls at the time of boarding. So far, the country’s crime rate has not influenced the cruising market. This does not mean that companies are not seriously concerned.
The national government is refusing to transfer jurisdiction of the Port of Buenos Aires to Buenos Aires City. Has this had any bearing on the sector?
It has no influence at all on the cruise industry.
Beyond the sailing priority enjoyed by cruisers, has the sector been affected by the cargo ship business?
Cruise navigation enjoys an advantage over most cargo ships, with the exception of regasifier vessels. But delays are minimized by the Coast Guard’s very good traffic coordination. But the biggest problem has been — and still is — sailing the River Plate via a one-way channel which only allows ships’ crossings at given sites.
Source: Buenos Aires Herald