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Opportunities open up for Argentina’s tourism sector

Country is getting cheaper and has many attractions, but still needs improvement

By | [email protected] | February 27, 2020 4:25pm

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After a series of severe devaluations of the peso, tourism could be turning into a new huge opportunity for Argentina, as the country once again offers very accessible products and services for the international market. But the way is not yet paved for Argentina to make the best out of this chance, as increased economic complexity could also turn into an obstacle, while there’s also room for improvement in terms of infrastructure and safety.

“Tourism in Argentina offers a great experience for foreigners, but the activity moves in a pendulum according to economic conditions, as well as security,” Ezequiel Agoff, director of the Infinity Travel agency, explains. “When a passenger travels abroad, alongside the pull of the tourist attractions, visitors want to feel that their trip is economically viable and that they are safe,” he adds. “When the devaluation is strong and the dollar costs are low, many foreigners arrive,” he concludes.

The newfound price competitiveness coincides with the country’s need to generate a foreign sector surplus to improve its perennial balance of payment issues, so the eagerness around the sector is palpable among macro-analysts and businessmen alike. “Argentina is a positive option economically for tourists, in fact Buenos Aires is in the ranking of the most visited cities of 2020,” Francisco Vigo, director for the Argentine travel agency Almundo, part of a multinational group, told The Essential.

But not everything is so simple or positive. The tourism sector is intertwined with the rest of the economy, one that is weighed down by problems ranging from a deficient transport infrastructure to an antiquated regulatory framework. The country has many natural wonders, a rich cultural and artistic heritage and unique entertainment on offer, but developers who want to invest in its tourism market must consider the challenges of operating in a developing country.

A vast, distant country

The data seems to be backing up the theories of a growth in foreign tourism following the 2018-2019 devaluation of the peso. Arrivals to the Ezeiza and Jorge Newbery airports in Buenos Aires were up by 10.1 percent in 2019, in contrast with a similar drop of 10.8 percent in tourism outflows throughout last year.

But the majority of those visitors had to experience an arduous journey of many hours in order to reach Argentina: the distances to the Southern Cone are often long, and arriving to Buenos Aires is often just the first part of the trip.

Argentina’s capital is usually the gateway and some spend only part of their stay there before moving south to El Calafate, San Carlos de Bariloche, or Ushuaia, west to Mendoza’s wine route, or north to the Iguazú falls or the mountain ranges in Córdoba or Salta.

The above destinations were ordered in terms of air tickets sold by Aerolíneas Argentinas, and show the wide range of options that are available. “Argentina is a diverse country with different climates and a quite unique choice of landscapes: there are deserts, waterfalls, mountains, lakes, snow and glaciers among other wonders,” lists Floxie, a very popular travel blogger with more than 50,000 followers on Twitter who worked for twenty years in the aerospace industry. “Today’s travelers are looking for distinctive and diverse experiences and in that sense Argentina has also become very creative: from visits to fancy Polo residencies, to exclusive tastings in vineyards and picnic grounds in the forests near the ‘end of the world’ in Ushuaia,” she adds.

But that diversity has a downside. Argentina’s territory comprises almost 2.8 million square kilometers. It is the eighth largest country in terms of length, and although that offers great resources and opportunities, it also demands a well-connected transport network that isn’t always at its best.

Air travel dependence

Argentina’s airline business was for many years concentrated in its flagship company, Aerolíneas Argentinas, which brings approximately 54,000 tourists a year to the country. Low cost alternatives were promoted by Mauricio Macri’s administration between 2015 and 2019, but many of Aerolíneas’ competitors are currently struggling. Andes has suspended services after failing to meet its salary payments for months, Norwegian sold its operations in the country and Flybondi has been trapped in Argentina’s political divide and is facing backlash after betting heavily on Macri’s continuity.

Infrastructure can also be inadequate in some airports. Delays due to weather conditions are more frequent due to lack of adequate radio support, and commuting from the airport is dependent on taxis and buses, with projects to build trains straight to the city (or to connect Buenos Aires’ two main airports) all cancelled.

“There was a lot of work done in recent years to improve airports and to increase the number of flights to different destinations, but the challenge of having an infrastructure according to the flow of passengers who visit us month by month is still there”, says Floxie, who highlights the recent improvements to the two airports with the highest flow in Argentina — Ezeiza and Aeroparque — and the reopening of Iguazú and Neuquén.

Long distance buses are not a good alternative. Their cost is only somewhat of an improvement when compared to planes, and routes are often not up to standard, leading to long, uncomfortable travels. Safety is an issue too, as about 20 people die every day in traffic accidents in Argentina.

Local tourism is often based on bus and car travel, but the distance covered by locals is often shorter. For international travelers who want to see multiple Argentine attractions in a few days or weeks, land travel just doesn’t cut it. It can take at least 12 hours to reach Mendoza by land, 16 hours to make it to Iguazu, 18 hours to Salta and Bariloche and a staggering 33 hours to drive to El Calafate. So it mostly comes down to the air, hoping for no delays or cancellations to strike.

Bad regulation

Regulations in Argentina can be convoluted, and tourism is no exception.

“Regulation hinders tourism more than it helps it. The law regulating travel agencies, for example, dates back to the 1970s,” argues Fernando Dangelo Martínez, lawyer and founder of Derechoyturismo.com. “The approach is very far from that of the business world: transport suffers from too much state intervention, price ranges are usually fixed by the state and the main airline is not private,” he says. “Even new regulations, such as those issued in the City of Buenos Aires or in the province of La Pampa, omit new business models such as Airbnb”.

But perhaps the biggest regulatory rarity comes from Argentina’s multiple exchange rates.

Money exchange can be a true cultural experience for tourists. The Argentine peso has multiple quotes depending on where you buy it. There’s an official price in banks and exchange houses, a grey market for some financial transactions, and a black-market price in the streets and underground exchange houses.

The latter is the most profitable for tourists: if they dare walk towards the arbolitos (Spanish for “little trees”, a friendly name given to men who loudly announce that they trade dollars and pesos in the streets of downtown Buenos Aires) or go into a cueva (underground exchange house), they are likely to get around 30 percent more pesos for every US dollar they sell when compared to the bank or the airport.

In terms of taxes, there is a VAT refund program that works well for goods and services, and foreign tourists may obtain the refund for some of their purchases, although dealing with paperwork is often the last thing a tourist is looking for while on a holiday. “There is VAT exemption for foreign visitors, but certain requirements must be fulfilled and it may be difficult to apply,” accountant Andres Robledo told The Essential.

Overall, the system of high taxes and multiple exchange rates ends up fomenting black markets and, for those following the rules, the losses can be significant.

“The truth is that we are at a loss, because salaries increase, supply costs increase, but our income has to be invoiced at the official exchange rate”, a businessman from a 5-star hotel told The Essential.

Safety matters

Although Buenos Aires is relatively safe, traveling to a big Latin American city always comes with some safety concerns.

Looking at newspaper reports from the last few months shows a story about a Briton killed in Puerto Madero in December 2019, a Swede who lost a leg after being shot in Monserrat earlier that year, and a Canadian who suffered a knife attack in San Telmo last month.

Despite these violent attacks, Buenos Aires city is one of the safest in Latin America, with a homicide rate of 3.26 per 100,000 in 2019, similar to the 3.6 per 100,000 registered in New York.

Of course, this doesn’t mean that visitors shouldn’t be aware of the risks: pickpocketing, luggage robbery, car and taxi scams can be common.

For female solo travelers, there are of course other issues. According to Asher Ferguson’s Women Danger Index, Argentina ranks a poor 37 among the 50 most visited countries in terms of risks for women.

High potential

Buenos Aires has been looking for new tourism revenue for some time, and it has been gaining strength lately as a destination for Meetings & Events.

“Events had their peak with the G20 summit held in Buenos Aires, but there’s been growth in this area for many provincial economies, generating a large number of jobs in Córdoba and Mendoza, as well as in the country’s capital,” says Pablo Sismanian, director of tourism products at INPROTUR, the Federal Institute for the Promotion of Tourism.

Today, Buenos Aires ranks 18th among worldwide destinations for meetings and events, Sismanian says, in a ranking that measures factors such as infrastructure, prices, transportation and other items. A high-end convention for 500 people can generate US$2 million for the country, he estimates. Among the recent events, the Youth Olympics Games in Buenos Aires and the Congress of the Spanish Language in Córdoba were the highlights.

Culture and nightlife can also be an attraction with more than 7,000 bars and restaurants, 287 theaters, 380 bookstores and 150 museums in the city.

As for the language barrier, it can be relatively easy to find English or Portuguese-speaking staff in hotels and restaurants in the main tourist destinations, although other languages will be a challenge.

Overall, distances and regulations remain troublesome, but the potential is obvious.

“After having travelled almost the whole country and having stayed in all types of accommodation, I can say that hospitality in touristic places, especially in smaller towns, makes one feel at home,” says Floxie, who hopes the country can “prepare better” to “receive tourists from all over the world.”

“Argentina has everything to host tourists, but the lack of stable long-term policies at the political and economic level means that this industry does not achieve the potential it could,” Agoff concludes.

 

*Jenny Moule and Walter Duer contributed to this report