Strong U.S. dollar makes Latin America a bargain for tourists, a potential boon for the region | Opinion

The economic outlook for Latin America and the Caribbean for the rest of the year, and 2023, looks grim, but there is one potential bright spot thanks to the unusual strength of the U.S. dollar — tourism.

That was one of my main conclusions after talking with Ilan Goldfajn, the head of the International Monetary Fund’s Western Hemisphere Department, earlier this week.

The IMF forecasts that the economies of Latin America and the Caribbean will grow by only 1.7% in 2023. That’s about half the region’s estimated growth for this year, and less than the projected economic expansion of China, India, sub-Saharan Africa and other parts of the developing world.

But when I asked him which Latin American and Caribbean countries will do best, he said that, “The ones that will grow the most are the Central American and Caribbean countries that depend on tourism.”

Indeed, the strong U.S. dollar is helping tourist destinations and could be a boon for the entire region. While a strong dollar makes it more expensive for Latin Americans to travel abroad, import goods and pay foreign debts, it gives them a rare opportunity to attract more U.S. and European tourists with bargain prices.

I visited Argentina earlier this year and invited five relatives and friends for dinner — including appetizers, main course, dessert and wine — for the equivalent of just $50. I rarely paid more than $5 for a taxi ride within Buenos Aires, the capital.

On a recent visit to Colombia, I found prices in U.S. dollars to be a little higher, but not by much.

And yet, with the exception of Mexico and the Caribbean, which together account for the bulk of foreign tourism to the region, most countries are barely taking advantage of the strong dollar to attract more U.S. and European tourists.

A recent report by the World Travel and Tourism Council (WTTC) shows that, while top world tourism destinations such as Spain rely on foreign travelers for 40% of their overall travel and tourism income, Brazil gets only 4% of its tourism income from foreign travelers, and Argentina a paltry 1%. Other South American countries get even smaller percentages of foreign tourists.

“In South America, international tourism is still in its infancy,” Gloria Guevara, a former Mexican minister of tourism and former head of the WTTC, told me.

That’s a shame, because foreign tourism is likely to keep growing in the coming years. The WTTC projects that world travel and tourism income are set to grow on average by 5.8% annually between 2022 and 2032, outpacing the 2.7% projected annual growth of the overall economy.

International travel and tourism are expected to return to 2019 pre-pandemic levels in 2023 and to create nearly 126 million new jobs worldwide within the next decade, the report says. About 16 million of those expected new jobs will be in Latin America and the Caribbean, it says.

A survey of experts in a separate report by the U.N.’s World Tourism Organization shows that most expect a return to 2019 international arrival numbers by 2024.

Asked what Latin America should do to attract more international tourists, Guevara told me that one of the region’s first priorities should be improving flight connections between countries. To make a connection from one Latin American country to another, she said, passengers often have to fly to Miami or Panama.

In addition, with the exception of Mexico and Caribbean countries, few Latin American countries have long-term strategies to promote international tourism. “The challenge is that every new government changes what the previous one did,” she told me.

Neglecting international tourism is a huge lost opportunity at a time when many Latin American countries badly need hard-currency incomes.

What Goldfajn, of the IMF, told me almost as an afterthought should become a top priority for governments in the region. There aren’t many places in the world that can offer foreign tourists Latin America’s natural beauties, cultural treasures, warmhearted people and exquisite dining experiences — and for bargain prices.

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