In my Business Spanish class, our final project was to give a 20-minute presentation on a topic of our choosing. For my topic, I chose the effect of tourism on the economies of different Hispanic countries. Tourism, in the sense I reported on, is more than just the act of vacationing for luxury, as it also takes into account the social, cultural, and economic impacts of the movement of people throughout different countries. Studying the economic impacts of tourism is especially important in Hispanic countries as the majority of these countries have a huge influx of travelers annually and house some of the most popular travel destinations. In the Caribbean, tourism makes up 26% of the total Gross Domestic Product (GDP) on average and in Latin American countries, tourism makes up 10% of GDP which translates to $209.6 billion dollars. This is an extremely large amount of money that greatly benefits the economy, which is coming from just one revenue stream: tourism. In addition to the overall impacts that general tourism has on economies, there are also the current issues of the changes in economy and tourism because of the pandemic, the impacts of globalization and expatriates, and the sociocultural impacts of tourism.
The idea that tourists greatly stimulate the economy of the city they are traveling to has long been established. Tourists need to spend money on hotels, food, or other activities they might want to participate in during their time in a new city. Oftentimes tourists also want to shop in retail stores or other local community vendors like thrift stores or flea markets. As a result, the business owners will have more money, which can also be spent in their local economy. In this manner, tourists add to the total amount of money in a community and therefore increase the amount of money in a city’s economy which allows the city to be more prosperous.
When there is an influx of tourists, there is generally an influx of job opportunities as well. All of those hotels, restaurants, and retail stores need employees and the more customers, the more employees they need. In various countries, the tourism sector is a huge contributor to the country’s employment. In Spain during 2021, the country reports that 2.5 million people worked in the tourism sector, and in the Dominican Republic, 9.7% of employment comes from the tourism sector which equates to over 760,000 workers.
The large number of tourists also means countries must have adequate infrastructure to house all of the people. This means many countries that have been seeing an increase in tourists have been making improvements to their infrastructure for updated roads, airports, and public transportation so tourists feel more welcome. These improvements might have stemmed from the tourists, but any improvement to the cities has great benefits for the citizens as well. Costa Rica is one country that has seen a great increase in tourists and expats since the pandemic and therefore in recent years has been working to redo its roads, build better airports, and make public transportation more accessible to everyone. Since sustainability and the environment is very important to Costa Rica, they have ensured that all these improvements have been done sustainably.
During the pandemic, many countries imposed quarantines, entry bans, or other travel restrictions to limit the disease in their country. For example, Panama closed its borders to international travelers on March 16, 2020 and didn’t open its borders again until October 12, 2020. These changes caused a great drop in revenue for the majority of countries across the world. During 2020, tourism-related GDP in Latin America dropped by $52.8 billion, and $26.4 billion in the Caribbean. With the great decrease in revenue from tourism, many workers lost their jobs as well as employers no longer had the money to pay their salaries. Employment in the tourism industry reduced by 24% in Latin America in 2020 and similar decreases were seen throughout the world.
Even though borders have now been opened again and tourism has successfully picked back up, the majority of world economies have not fully recovered. Inflation is increasing, most unemployment rates have not returned to the numbers they were in 2019, and tourists are changing their priorities for traveling. The pandemic affected everyone’s outlook on diseases and healthcare so while before the pandemic international openness (a strength of Hispanoamerica) was important to travelers, now tourists are focused more on healthcare. They want to ensure that if they get sick or hurt on vacation, they will be adequately taken care of. This can be harmful to many countries because many travelers from the United States have very low opinions of healthcare systems abroad, thinking they are lesser than. To appear attractive to travelers, Hispano-American countries must work to reverse this opinion while also spending money to upgrade their healthcare facilities and advertise those improvements to travelers.
Upgrading their healthcare facilities and changing these opinions are crucial for countries that rely on tourism for their GDP because according to the World Economic Forum, the pandemic also made the tourism industry far more competitive than before. Countries must now compete with each other for tourists to prove they are the best country. The World Economic Forum also reports that better air transportation would help Hispanoamerica be more competitive – especially in South American countries that have to work around natural barriers that make land travel difficult – and a better contribution between the public and private sectors that takes sustainability into consideration.
As Hispano-American countries struggle to get back the money they lost during 2020, they also have to deal with higher inflation, the changes the US has made to their own economy, and being competitive in the global tourism industry.
Globalization is the idea that economies, societies, and cultures all across the world are connected, even if they don’t seem to be. A major way that globalization has appeared in the past few years is through technology, as different tactics move from country to country. Globalization affects trade, investment, finance, politics, and much more. Despite having a lot of positive effects, globalization also comes with consequences.
I believe tourism is a part of globalization, as tourism deals with the economy changing because of the countries of the world becoming more connected and people wanting items or services from other countries. If you do a lot of business in another country, the owners must travel to that country to meet in person regularly.
Globalization has had both positive and negative impacts on Latin American countries. For one, there is an increase in international trade which therefore increases GDP. However the increased trade has had a negative effect on the environment, including deforestation (because of an increase in demand for timber and other natural resources) and pollution (from increased industrial activity and transportation). Globalization has also enhanced economic inequality, since the economy of your country is no longer just dependent on your country, and income inequality.
Argentina has taken a cautious approach to globalization after experiencing a financial crisis in 2001 that led to continuous economic problems. Argentina is a good example of adequately balancing international trade and investment while protecting its own domestic industries. Globalization has evolved over time and helped Argentina through economic growth and increased employment, but also provides some challenges with higher inflation, income inequality, and lots of political instability.
Another aspect of globalization and tourism is currency exchange. With inflation and raising interest rates, the dollar has been strengthening. For example, the US dollar has been appreciating against the Mexican peso, so it is becoming more and more expensive for Mexicans to purchase US goods and services.
Many countries owe a debt to the US, both debt in dollars and other national currencies. The rising interest rates cause an increase in the cost of borrowing which means the countries have higher debt payments. In many cases, countries that owe a debt to the US are already low-income countries, that had major economic crises due to the pandemic, Russian conflicts, and the recession, and now have to deal with the recession and interest rates while still having problems with natural disasters and regular climate issues.
There are also several Hispanic countries who participate in dollarisation, when the country switches out their own currency for the US dollar. This means they are giving up control of their own monetary policy and connecting it with the US monetary policy which makes the country extremely susceptible to raising interest rates. Ecuador is one of the countries that has seen this as a major problem in recent years, as they adopted the dollar in 2000 to help combat hyperinflation. Instead of helping them, the rising interest rates have now forced Ecuador to cut public spending and subsidies to meet its debt obligations. With the strengthening of the dollar, it also causes imports to be way more expensive which contributes to hyperinflation and economic instability.
It is important to realize that the laws and policies that the US Government and the Federal Reserve put in place do not just affect the 50 states of the US, but a majority of the countries in the world. It’s easy to not realize the broad impact the US has on the wider world when supermarket prices are skyrocketing and it’s becoming increasingly hard to buy a house, but there are many countries around the world that have been hit far harder by the new US economic changes.
Expats are people who have chosen to live outside of their country of origin for any period of time for things like work, study, or just to experience another culture. Expats face problems like learning a new culture or being far away from home. However when speaking about expats for work, those who have relocated abroad while still working for the same company, there are a lot of benefits as well. Workers generally make more money than they would at home and more than the local employees. They also generally have a relocation or housing allowance and other incentives to make the overseas move easier.
Expats, even when they move for work, are oftentimes still thought of as tourists, especially at the beginning of their stay. This is because they have an impact on the city’s economy that cannot be shown through previous studies, as the expat is new to the community. Their money was not in the community before and after the expat officially moves, there will be more money in the economy than before. Expats also tend to have higher amounts of disposable income from the increased remunerations that they can spend in the local economy.
The money doesn’t always go to local companies though. Especially when expats move from the United States, they are used to buying from multinational supermarket brands or large corporations like Amazon and aren’t used to the more local way that most Hispanic countries do business. Small businesses are very important in Hispanoamerica, and therefore expats must get used to this change in culture to truly support the community.
Latin America has increasingly been a popular place for young professionals to move to do work in the technology, finance, and energy industries. There is also a general lower cost of living in Latin America than in the United States which makes the move more attractive. The most popular cities for expats in Latin America are Mexico City, Mexico, Bogota, Colombia, and Sao Paulo, Brazil.
The number of expats or online workers has increased greatly after the pandemic when workers and companies realized they didn’t need to have everyone in the office. This increase and more travel helped stimulate economies, but it also had a lot of negative effects on locals.
For example in Costa Rica, the average price per square meter of a new house in the Central Valley, a particularly popular expat destination, region increased by 7% between 2019 and 2020 because of the increase in expats during 2020, according to a study by the Costa Rican Chamber of Construction. Expats greatly help stimulate the Costa Rican economy, and a report in 2017 by the International Organization of Migration states that expats in Costa Rica spend around $1.3 billion annually which represents 3% of the country’s GDP. However, this increase in housing prices because of an increase in demand is hard for the locals, especially those who may already be struggling to afford housing while the expats continue to make lots of money from online jobs. As housing prices have risen due to expat demands in Costa Rica, locals have found themselves priced out of certain neighborhoods which leads to a loss of community and cultural identity and increased economic inequality. There are also some developers who have focused on building luxury properties to cater to the expats rather than making more affordable and practical housing for locals because of the large demand.
While the presence of expats can bring benefits to a local economy, it’s important for expats to take initiative in their new country like supporting local businesses, being respectful to locals, and getting involved in the community.
The major sociocultural effect is through the changes in cultural practices and traditions. When visitors come, they bring with them new ideas, customs, and new ideas of what is normal or odd. This can lead to a loss of cultural identity or traditional practices.
For example in Guatemala, the country has experienced an increase in Westernization as it sees an increase in tourism. Indigenous languages and religious customs have made their way out while new Western ideas integrate through society. When expats relocate to Guatemala, or any other country, they bring their own traditions with them and replace traditional ones. New friends might pick up on these external traditions and therefore weaken their own traditional practices. Guatemala has also seen a lot of commercialization, since tourists want an “authentic” experience so traditional practices have been commodified and simplified to appeal to tourists.
In addition to the loss of cultural identity, tourism also brings with it environmental impacts and social and economic inequality, as discussed before. Hispanoamerica has seen lots of environmental impacts like pollution, damage to natural habitats and the depletion of natural resources, which impact the country socioculturally since it decreases the availability of certain things. An example of this is the damage to coral reefs in Mexico’s Yucatan Peninsula due to increased tourism activities. People pay lots of money to see the reefs, an activity that might not happen for much longer due to the damage. Mexico is implementing sustainable tourism practices and water treatment programs but it might be too late for the reef, which plays a crucial role in maintaining the health of the ocean.
This idea of promoting sustainable tourism and minimizing negative impacts is extremely relevant in this time period as we see more and more of how the climate crisis is affecting people and places. While scientists knew that tourists were leaving a large footprint behind, it wasn’t especially apparent until the COVID pandemic. The pandemic showed a control group for GDP without tourism, but also showed a control group for the environment in various countries without tourism. The pandemic led to a significant decrease in tourism activity which led to a significant reduction in environmental impacts in many popular tourist destinations. Seeing these places flourish without people made it apparent that tourism needs to be more sustainable.
A positive sociocultural impact of travel can be the official preservation of cultural heritage spaces. With more tourists and people around the country, citizens are more likely to officially turn important spaces into government-protected heritage sights so that they aren’t damaged. The creation of jobs can result in more accessible social mobility because there is a better hierarchy to getting promoted and getting a raise.
All of these sociocultural aspects affect the economy in an indirect way, like consumer behavior. Changes in religion, ideologies, or norms all change how people spend their money or if they’re more likely to spend or save. There is also a political aspect, as ideologies change who you choose to vote for and support and the majority of political decisions have an economic aspect to them.
An example of how sociocultural aspects affect the economy in a Hispano-American country can be seen in any country with a big celebration or festival. For example, the majority of cities in Spain have a large celebration for Holy Week that brings in a large number of domestic and international tourists to participate. It is estimated that around 3 million tourists attend Semana Santa celebrations in Spain each year. The event is a sociocultural event, as it’s based on a religion and it’s a tradition for Spaniards, but the influx of tourists impacts the economy greatly with tourists spending money in cities in Spain.
Tourism is a trillion-dollar industry that affects every country in the world and indirectly impacts the development of various other industries as well. Since the industry has such a wide reach, it’s easy to see how important the sector is to various economies. To be completely beneficial to countries though, the sector must be researched thoroughly. Having the correct research would give a country’s government more information on the details of the economic impacts of tourism like the direct and indirect effects on employment and income while also identifying opportunities for various countries to promote more sustainable tourism and minimize the negative impacts.
There was a lot of research on this topic already, but more research into the patterns and correlation between the economy and travel can be very useful to many different sectors. It can aid policymakers in making more informed decisions about promoting tourism and its related industries. Industry analysts would be able to understand trends and fluctuations more accurately so business owners know when to have a big supply versus a smaller supply based on the number of tourists that season. Environmentally, more research can help the government know what places to protect in their city and identify opportunities for collaboration between private and public sectors to promote tourism and sustainability while minimizing climate problems.
Tourism will continue for centuries to come and will continue to have a grand importance on economies and environments in various countries. To continue growing positively, policymakers should push for more research into the details of tourism so that the economies can continue to develop.
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