Insurance and assistance frontier markets in Latin America

Ecuador’s travel hub status

Like neighboring Colombia, Ecuador is a travel hub located between North America, Central America and South America, which has allowed it to organically increase its influx of travelers. However, the market remains relatively small for travel insurance and assistance providers. Two million people visited Ecuador in 2019, a 19% reduction from the previous year’s total of 2.4 million travelers.

Ecuador has significant mineral reserves and has made efforts to improve the investment environment and attract oil and mining investors. However, opportunities outside these sectors continue to be limited by low purchasing power, measured in terms of GDP per capita; this lack of opportunity includes hospitality and tourism. Persistent poverty and income inequality have hampered household consumption growth, even though Ecuador uses the US dollar as legal tender.

In an effort to stabilize inflation and end exchange rate volatility, Ecuador made the US dollar its legal tender on March 13, 2000. However, economic development has been slower in coming, and the lack fiscal support measures for consumers and businesses has caused permanent damage to households. Income. The country recorded 1.5 million outbound travelers in 2018 and 2019, the lowest number of travelers relative to population among the 14 Latin American countries.

Decree No. 1355 stipulates that only Ecuadorian companies duly registered with the national health system can provide medical assistance inside the country.

In 2018, the Ecuadorian government required tourists to show proof of travel insurance when entering the country. The requirement was enacted nationwide in May, but was later restricted to visitors to the Galapagos Islands. Aided by this government requirement, travel insurance and assistance providers could find the opportunity to control their service networks to better manage their investments and take advantage of the country’s existing infrastructure. Although historically poor, the general standards of health services had gradually improved before the coronavirus pandemic. The number of doctors per 1,000 inhabitants has increased from 1.6 in 2007 to around 2.2 in 2020.

Providers should be aware of a 2017 regulation that limits offers of medical assistance in Ecuador. Decree No. 1355 stipulates that only Ecuadorian companies duly registered with the national health system can provide medical assistance inside the country, which increases compliance costs for new and potential providers. The restriction does not apply to Ecuadorian nationals or travelers traveling abroad.

Tourism in Guatemala goes hand in hand with El Salvador

Guatemala’s tourism sector hit rock bottom in the second and third quarters of 2020 and struggled to recover, despite opening its borders to foreign tourists with a negative Covid-19 test result. Guatemala lags behind neighboring countries which have seen a slight upturn in tourist arrivals this year.

El Salvador and Guatemala are each other’s largest tourist markets. This has been disrupted by the pandemic and is unlikely to recover in 2022 as both countries are still grappling with slow vaccine deployment and household income levels that are under pressure due to the slow of economic recovery.

The Guatemalan economy receives large remittances from abroad, particularly from the United States. Travel between the two countries is strong and stable due to the large number of Guatemalan expats coming from abroad, especially during holiday periods.

Guatemala’s relationship with the United States is both a strength and a vulnerability. Guatemalan-born workers who have the right to stay in the United States benefit from labor market improvements there and send money back to the local economy. The recovery in domestic demand and oil prices will boost imports, and external demand for Guatemalan exports will be firm (reflecting the recovery in the United States). However, tourists remain wary of the country’s poor security environment, weak health infrastructure and slow rollout of the Covid-19 vaccine, which means the risk of new waves of infection is high.

The US State Department currently has a Level 4 “do not travel” alert for Guatemala, and tourist inflows are not expected to return to pre-pandemic levels until 2026, according to The Economist Intelligence Unit. Travelers will likely be more cautious than before the pandemic, which will affect arrivals to Guatemala.

The Panama Canal key to tourism

Tourism is a growth engine for the Panamanian economy, alongside construction, transportation and the Panama Canal. From 2015 to 2019, tourism spending as a percentage of GDP was between 10.6% and 11%.

In 2019, before the Covid-19 pandemic, the government launched various initiatives to increase the number of inbound tourists, which had remained static at 1.8 million in the previous two years. A tourism cabinet was formed to coordinate efforts, and Spanish tourism group Globalía was hired to promote Panama in Europe and attract an additional 20,000 visitors a year. The Panama Tourism Authority has also promoted tourism from China by advertising on Chinese social media.

Canadian multinational Scotiabank is a major provider of travel insurance for its credit card customers

Copa Airlines – the Panamanian airline – uses Panama City’s Tocumen Airport as a regional hub and expects to attract an additional 125,000 visitors a year through its Panama Stopover program which incentivizes spending up to a week in the country. The government has also scrapped a 5.5% gambling tax in a bid to attract visitors to local casinos and hotels.

Canadian multinational Scotiabank is a major provider of travel insurance for its credit card customers, a trend that other financial services companies are likely to follow. At the level of international insurers, Assist Card, Universal Assistance, MAPFRE and the Brazilian assistance provider Intermac Assistance are active in the country. Intermac is a notable example of a local travel insurance and assistance provider that is actively expanding its reach in the region.

The infrastructure, tourism and production of the Cobre Panamá copper mine will drive growth in Panama for several years to come. Although private consumption and investment will contribute to the economic recovery, the depth and nature of the Covid-induced recession will hamper growth prospects. Household incomes have been hit hard by the halt in economic activity, which is expected to remain depressed due to sectoral trends (the recovery in tourism will be weak and gradual) and the permanent deterioration of corporate balance sheets. Private consumption won’t fully recover until 2023, according to The Economist Intelligence Unit.

Land tourism is limited, especially between Panama and Colombia, which are not connected by road. The impenetrable jungle region between the two countries is known as the Darien Gap and is one of the most biodiverse regions in the world. However, its dense vegetation has become a backdrop for drug trafficking and migrants heading to the United States.

Leverage existing medical support networks

Universal Assistance and Assist Card are present throughout the region, particularly in the most difficult markets, such as those in Central America. Other notable players in three of the four frontier markets (Costa Rica, Guatemala and Panama) include Spanish multinational MAPFRE and regional banking conglomerate Promerica, which are leveraging their pre-existing networks in the country. Notably, Panama and Ecuador use the US dollar, which in principle could help boost tourism, although this has not been the case in Covid times. Both countries have unique economic environments that affect travel insurance and assistance providers differently.