Visiting friends and relatives tourism: the case of Uruguay

Resumen

In this paper, we analyze Uruguayans living abroad that visit Uruguay for their holidays,
what in the literature is called Nostalgic tourism or Visiting friends and relatives (VFR) tourism.
Several studies point Uruguay as one of the South American countries with the largest
proportion of its population living abroad. In addition, tourism is a very important economic
activity in Uruguay. Visitors from Argentina have been always the majority in the Uruguayan
inbound tourism. During 2017 in Uruguay 68% of total tourists were Argentinians, 12,5%
Brazilians, and 8% VFR tourists. This last share was near 16% during the first decade of this
century and even higher in the XXth. century.
We analyze and estimate the VFR tourism demand in Uruguay, and compare it with
Argentinian tourist demand, since the majority of VFR tourists live in Argentina (64%). After
characterizing VFR tourists, we apply Johansen methodology and built four models: two for
VFR tourism and two for Argentinian tourism, considering monthly data for the number of
tourists and quarterly data for tourists’ expenditure.
Applying Johansen methodology, we found at least one Vector error-correction model
(VEC) equation for each model considered. In the first two models (taking into account
the number of tourists), the elasticities (income and prices) were smaller for VFR tourists
compared with Argentinian tourists, meaning that the number of VFR tourists react less to
changes in income or relative prices than Argentinians. But in the case of tourists’ expenditure,
the result was the opposite, with VFR tourists responding more to changes in prices or
income than Argentinians. Impulse response functions show a greater reaction of Argentinian
tourists to changes in relative prices, but similar in the case of an income shock. Finally,
forecasts show a good adjust of the forecast to actual data.