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FRANOIS DOSSA - July 2009
Brsil, le pays du prsent
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Table of contents
About Brasil
3
02
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By 2019 emerging countries should account for more
than half of the worlds GDP
Share and forecast of emerging countries and developedcountries in the global GDP - 1989 2019
4
03
1989
1990
1991
1992
1989
1989
1993
1994
1996
1995
2000
1999
1998
1997
2003
2002
2001
2007
2006
2005
2004
2011
2010
2009
2008
2015
2014
2013
2012
2019
2018
2017
2016
30,0%
35,0%
40,0%
45,0%
50,0%
55,0%
60,0%
65,0%
70,0%
Assumptions based on GDP growth
Developed growth: 2.52%
Emerging growth: 6.92%
Global Growth 2013-2019: 4,7%
36,77%
36,17%
36,44%
37,13%
37,30%39,52%
42,54%
46,26%48,20
53,35%
56,80%
63,23%
63,83%
63,56% 63,12% 62,13%
57,46%
53,74%
43,94%45,84%
49,89%
Emerging
Developed
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The weight of BRIC countries in the global GDP
Share of US and BRIC countries in the global GDP (in %) 1995-2009
5
20.06%
21.88%22.32%
22.99%22.98%
23.61%23.23%
20.49%
19.69%
15.28%
16.54%15.07%
0.1
0.12
0.14
0.16
0.18
0.2
0.22
0.24
0.26
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
EUA BRIC
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Nominal GDP > 800 billionof US$
Population > 100 millionArea > 4 million km
Brasil, playing in the big league
05
Indonesia
Nigeria
Bangladesh
Pakistan
India
Mexico
France
Japan
Germany
Italy
UnitedKingdomSpain
South Korea
Canada
Australia
Russia
USA
Brazil
China
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Brasils Main Economic Features: a great market
Total population
Area
GDP per capita
Population growth
8,514,876 km2
World's 5th
largest
194,227,984World's 5th largest
1,4 % in 2008
USD 6,937
Literacy rate 89.35%
Source: IBGE
Fertility rate 2009: 1.8 children / women in the ageof procreationFertility rate in 1960: 6 children / women in the ageof procreation
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Brasil: feeding the world?
Sugar
20.3
5.5
3.5
M tons
Coffee
24.6
18.5
10.6
M 60 kg bags
Iron Ore
342
268
85
M tons
Soybean
33.7
26.2
7.4
M tons
Orange Juice
1.2
0.1
0.05
M tons
Poultry
3.5
3.3
0.7
M tons
Beef
1.801
1.407
625
K tons
Tobacco *2007
0.7
K tons
Ethanol
5.2
Billion Liters
June, 2009
08
Exports
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Brasils Main Economics Features:
also a Leader in the Industry
Power100,449 MW installed capacity
Itaipu: Worlds largest hydroelectric plant in installed capacity(12% of the global hydric resources).
Brasil has a non-neglectable nuclear potential, and is consideredthe 6th worldwide producer of uranium (300.000T).
AviationEmbraer:Among the worlds 3 largest aircraft manufacturers
Pulp and PaperWorlds 4th largest producer and among thebiggest exporters
ShoesWorlds 3rd largest exporter
Telecom43.5 million installed fixed lines154 million mobile phonesHandsets: Worlds 2nd producer
Auto Industry2009 Production (Jan-April) 917 thousandvehicles5th worldwide largest manufacturer
OilPetrobrs ranks among top 3 worldwide marketcapitalization.
Tupi reserves = 30 billion barrels.
MiningVale:Worlds 2nd iron ore largest producerMarket value: US$ 101 billions
Brasil is the 8th steelmaker and one of the biggestmining producers with large corporations likeGerdau, Usiminas, CSN...
IndustryBrasil has 13 of the 100 future global leaders in their respectivefields (WEG, VALE, COTEMINAS, GERDAU, NATURA, BRFOODS,etc.)Global positioning in growing sectors in which the global supply islower than the demand in the long-term
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90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
125110 121 109 111
151
203
297
349Historical average
204
9Source: MDIC 6
Metal commodities price index 1990-2009 (2008 YTD)
June 2009
394
09
S
ource:BradescoandFMI
10
104 10199116
09080706050403020100999897969594939291
9498
90
Historical average
8581
85 8689 98
122102
8371 72 73
8390 100 89103
153
209
155
Agricultural Commodities Price Index Grains 1990-2009 (2008 YTD)
Commodity prices still above historical average helping
the trade surplus
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Positive FDI evolution
Source: BCB 10Source: MDIC 6
A new level in 2008 showing the strong interest of MNCs
10.000
30.000
50.000
70.000
ChinaBrasil
45,000
54,000
34,585
18,82215,06618,14610,144
2x
Rssia ndia
20086,500 15,000
2008 2008 200820072006200520042003
**estimate 2009
Source: MCM/Veja Magazine
2009
25,000**
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Source: IBGE
Unemployent under control
12
12,5
8,5
10,5
6,5
Sep/06Mar/05 Sep/05 Mar/06 Mar/09Sep/08Mar/08Sep/07Mar/07
Mar/200510,8% Mar/2008
10,4%
Dec/2008 6,8%
Mar/20099,0%Mar/2008
8,6%
Mar/2007
10,1%
May/2009
8,7%
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Inflation: not an issue anymoreBrazilian government elected inflation as focus number one in its economical policy.
Central Bank used interest rates to maintain inflation within the target.
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What are the main advantages in reducing interest rate
(1/2)Annual monthly average of Brazilian interest rate
Dec/09Jan/07Mar/05May/03Jul/01Sep/99Nov/97Jan/96
10
5
0
33,8%
9%
13,1%
19%
26,3%
18,6%19,4%
45,9%
15
20
25
30
35
40
45
50
Source: IBGE
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15
1989 1994 1999 2004 2009 2011
29,132,7
26,3 23,6
45,6
90
Increase of the credit total offer Evolution of infrastruture investment in Brasil
2001 2003 2005 2007 2009 2010 2012
3317
37
52
7982 89
2008 2009
162
134
% on GDP Billion R$
Billion R$
Reduction on public debt cost
What are the main advantages in reducing interest rate
(2/2)Increase of individuals at Bovespa
2005
2007
2009
2013
155.183
456.557
519,057
1 million
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New discoveries should increase Brazilian reserves upto 90 Bn boe and put Brazil in the top 7 producingcountries
Petrobras is the main player in this sector
3rd largest energy company worldwide (by Market Cap)
Global leadership in deepwater drilling
Brasil: A new energy giant?Oil & Gas
Brazilian self sufficiency in oil production was
achieved in 2006 (1.8 MM bbl/day)
Petrobras is investing in ethanol. In 2007 ethanolconsumption overcame gasoline consumption in Brazil
1114Source: MDIC 6Source: Bloomberg; of 06/2009
Petrobrs Capex: 142 Billion USD in 4 years.
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MARKET CAP(USD BN)COMPANY
2009
RANKING
1
2
3
4
5
6
7
8
9
10
Petrochina
Exxon Mobil
Petrobras
Royal Dutch
Total S.A
BP
Grazprom
Chevron
China Petroleum $118,50
$139,10
$146,78
$162,70
$163,66
$174,95
$181,37
$352,76
$361,99
BHP Biliton$157,31
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The Demographic Transition: an historical opportunity
Wealthier consumers seeking more comfort.
A rising household consumption.
Emergence of a middle-class.
19802020 2050
Men Men MenWomen Women Women
60 years old
60 years old 60 years old
15 years old15 years old 15 years old
50 million new producers and consumers.
121 million people 209 million people 250 million people
The evolution of total population gives Brasil 30 years of guaranteed growth.
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Explosion of the medium class: 97,2 million people in
2008Income increase boosting consumption
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
12
%
15
%
4
3%
54%
45%
31%
2002 2008
Class A/B Class C Class D/E
Increase of themedium classReductionof poverty
Source: Veja 12Source: MDIC 6Source: FGV Ago 2008March 2008
Source: Veja Magazine
Source:CPS/FGVbasedoninformationfrom
PME/IB
GE
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Credit expansion further leveraging consumptionTotal credit and credit/GDP growth
0
2006 2007 2008
Credit Volume BRL MM
0
5
10
15
20
25
2005 2006 2007 2008
Credit/GDP Ratio (%)
30
35
40
28.1 30
.834.7
37.7
200.000
400.000
600.000
800.000
1.000.000
498,3
660.8
10
523.8
96
13Source: MDIC 6
1.200.000
660,8
871,9
2005
403,7
40.2
41.3 4
4.0
2009
February 2009
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Brazil
Chile
frica do Sul
Holanda
EUA
0.0
50 %
100 %
150 %
200 %
250 %
40%
63%
141%
166%
249%
Source:VejaMagazine
Low Risk: Brazils percentage of loans is low compared to other economies.
March, 2009
Brasils Percentage of Loans: nothing to worry about
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0.0
100
200
300
400
500
600
Brasil
Russia
Before Crisis Before CrisisAfter Crisis After Crisis
2
05
20
9
581
404
Brasils Foreign Reserves: no impact of the crisis
* Billion dollars
Source:BloombergandBCB
Brasil slightly increased foreign reserves since the beginning of the crisis inSeptember, 2008.
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WellsFargo
HSBCBank ofAmerica
UBS
GoldmanSachs
BNPParibas Bradesco
JPMorgan
CreditSuisse
SocieteGenerale RBS
Citigroup
MorganStanley
Barclays
DeutscheBankk
155117 86
714244
49
36
70
16
29
Itau &Unibanco
74
215
36
118216
100
108 101 7550 116 76
49
120
255
165
54
Market Cap 2Q 2007
Market Cap 06/01/2009 USD Bi
29
BB +Votorantim
136
Santander
91
116
Brazilian Banks among the Global Players
19
80
3637
91
23
39
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Brasil the best of emergents in 9 of 15 criterias (1/2)
2 3 51
Brasil
Rssia
ndia
China
Mxico
3,22
2,86
2,89
3,08
2,86
1 2 3 54
Brasil
Rssia
ndia
China
Mxico
3,29
5. The best telecominfrastructure
4
2,88
3,14
3,01
2,67
Brasil
Rssia
ndia
China
Mxico
1 2 3 4 5
3,43
2,77
2,62
2,94
3,23
1. Highest rate of return overthe last 5 years
2. The best in businessopportunities in the next 5 years
Research conducted by Exame Magazine with 69 of the world's largest companies, listed in the ranking of the Fortune 500.
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3. Executives well prepared4. Best quality of staff withintermediate educational level
Brasil
Rssia
ndia
China
Mxico
3,38
2,86
2,96
2,83
2,99
1 2 3 4 5
Brasil
Rssia
ndia
China
Mxico
1 2 3 4 5
3,28
2,97
2,78
2,90
3,07
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Brasil the best of emergents in 9 of 15 criterias (2/2)
8. The most reliable politicalsystem
9. Most social and politicalstability
7. Best level of economicstability
6. Best natural resources
Rssia
ndia
China
Mxico
Brasil 3,57
1
Brasil
Brasil Brasil
Rssia
Rssia
Rssiandia
ndia
ndia
China
China
China
MxicoMxico
Mxico
3,01
2,65
2,9
2,87
2 3 4 5 1
1 1
2
2
3
3 32
4
4 4
5
5 5
3,23
2,86
2,99
2,83
3,1
3,42
2,99
2,81
2,52
3,26
3,36
2,81
2,78
2,88
3,16
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Brasil: Risk today is much more on microeconomy
An important informal economy is remaining:
Tax evasion, forgery, smuggling.
26
And Brasil has to invest in education.
Firms penalized by deficits in infrastructure.Ports, airports, roads, public transportation.
... And by a blurred sectorial regulatory framework.Weakness of the sectorial regulation agencies.
A high tax pressure (more than 37% of the GDP).
Many heavy and rigid regulations.Labour law, firm creation procedures.
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Growing capital flows
Financing cost proportionally lower
New target for foreign investments
Brasil: the future is today!
Three important consequences:
40
30
20
10
0
-10
-20
-30
-40
-50
1999 2000 2001 2002 2003 2004 2005 2006 2007
___USD Dbn
Inflows Outflows Net flows
Foreign Direct Investment Flows
Source: D & B Country report
27
50
2008
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Macroeconomy: 15 years of continuity make the
difference and inspire confidence!
No specific worry about 2010 election.
Growing independence of the economic and political sectors.
Emergence of a financial orthodoxy : inflation targeting , reducing external vulnerability,recovery of public finances.
Broad consensus on an economic policy sustaining growth.
A country in which market share is still affordable.
And...
No specific social or racial conflict in the country.