Inserção desses países na dinâmica da economia mundial, comparando oportunidades, desafios e riscos de cada um na economia local e global, assim como o potencial de crescimento associado ao comércio internacional e ao mercado interno.

1. Presentation
Cemig Conference:
Bienal da Energia
“The Future of
Emerging Markets”
By
Antoine W. van Agtmael
Chairman and CIO
Emerging Markets Management, LLC
and author of
The Emerging Markets Century
0

2. How the world is changing…
September 27, 2008
In the same week that Secretary
Paulson and Fed Chairman Bernanke
begged Congress for a bail-out package
to avoid a financial meltdown…
1

3. How the world is changing…
September 27, 2008
In the same week that Secretary
Paulson and Fed Chairman Bernanke
begged Congress for a bail-out package …Chinese celebrated
to avoid a financial meltdown… their first space walk
2

4. Crises – then… and now
1994 Mexican Financial crisis
1998 Asian Financial Crisis
2008 American Financial Crisis
This time around, emerging markets are not the problem but
suffered “collateral damage” and may be part of the solution
3

5. At the root of the current financial crisis and
loss of competitiveness
For decades, the US (and the rest of the
“developed world”) have been
over-consuming and over-leveraging
under-investing and under-saving
… emerging markets have been under-consuming
while investing in their infrastructure and
becoming lenders and investors
4

6. A long-term shift makes its power felt
Where is much manufacturing done?
Who has all the money these days?
Where are financial crises originating now?
Who has current account surpluses now?
Where are the budget deficits?
From where do we get our oil and gas?
Where do multinationals see most of their growth?
Who graduates most engineers?
A monumental shift in risks and opportunities
5

7. Quite an evolution in 25 years
25 years ago Remember
Peripheral China: experiments
Poor (“Third world”) Russia: Soviet
Behind India: bureaucratic
Protected Brazil: a mess
Undiscovered
6

8. The 20th century
“West” Emerging Markets
Wealth Debt
Surpluses Deficits
Technology Cheap labor
Innovation Imitation
Infrastructure Poor/few roads, ports,
power plants
The new reality is rapidly changing
7

9. Already 25% of global economy
Global Population Global Economy
15%
25%
75%
85%
Emerging Developed
Source: World Bank Atlas; JP Morgan
8

10. Emerging markets are now as important as the
United States in the global economy
Nominal GDP (US$ trillion)
16 Emerging Markets
14
U.S.
12
10
Euro Area
8 excl. EM
6
4
2
-
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
Source: J.P. Morgan
9

11. Emerging markets in the 21st century
Now central to the global economy, no longer
peripheral
A major factor in commodity prices from oil and
metals to food
“Home” markets have grown exponentially
Emerging multinationals have become active in
acquisitions – not over despite recession
The world is not flat – it is tilting
10

12. Outspending US and Europe on infrastructure
in a major boom
Gross Fixed Capital Investment (US$ trillion)
4.5 Emerging Markets
4.0 …on top of nearly a billion new
3.5 consumers in emerging markets
3.0 within a decade U.S.
2.5
2.0 Euro Area
excl. EM
1.5
1.0
0.5
-
1987 1997 2007
Source: J.P. Morgan
11

13. Emerging markets today
Mobile phones are universal
Emerging markets own 75% of all foreign exchange
reserves
Macro-economic policies are sound
Financial systems are solid
Infrastructure boom not just in China
Catching up fast
12

14. The emerging consumer is not burdened with debt
Household debt/GDP
2007 %
US 100%
UK 110%
Australia 114%
Korea 82%
China 16%
India 17%
Brazil 14%
Russia 10%
Mexico 16%
Source: JP Morgan, Credit Suisse, Morgan Stanley, EMM calculations as of 9/19/2008
13

15. Emerging markets external debt vs. reserves
Reserves
Debt as % of
expressed as
Exports
months of
imports
130 10.0
120
9.0
110
8.0
100
7.0
90
6.0
80
5.0
70
60 4.0
2001 2002 2003 2004 2005 2006e 2007f
Source: Institute of International Finance
14

16. The West is less and less the center of
the universe
1. Less dominant
2. The competitive edge is shifting
A new group of countries – BRICs and
other major emerging markets - are
becoming key players
15

17. Risks have shifted
BRICs (Brazil, Russia, India and China)
Data in US$ billion
1990 2000 2008
GDP 2,255 2,563 8,875
Inflation (%) 594% 5.1% 7.7%
FX Reserves 45 265 3,099
Foreign Debt 359 675 1,360
Reserves/Debt 0.1x 0.4x 2.3x
Current Account -2 +41 +356
Budget Deficit -221 -91 +29
Exports 182 455 2,296
as % of world 6% 7% 15%
Source: JP Morgan, EMM calculations as of 9/19/2008
16

18. How important are the BRICs?
Together over half of the U.S. economy and about half
of emerging economies
This past year, BRIC consumption contributed 1.1% to
global growth, against 0.2% for US consumption
Consumption is only 45% of GDP against over 70% in
the United States
The BRIC consumer saves a lot and has little debt
(although it has grown)
Source: Merrill Lynch
17

19. Resilience of the BRICs is high
Huge foreign exchange cushion
No longer basket cases but good macro-policies
Governments have domestic credibility
Ability to ease and support banks
Room to increase fiscal spending
“Under-consumption” (China”) and low
household debt
Long-awaited opportunity to retool economies
toward health care and “greener” growth
18

20. Emerging multinationals are becoming
world-class
75 of global Fortune 500 from emerging markets
(19 in 2000)
28 from China alone (leads emerging markets)
Potential for many existing “world size” companies to
become “world class”
World class competitors but also potential
business partners
Source: Fortune 500; EMM
19

21. Companies are much bigger
Number of companies with market cap
of $1 billion or greater
1600
1,428
1400
1200
1000
800
600
345 359
400
200 128
8
0
1987 1992 1997 2002 2007
Source: IFC, MSCI, EMM Research
20

22. 25 “World Class” Emerging Multinationals
Not just China or Asia
Asia (14) Latin America (10)
Korea 4 Brazil 4
Taiwan 4 Mexico 4
India 3 Argentina 1
China 2 Chile 1
Malaysia 1
Africa (1)
South Africa 1
21

23. #1 global market share - examples
• memory semiconductors Samsung
• flat screens Samsung
• LNG shipping MISC
• athletic and casual shoes Yue Yuen
• contract manufacturing Hon Hai
• deep sea drilling Petrobras
• regional jets Embraer
• iron ore Vale
• market pulp Aracruz
22

24. We need emerging markets
Emerging markets will lead the way out of
“Great Recession” – crucial to global recovery
Remain net savers and have built up a $5
trillion reserve cushion in addition to $2 trillion
in sovereign wealth funds – can take a blow
Most global growth now comes from emerging
markets
The emerging consumer will need to pull the
world out of the recession
23

25. The future of emerging markets
Current global slowdown:
Largely avoided financial crisis
First-in, first-out of economic crisis
New respect: G-20 instead of G-7
In three years (post-recession):
Stronger: one-third of global economy (vs. 25%)
Much more intra-EM trade and investment
More regional swap lines
24

26. The future: a 10 year perspective
1. One billion new consumers:
Less dependence on the “West”
“Chindia” as important as US or EU
2. BRICs will be among the new G-7 (or 10)
No longer junior partners
Bigger voice in UN, IMF, WTO, G-20
3. Moving away from a carbon-based world
China a leading player in electric cars
Brazil a leading player in biofuels
25

27. The Yin and Yang of the Emerging Markets Century
“We have, at most, 10
years to alter the trajectory
of global greenhouse
emissions.”
--NASA scientist Jim Hansen, July 2006
“If not reversed, environmental degradation threatens
to become a major impediment to economic
development in China and India”
- Der Spiegel
26

28. The future: a 25 year perspective
1. China will be the anchor economy
Replacing the United States
Back to pre-Industrial Revolution times
2. Emerging markets will be over 50% of the
global economy
A tectonic shift
3. R&D will be more broad-based
Mobile access to information globally
Lower-cost, higher share, better education
27

29. The future: 25 years
BRICs outpacing G7 economies
Projected GDP (US $ trillion)
BRICS G7 Emerging Developed
2005 4.2 27.3 8.9 32.4
2030 28.2 43.0 46.8 51.6
2050 90.0 64.2 138.0 77.0
Emerging markets will surpass developed countries in about 25
years and will be nearly twice their size by mid-century
Source: Goldman Sachs for BRICs/G7, EMM calculations for Emerging/Developed assuming
G7/Developed countries will remain stable,BRICS/Emerging will increase, China will slow
down and emerging market currencies will strengthen
28

30. China aggressively expanding R&D spending
R & D as % of GDP (2005)
Japan 3.1
US 2.7
Germany 2.5
France 2.3
UK 1.9
Korea 2.6
Taiwan 2.5
By By
China 1.5
2010 2020
Russia 1.3
Brazil 1.0
India 0.8
South Africa 0.7
Chile 0.7
Mexico 0.4
Indonesia 0.0
0 0.4 0.8 1.2 1.6 2 2.4 2.8 3.2
Source: IMD World Competitiveness Report 2002 and 2005, Fortune Innovation Insider.
29

31. De-railment or
re-emergence?
The American
financial crisis and
its impact on the
future of emerging
markets

32. The headlines got it wrong
1. Not a “global” financial crisis but a half-
global financial crisis
US and part of Europe and Eastern Europe
No bank failures in emerging markets
Strong but temporary effect on trade finance cuts
2. Emerging markets stopped producing before
developed nations stopped consuming
Recovery also earlier
China major engine for recovery
31
31

33. Outlook
- During Q4 the global economy fell off a cliff and emerging
markets were also hard-hit
- Dramatic drops in industrial production in Q408 in Korea,
Taiwan, Russia, Brazil and many other emerging markets
on quarter on quarter basis; now beginning to recover
- “De-stocking phase” now largely over
- Emerging consumer took fright but recovered quickly
- Unemployment in US and Europe is still rising
- Deleveraging will take a long time
- It will take time for world trade to recover
- Global GDP won’t grow as fast in the future
32

34. First in, first out
1. Emerging markets are less leveraged at a
national, corporate and household level
2. For the first time, active counter-cyclical fiscal
and monetary stimulus
3. Exports are not the only growth driver;
production is already stabilizing
4. Policy room to stimulate in Asia, automatic
stabilizers in Latin America (esp. Brazil)
5. Flexible: current accounts remain strong as
imports adjusted as fast as exports dropped
6. Healthy corporate balance sheets: most
corporations have strong balance sheets and
enough cash to weather this storm
33

35. Volatility has come way down again everywhere
125 VIX and EEM Implied Volatility (30D Put Option)
100 EEM Implied
Volatility
43.0
75
50
VIX Index
25 33.0
0
10/25/07 01/26/08 04/28/08 07/30/08 10/31/08 02/01/09 05/05/09
Source: Bloomberg: VIX; EEM IV; 10/25/2007-05/05/2009
34
34

36. Credit default swaps plummeted from panic levels
1100
1000
900
800
700
Russia
600
500
400
Turkey
300
S Africa
200 Korea
100
0
10/31/07 01/31/08 05/02/08 08/02/08 11/02/08 02/02/09 05/05/09
Source: Bloomberg: Oct 31, 2007 – May 6, 2009
35
35

37. Currency devaluations are reversing
20%
10%
Brazil -16%
0%
Russia
-25%
-10%
S.Africa
-18%
-20%
India
-21%
-30%
Korea
-27%
-40%
12/31/07 02/18/08 04/07/08 05/26/08 07/14/08 09/01/08 10/20/08 12/08/08 01/26/09 03/16/09 05/04/09
Source: Bloomberg; 12/31/2007-05/05/2009
36
36

38. Freight rates remain low but are up from bottom
350 Up 306%
300
250
200
-82%
150
100
50
0
-50
-100
09/30/05 03/13/06 08/24/06 02/04/07 07/18/07 12/29/07 06/10/08 11/21/08 05/04/09
drop…
As exports slow and commodities drop…
Source: Baltic Freight Index, Bloomberg; Sept 2005- May 6,
2009
37
37

39. Metals have bounced back from the bottom
150
125 Metals
100
75 Commodities
50
25
0
09/30/05 03/13/06 08/24/06 02/04/07 07/18/07 12/29/07 06/10/08 11/21/08 05/04/09
Source: Bloomberg CRB Index; Sept 2005- May 5, 2009
38
38

40. Less concern that oil will go to $30 or lower
% increase
500
450 $147
400
350
300
250
200
150
100 $55
50
0
09/30/03 11/12/04 12/26/05 02/08/07 03/23/08 05/06/09
Source: Bloomberg: Brent Crude Spot September 30,2003 through May 6, 2009
39
39

41. The impact of the crisis
1. Big earnings decline in emerging markets in 2009
2. Only 2% economic growth (little growth ex-China) in 2009,
turnaround in Q2, recovery (4-5%) in 2010
3. Recession (-2%) in US/EU/Japan but recovery in 2010
4. 1% slower growth pace in developed and emerging markets
over coming decade
5. Larger share of global consumption in emerging markets as
consumers in US/EU deleverage
6. More government-led investment, less business investment
over next 1-3 years
7. After steep fall, uptick in metal and oil prices
40
40

42. Up 50% since October 2008 bottom and 41% better than the
developed markets (EAFE)
50
40 MSCI IMI Net
+50%
30
20
10
0
-10 MSCI EAFE Net
+9%
-20
10/24/08 11/17/08 12/11/08 01/04/09 01/28/09 02/21/09 03/17/09 04/10/09 05/04/09
Source: MSCI Net: IMI, EAFE; Oct 24, 2008 – May 5, 2009
41
41

43. re-emerging”
Emerging markets are “re-emerging”
500
450 ..Emerging markets gave back all of their
.. +470%
gains of the past three years but still
400 made more money longer term
350
…while developed -43%
MSCI EM Net
300 markets have done much
worse longer term and
250
recently
200
150
MSCI EAFE Net
100
50
0
09/30/02 01/16/06 05/04/09
Source: MSCI Net, EAFE Net; Sept 30, 2002 – May 5, 2009
42
42

44. Since their peak, emerging markets moved in line
10
with EAFE (and did better than Europe)
0
-10
-20
-30
-40 MSCI EAFE Net -
44%
-50
-60
-70 MSCI IMI Net -
43%
-80
10/24/07 12/25/07 02/25/08 04/27/08 06/28/08 08/29/08 10/30/08 12/31/08 03/03/09 05/04/09
-90
-100
Source: MSCI Net: IMI, EAFE; Oct 24, 2007 – May 5,
2009 43
43

45. …and this year they continue to outperform
30
25
20 MSCI IMI Net +26%
15
10
5
0
-5
-10
-15
MSCI EAFE Net -
0.1%
-20
-25
-30
12/31/08 01/31/09 03/03/09 04/03/09 05/04/09
Source: MSCI Net: IMI, EAFE; Dec 31, 2008 – May 5, 2009
44
44

46. Unprecedented intervention
A foundation has been built for ultimate
recovery
1. Determination to save systemic banks
2. Serious fiscal and monetary stimulus
3. Emerging markets participated for the first
time and now have seat at the table (G-20)
45

47. Is the future rosy or scary?
Fiscal and monetary stimulus will promote confidence
and put the world back on a growth path later in 2009
Even in serious recessions negative growth moderates
after “destocking”
Not only the crisis but also fiscal stimulus is
unprecedented for many decades
A new burst of innovation is required to stave of
environmental gridlock – solar, batteries, LED, new
materials
Crises typically spur innovation
46

48. Turnaround: a sharp come back
1. Deeper but faster than expected
- Great recession but not great depression
2. Markets always get worse than anyone expects in a
downturn
- When the financial system suffers from cardiac
arrest, investors have a collective nervous
breakdown
3. “Hot money” reversal is mostly behind us
4. Markets typically turn around before the economy
improves and do so suddenly
- There is now upside as well as downside risk
47
47

49. How good are the alternatives?
1. U.S. superpower status has suffered
…over-extension, financial crisis and the rise of new powers
…crises can no longer be resolved by national or even G-7 actions – a
globalized world requires global action plans
2. U.S. no longer has unquestioned credit standing
…more dollar volatility
…Middle East and other “new rich” will invest more in other emerging
markets
3. American consumer is no longer king
… years of over-consumption and over-borrowing need to be adressed
…one billion new consumers over next decade
4. Europe has its own problems
Investors must get used to big new realities
48

50. The world has changed
Emerging markets will be the right place to
be over the next decades
… as opportunities and risks have shifted
… as they continue to benefit from a dramatic tilting in the
global economy
… as they come out of the current crisis and slowdown
faster and stronger
We are entering
The Emerging Markets Century
49

51. END
50