Overview of Brazilian economy and the role of industry.

1. Economic challenges and opportunities in Brazil
Overview of Brazilian economy and the role of industry
Brazil Day – Colorado
Robson Braga de Andrade
National Confederation of Industry (CNI) - Brazil

2. Main messages
Brazil is growing, but it is still under
its potential
Inequality and poverty have been
decreasing
Huge domestic market potential
Manufacturing is under stress
Structural changes and trade
Competitiveness and innovation
The “China effect”
Great opportunity to grow more and better

3. Agenda
Agenda
 Recent economic trends
 Industry role
 Investment opportunities
 Challenges
 Strategic Map of Industry
3

4. Agenda
Agenda
 Recent economic trends
 Industry role
 Investment opportunities
 Challenges
 Strategic Map of Industry
4

5. Recent economic trends
Economic recovery is under way
GDP variation over the previous quarter – S.A.
0.83
1.47
0.77
0.63
0.39
0.37
0.22
0.18
IV
I
0.11
-0.07
I
II
III
2011
II
III
2012
IV
I
II
2013
Source: IBGE
5

6. Recent economic trends
Consumption gives space to investment in GDP growth
Household consumption and investment (GFCF)
Quarter over quarter variation (%) – S.A.
4.74
3.59
1.55
1.15
0.88
0.87
0.78
0.26
-0.03
-2.36
I
-1.90
II
-1.44
III
2012
Household consumption
Source: IBGE
IV
I
Gross fixed capital formation
II
2013

7. Recent economic trends
Poverty rate is decreasing
Cruzado I
Price freeze
“Bolsa família”
benefited more than
14 million
households in 2012
“Real” Plan
Cruzado II
hiperinflation
Increase in “Bolsa Família”
program and economic growth
Source: IBGE

8. Recent economic trends
Unemployment rate fell down even with global crisis
Brazilian economy is
working close to
natural
unemployment rate
Source: IBGE

9. Agenda
Agenda
 Recent economic trends
 Industry role
 Investment opportunities
 Challenges
 Strategic Map of Industry
9

10. Industry role
Brazilian industry profile
26% of GDP in 2012
45% of tax burden in 2009
24% of labor market in 2012
24% of labor income in 2012
51% of exports in 2012
Source: IBGE, RAIS/MTE, FIESP and SECEX/MDIC

11. Industry role
Brazil has a diversified and competitive industry
•Number one producer of regional jet planes
• 3rd largest footwear producer
• 3rd largest soft drinks producer
• 5th largest rubber producer
• 3th largest pulp producer
• 6th largest automobile producer
• 9th largest steel producer

12. Industry role
Technology-intensive industrial exports
36% of Brazilian industrial exports are:
• high-technology products (aircraft, pharmaceuticals and IT)
• medium-technology-intensive products (electric and
mechanical materials, automobiles and chemicals)

13. Industry role
China effect?
US$ Billion (FOB) – 2009-2011 average
45
41
34
28
27
22
18
15
European Union
China
Exports
Source: SECEX/MDIC
EUA
Imports
Argentina

14. Industry role
A different story for manufacturing trade
US$ Billion (FOB) – 2009-2012 average - manufactured
39
26
26
16
16
12
11
2
European Union
China
Exports
Source: SECEX/MDIC
EUA
Imports
Argentina

15. Agenda
Agenda
 Recent economic trends
 Industry role
 Investment opportunities
 Challenges
 Strategic Map of Industry
15

16. Investment opportunities
Brazil is a very attractive market
• Brazil is a dynamic and competitive economy
• We are the biggest Latin American economy with huge and growing
domestic market
• There are innumerous investment opportunities that may be done
directly or in terms of joint ventures with Brazilian firms
• The size of the Brazilian market is attractive to investments towards
mass consumption, such as domestic appliances
•Economies of scale allow that Brazil may be used as an export platform
to reach other markets
•Agribusiness is a dynamic sector, where Brazil is highly competitive

17. Investment opportunities
Environmental features
Brazilian Amazon biodiversity is an asset of sustainable opportunities
• The use of its natural resources in a great variety of the industry’s supply
chain such as timber, mining cosmetics, perfumes, food and many others...
• Researches resulting in new applications of
pharmaceuticals, cosmetics, phytotherapy and nanotechnology
• Ongoing possibilities with the clean Development Mechanisms (CDM/FCCC)
Brazil holds 20% of the world’s biodiversity

18. Investment opportunities
Energy
• The share of renewable resource in the global energy matrix
is 14%. In Brazil the percentage is 45%
• 85% of the Brazilian installed capacity is derived from
hydroelectric power plants. The remaining 15% is derived
from thermoelectric plants
The Brazilian hydroelectric potential is 260
thousand Megawatts, 170 thousand of which
are yet to be exploited

19. Investment opportunities
Specialization in ethanol
• Largest producer of sugarcane ethanol
• World’s largest exporter
• Ethanol fuel consumption has a 50% market share
of the gasoline-powered fleet in Brazil
Brazil is focused on creating a
global, standardized and free-trade market

20. Investment opportunities
Pre-salt discovery
• Until 2015, Petrobras will drilling 67 exploratory
wells in the Campos Basin
• Four more oil refineries will be operating in the next
few years

21. Investments for the next four years
US$ 1,03 trillion
In investments already anounced by the
industry in the period from 2013 to 2016
Source: BNDES

22. Investments by sector for the next four years
Sector
Estimates
(US$ billion)
Oil e gas
Aeronautics
10
Steel
28
Chemistry
30
Automobiles
63
Electronics
28
Pulp and paper
30
Textile
14
Others industrial
368
Manufacturing
977
Mining
57
Total
Source: BNDES
405
1.033

23. World Cup 2014 and Olympics Games 2016
• Construction 12 arenas for the World Cup 2014 already added up US$
1,4 billion in signed contracts
• Investments in 13 airports add up US$ 4 billion
• There are 7 ports that are constructed or developed with modern
touristic terminals – investments estimated: US$ 563 million
• The world Cup itself will aggregate US$ 108 billion at Brazilian GDP
through 2019, which means plus 0,4 percentage points in GDP per year

24. Agenda
Agenda
 Recent economic trends
 Industry role
 Investment opportunities
 Challenges
 Strategic Map of Industry
24

25. Challenges
Challenges to increase competitiveness
Tax
Labor
Infrastructure
Education
Innovation
25

26. Challenges
Challenges: development opportunities
Infrastructure
Pharmaceuticals
Agribusiness
Aerospace
Bioeconomy
Energy

27. Agenda
Agenda
 Recent economic trends
 Industry role
 Investment opportunities
 Challenges
 Strategic Map of Industry
27

28. Strategic Map of Industry
COMPETITIVENESS WITH SUSTAINABILITY
MACRO-ECONOMIC
ENVIRONMENT
INNOVATION AND
PRODUCTIVITY
• Stability and
predictability
• Institutional environment and
incentives for innovation
• Technological consult. services
• Business management
• Global value chains
• Sectoral policies
LABOR RELATIONS
• Management of
public spending
• Modernization of
labor relations
• Labor costs
Source: CNI
FINANCING
• Regional
development
• Bank credit
• Stock market
• Micro, small and
medium enterprises
LEGAL SECURITY AND RED
TAPE
•
INFRASTRUCTURE
• Transportation logistics
• Energy
• Telecommunications
• Sanitation
EDUCATION
• Access to markets
• Internationalization
• Investment rate
GOVERNMENT
EFFICIENCY
MARKET DEVELOPMENT
• Basic education
Predictability of
rules
•
Court efficiency
•
Red Tape reduction
•
Environmental
licensing
TAXATION
• Tax load
• Elimination of burdens
on investments and
exports
• Simplification and
transparency
• Technical and vocational
education and training (TVET)
• Training of engineers and technologists
28

29. Thank you
For more information about Brazilian industry go to CNI website
www.portaldaindustria.com.br