The BRIC countries (Brazil, Russia, India and China) with their booming economies and rapidly growing middle class consumers, offer unprecedented and exciting new opportunities for Australian exporters. However, as with any emerging market, they come with risks, challenges and problems which will be unfamiliar and sometimes daunting to companies of all sizes and experience. So, how much do you know about the BRIC countries and their influence on the Australian economy? What are the opportunities? How do you identify and manage the risks? To hear from leading experts on the relevant issues, who can share their on the ground experiences, stories and case studies, come along to learn more about doing business in the BRICs.

1. The toolbox to the BRIC
30 05 2012
In collaboration with:

2. Coface Australia
30 05 2012
Alex Hall, S i C
Al H ll Senior Customer Relationship Manager, Coface Australia
R l i hi M C f A li

3. Agenda
g
Coface, who we are
C f h
Country Risk according to Coface
Coface risk overview: BRIC countries
How to minimize risks and trade safely
3 www.coface.com.au

4. Who is Coface?
● Coface is the 3rd largest credit insurer worldwide, offering companies around the
globe solutions for trade receivables management.
● Direct subsidiaries in 66 countries and able to provide credit insurance and credit
management services in 95 countries via CreditAlliance network.
● Each quarter, Coface publishes its assessments of country risk for 157 countries,
based on its unique knowledge of companies' payment behavior and on the expertise
of its 250 underwriters.
● Common risk system -‘Atlas’, a unique worldwide database which flags payment
incidents in 370 billion euros of trade flows.
● 39 000 clients i credit insurance worldwide
39, li t in dit i ld id
● The manager of the French government export guarantees.
4

5. Coface in Australia
● 2000 Coface entered the Australian market through a managing agent that
underwrote Coface policies on behalf of Coface SA
● 2004 Coface Services Australia was launched.
● 2008 Coface Australia started operating as an APRA authorised local branch, subject
p g , j
to Australian regulatory rules.
● 2008 A Credit Alliance agreement was signed in 2008 with Veda Advantage, our key
information supplier and Easy Number partner.
partner
● 2010 New strategy: Coface Australia focus on its core business Trade Credit
Insurance and maintain relating business lines (Debt Collection and Business
Information) mainly for internal needs within the organisation.
I f ti ) i l f i t l d ithi th i ti
● Direct presence in Australia:
Sydney (h d office) and M lb
S d (head ffi ) d Melbourne
5

6. Coface global offer in credit insurance
Availability in 95 markets
50 countries Coface offers credit insurance directly
45 countries Coface offers credit insurance by using partners to front policies
6 www.coface.com.au

7. Coface global offer in credit insurance
Availability in 95 countries
Europe Europe Middle East Africa Americas Asia-Pacific
West-North-South Central-East / CIS North Africa
Belgium
B l i Austria
A ti Algeria
Al i Benin
B i Argentina
A ti Australia
A t li
Cyprus Bulgaria Bahrain Burkina Faso Brazil Bangladesh
Denmark Czech Republic Egypt Cameroon Canada Brunei
Finland Estonia Iran Chad Chile China
France Hungary Israel Djibouti Colombia Hong Kong
Germany
G Kazakhstan
K kh t Jordan
J d Gabon
G b Ecuador
E d India
I di
Greece Latvia Kuwait Gambia Mexico Indonesia
Ireland Lithuania Lebanon Guinea Panama Japan
Italy Poland Libya Mali Paraguay Malaysia
Liechtenstein Romania Morocco Nigeria Peru New Zealand
Luxemburg Russia Mauritania Senegal United States Pakistan
Malta Slovakia Niger South Africa Uruguay Philippines
Netherlands Slovenia Qatar Sudan Venezuela Singapore
Norway Saudi Arabia Uganda South Korea
Portugal Syria Taiwan
Spain
S i Tunisia
T i i Thailand
Th il d
Sweden UAE Vietnam
Switzerland Yemen
Turkey
United Kingdom
Bold: Coface direct presence
7 www.coface.com.au

8. Coface Country Ratings: BRIC
● The BRIC countries include:
- BRAZIL
- RUSSIA
- INDIA
- CHINA
8 www.coface.com.au

9. Merchandise trade levels by BRIC country
AUSTRALIA
Imports volume Imports Exports volume Exports
(AU$million) growth (%) (AU$million) growth (%)
Brazil 758 20.40% 1,574 70.80%
Russia 370 2.90% 854 45.30%
India 2,083 12.90% 15,742 -2.70%
China 41,109 13% 64,835 39.40%
TOTAL volume of BRIC
trade levels 44,320
44 320 83,005
83 005
Percentage of BRIC trade
levels (%) 20.20% 33.72%
TOTAL volume of trade
levels (world) 218,968
218 968 7.40%
7 40% 246,713
246 713 17.30%
17 30%
Source: Department of Foreign Affairs and Trade 2010/2011
9 www.coface.com.au

10. Country Risk according to Coface
● Country Risk measures the influence of a country macroeconomic
and institutional evolution on companies credit risk
● Country risk assessment
 Assesses the average risk of payment defaults by companies in a given country
 To rate countries, Coface combines economic and political prospects of the country, Coface
payment experience and business climate assessment
 This rating has 7 grades: A1, A2, A3, A4, B, C, D
● Business climate assessment
 Assesses overall business environment and more precisely whether corporate information is
available and reliable and whether the legal system provides fair
and efficient creditor protection
p
 This rating has 7 grades: A1, A2, A3, A4, B, C, D
10 Coface Country Risk Conference 2011

11. BRICs: Risk Assessment
Business
Country Risk Climate
January January January January January March September January
June 2011
2007 2008 2009 2010 2011 2011 2011 2012
Brazil A4 A4 A4 A4 A3 A3 A3 A3 A3 A4
Russia B B B C B B B B B B
India
I di A3 A3 A3 A3 A3 A3 A3 A3 A3 A4
China A3 A3 A3 A3 A3 A3 A3 A3 A3 B
11 www.coface.com.au

12. BRAZIL Risk Assessment: A3
● STRENGTHS
- Scale and potential of the domestic market
p
- Abundant natural resources
- Significant manufacturing industry
- Primary budget surplus
y g p
- Considerable currency reserves (12 months of imports)
● WEAKNESSES
- Dependence on raw materials and foreign capital
- Deficient infrastructures (energy, transport)
- Lack of skilled labour
- Shortfall in household savings rate and high cost of credit
- High taxes primarily devoted to operating expenditures
- Corruption and crime flourishing on inequalities
12 www.coface.com.au

13. Brazil: Overheating is over, not the temptation of
protectionism…….
p
100
80
60
40
20
0
-20
-40
2007 2008 2009 2010 2011p 2012p
Portfolio investments (Bns $)
Net foreign direct investments (Bns $)
Current account balance (Bns $)
13 www.coface.com.au

14. RUSSIA Risk Assessment: B
● STRENGTHS
- Abundant natural resources (oil, gas, metals…)
( ,g , )
- Skilled labour force
- Low public debt and sizeable currency reserves
- Confirmed regional and energy power
g gy p
● WEAKNESSES
- Accentuation of the rentier nature of the economy
- Poor competitiveness of the industrial sector
- Fragile private banking sector
- Poor infrastructure base
- Population decline
- Continuing shortcomings in the business climate
14 www.coface.com.au

15. Russia: Consumers and credit are back!
Consumption and Unemployment Banking Credit Growth
Unemployment rate Annual nominal growth Credit to
80% (%)
14 Private Consumption growth (%, 20 corporates
Crédit to
12 15 60%
Household
10
10 40%
8
5 20%
6
0
4 0%
2 -5
-20%
déc-07
juin-08
déc-08
juin-09
déc-09
juin-10
déc-10
juin-11
0 -10
10
1996
1998
2000
2002
2004
2006
2008
2010
2012
15 www.coface.com.au

16. INDIA Risk Assessment: A3
● STRENGTHS
- Diversified drivers of growth
g
- Solid fundamentals: high savings and investment rates
- Competitive private sector in industry and services
- Moderate foreign debt and satisfactory foreign exchange
g y g g
reserve
● WEAKNESSES
- Lack of infrastructures and deficient educational system
- Skilled labour wage rise threatening to erode competitive
advantage
- Increasing private corporate debt
- Weak public finances
- Persistent uncertainties over the Kashmir question
16 www.coface.com.au

17. India: Financial weaknesses
0% 12%
GDP Growth (%) RH scale
-1% Current account balance / GDP (%) LH scale 10%
-2% 8%
-3% 6%
-4% 4%
100%
-5% 2%
76% 74%
80% 73% 73%
-6% 0% 69% 68% 68%
2006/07 2007/08 2008/09 2009/10 2010/11e 2011/12p 2012/13p
60%
Public debt service / revenue (%) Public debt / GDP (%)
40%
20% 34.6% 35.4% 37.1% 35.6%
32.2% 34.4% 34.5%
0%
2006/07 2007/08 2008/09 2009/10 2010/11e 2011/12p 2012/13p
17 www.coface.com.au

18. CHINA Risk Assessment: A3
● STRENGTHS
- External accounts benefitting from competitiveness and industrial diversification
- Ri k of foreign over-indebtedness li it d thanks to the high level of foreign exchange
Risk f f i i d bt d limited th k t th hi h l l f f i h
reserves and to the current account surplus
- Sovereign risk contained: public debt mostly domestic and denominated in local currency
- Infrastructure development spurred by the stimulus package
- Very high corporate savings rate that funds most investments
● WEAKNESSES
- Growing social tensions linked to mounting inequalities
- Aging of the population and gradual drying up of the pool of abundant cheap labour
- Overcapacity in industry and trade
- Weakness of Chinese banks due to credit dynamism and uncertainty as to the level of
non-performing loans
- Environmental problems
18 www.coface.com.au

19. Will 2012 be a Chinese business-friendly year?
Main risks for Chinese businesses in 2012
35%
Tighter monetary policy and access to credit
30% Higher commodity price and rising inflation
30.1% Intensified domestic competition
Increasing wages & salary demand
25% 26.6%
Large & rapid yuan appreciation
Others
20%
20.1%
15% 15.9%
10%
5% 6.4%
0.9%
0%
19 www.coface.com.au

20. BRICs: Growth is under control
BRICs: GDP growth (%)
8
China 9.2
10.4
7
India 6.9
8.5
3.5
Russia 3.7 2012f
f
4 2011e
2010
3.2
Brazil
Bra il 2.8
28
7.5
0 2 4 6 8 10 12
20 www.coface.com.au

21. How to minimize risks and trade safely
● INFORM: Know who you are dealing with
● INSURE your customers through Trade Credit Protection
 Effective control of bad debts
 Balance sheet protection and cash flow relieve
 Alternative to LCs
 Trade safely in existing and new markets
 Secure increase levels of finance
● MANAGE your debts effectively:
 Directly
 Outsource to b2b debt recovery agency
 Coface TCI includes debt collection services as part of the policy
21 www.coface.com.au

22. Info available: www.coface.com.au
22 www.coface.com.au

23. Coface Country Risk Handbook
Economic review and 2012 outlook
for 157 countries
● Coface assessments
● 2012 outlook
● Economic indicators for each country
● Payment incident trends monitored by Coface
● Payment methods and collection practices
P t th d d ll ti ti
23 www.coface.com.au

24. Coface Australia
Sydney (Head Office)
Phone: +61 (0)2 8235 8600
E-mail: info@coface.com.au
Address: Level 10, York Street
Thank You!
Sydney NSW 2000
y y
Melbourne
Phone: +61 (0)3 9691 7600 Sydney
E-mail: info@coface.com.au Melbourne
Address: Level 18, 600 Bourke Street
Melbourne VIC 3000
www.coface.com.au
24 www.coface.com.au

25. The toolbox to the BRIC
30 05 2012
In collaboration with: