Economic challenges and opportunities in Brazil

Economic challenges and opportunities in Brazil Overview of Brazilian economy and the role of industry

Brazil Day – Colorado

Robson Braga de AndradeNational Confederation of Industry (CNI) - Brazil

Brazil is growing, but it is still under its potential

Inequality and poverty have been decreasing

Huge domestic market potential

Manufacturing is under stress

Competitiveness and innovation

Structural changes and trade

The “China effect”

Great opportunity to grow more and better

Main messages

3

Recent economic trends

Industry role

Investment opportunities

Challenges

Strategic Map of Industry

Agenda

Agenda

4

Agenda

Agenda


Industry role


Challenges


5


0.83

0.39

-0.07

0.22 0.180.11

0.37

0.770.63

1.47

I II III IV I II III IV I II

2011 2012 2013

GDP variation over the previous quarter – S.A.

Economic recovery is under way

Source: IBGE

1.150.78 0.87 0.88

-0.03

0.26

-2.36-1.90

-1.44

1.55

4.74

3.59

I II III IV I II

2012 2013

Household consumption and investment (GFCF)Quarter over quarter variation (%) – S.A.

Household consumption Gross fixed capital formation


Consumption gives space to investment in GDP growth

Source: IBGE

Poverty rate is decreasing


Source: IBGE

“Bolsa família” benefited more than14 million households in 2012

Cruzado IPrice freeze

Cruzado IIhiperinflation

“Real” Plan

Increase in “Bolsa Família” program and economic growth


Unemployment rate fell down even with global crisis

Source: IBGE

Brazilian economy is working close to natural unemployment rate

9


Industry role


Challenges


Agenda

Agenda

Brazilian industry profile

Industry role

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

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

Industry role

Technology-intensive industrial exports

• high-technology products (aircraft, pharmaceuticals and IT)

• medium-technology-intensive products (electric and mechanical materials, automobiles and chemicals)

Industry role

36% of Brazilian industrial exports are:

US$ Billion (FOB) – 2009-2011 average

45

34

22

18

41

27 28

15

European Union China EUA Argentina

Exports Imports

China effect?

Source: SECEX/MDIC

Industry role

US$ Billion (FOB) – 2009-2012 average - manufactured

16

2

11

16

39

26 26

12

European Union China EUA Argentina

Exports Imports

A different story for manufacturing trade

Source: SECEX/MDIC

Industry role

15

Agenda

Agenda


Industry role


Challenges


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


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)

Environmental features

Brazil holds 20% of the world’s biodiversity


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

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


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


US$ 1,03 trillionIn investments already anounced by theindustry in the period from 2013 to 2016

Investments for the next four years

Source: BNDES

Investments by sector for the next four years

Sector Estimates (US$ billion)

Oil e gas 405

Aeronautics 10

Steel 28

Chemistry 30

Automobiles 63

Electronics 28

Pulp and paper 30

Textile 14

Others industrial 368

Manufacturing 977

Mining 57

Total 1.033

Source: BNDES

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


Industry role


Challenges


Agenda

Agenda

25

Tax Infrastructure

Labor InnovationEducation

Challenges

Challenges to increase competitiveness

Infrastructure

Agribusiness Aerospace

Pharmaceuticals

EnergyBioeconomy

Challenges: development opportunities

Challenges

27


Industry role


Challenges


Agenda

Agenda

28

MACRO-ECONOMIC

ENVIRONMENT

GOVERNMENT

EFFICIENCY

INNOVATION AND

PRODUCTIVITY

LABOR RELATIONS FINANCING

INFRASTRUCTURE TAXATION

MARKET DEVELOPMENT

LEGAL SECURITY AND RED

TAPE

EDUCATION

• Stability and predictability

• Investment rate

• Access to markets

• Internationalization

• Global value chains

• Sectoral policies

• Regional development

• Predictability of rules

• Court efficiency

• Red Tape reduction

• Environmental licensing

• Basic education • Training of engineers and technologists

• Institutional environment and incentives for innovation• Technological consult. services• Business management

• Management of public spending

• Technical and vocational education and training (TVET)

• Tax load• Elimination of burdens on investments and exports• Simplification and transparency

• Transportation logistics• Energy• Telecommunications• Sanitation

• Bank credit• Stock market• Micro, small and medium enterprises

• Modernization of labor relations• Labor costs


COMPETITIVENESS WITH SUSTAINABILITY

Source: CNI

Thank you

For more information about Brazilian industry go to CNI website

www.portaldaindustria.com.br

http://www.portaldaindustria.com.br/