Global Economic growth: how deep will it fall and when will it bounce back?

Global Economic growth: how deep will it fall and when will it bounce back?

2009 BIAC Business RoundtableLisbon - Portugal

Brazil’s PerspectiveJosé Augusto C. FernandesCNI

Global Economic growth: how deep will it fall and when will it bounce back?

Trends in Brazil

Latecomer, buthighly affected

In transition torecovery?

Less impacted thanOECD. More than

India-China

Policies: credit, taxes and housing

construction

Our problems arenow opportunities

Assets to recoverty

Our projections before...the next revision

Global Economic growth: how deep will it fall and when will it bounce back?

Source: OECD & IBGE

GDP real % variation to the same quarter of previuos year

Latecomer

-2-101234567

II III IV I II III IV I II III IV

2006 2007 2008

Euro Area (16 countries) United Kingdom Brazil

in %

Global Economic growth: how deep will it fall and when will it bounce back?

Source: OECD

Industrial production (% variation to the same month of previous year)

Transition to recovery

-25

-20

-15

-10

-5

0

5

10

15

Apr-08May-08Jun-08Jul-08 Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09

Euro Area (16 countries) United Kingdom Brazil

in %

Global Economic growth: how deep will it fall and when will it bounce back?

Crisis impacts in Brazil

Less intense than OECD. But more than India and China Industry production dropped 16,2% (sep-08 to mar-09) Crisis channels:

Credit difficulty (external lines of credit vanished)

Financial low Liquidity

Confidence reduction (both supply and demand side)

Investment

Demand reduction

Deterioration of labor market is still in place

Global Economic growth: how deep will it fall and when will it bounce back?

IOF reduction (tax on financial operations)

Postponed tax collection (PIS/PASEP and Cofins)

Income tax reduction

IPI reduction for the automobile industry

IPI reduction for industry appliances

IPI reduction for some products of construction industry

What Brazilian government is doing

FISCAL

Global Economic growth: how deep will it fall and when will it bounce back?

What Brazilian government is doing

Reduction of reserve requirement ratio (almost to half of it)

Credit Special Program, created by BNDES to finance industrial enterprises working capital

PROEX expansion (export credits)

Interest rate reduction to historical lowest level

Central Bank intervention (buying dollars)

CREDIT

SPECIAL PROGRAM

Construction housing plan – plan to build 1 million subsidized houses for low income people

Global Economic growth: how deep will it fall and when will it bounce back?

Brazilian economy: assets for recovery

International reserves above US$ 200 billions

Lower Brazilian internal debt exposition to currency devaluation

International net creditor (international reserves are higher than external debt)

Banking system is solidly structured

Global Economic growth: how deep will it fall and when will it bounce back?

Financial market is more regulated, ensuring “no exposition” of international toxic assets (subprimes)

Internal demand has been less affected than the demand of most countries

Brazilian enterprises have low indebtedness level

Public debt-to-GDP ratio decreased from 52,4% in 2003 to 36% in 2008

Brazilian economy: assets for recovery

Global Economic growth: how deep will it fall and when will it bounce back?

CNI forecasts

Global Economic growth: how deep will it fall and when will it bounce back?

Relações comerciais Brasil-México

São Paulo

- Abril de 2009 -

www.cni.org.br