XVI Committee Meeting ofEconomic Cooperation Brazil-Japan

ECONOMIC SITUATION & PERSPECTIVES

José Augusto Coelho Fernandes Confederação Nacional da Indústria

2

AGENDA

Economic environment

Industry trends

Investment projections

Challenges

Strategic map of industry

3

AGENDA

Economic environment

Industry trends

Investment projections

Challenges

Strategic map of industry

4

Economic environment

Economic recovery is under way

I II III IV I II III IV I II2011 2012 2013

0.8

0.4

-0.1

0.2 0.2 0.1

0.4

0.80.6

1.5GDP variation over the previous quarter – S.A.

Source: IBGE

5

Economic environment

Growth composition improvement

I II III IV I II III IV I II2011 2012 2013

-3-2-10123456

Consumption and investments variation from the previous quarter – S.A.

Household consumption Gross fixed capital formation

Better contribution from investments in

GDP growth

Source: IBGE

6

Economic environment

Inflation pressure is decreasingA

ug/0

9

Oct

/09

Dec/

09

Feb/1

0

Apr/

10

Jun/1

0

Aug/1

0

Oct

/10

Dec/

10

Feb/1

1

Apr/

11

Jun/1

1

Aug/1

1

Oct

/11

Dec/

11

Feb/1

2

Apr/

12

Jun/1

2

Aug/1

2

Oct

/12

Dec/

12

Feb/1

3

Apr/

13

Jun/1

3

Aug/1

3

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%Consumer inflation12 month variation

Non regulated Regulated IPCA

Source: IBGE

7

Economic environment

New pattern for the exchange rateJa

n/0

1

Jul/0

1

Jan

/02

Jul/0

2

Jan

/03

Jul/0

3

Jan

/04

Jul/0

4

Jan

/05

Jul/0

5

Jan

/06

Jul/0

6

Jan

/07

Jul/0

7

Jan

/08

Jul/0

8

Jan

/09

Jul/0

9

Jan

/10

Jul/1

0

Jan

/11

Jul/1

1

Jan

/12

Jul/1

2

Jan

/13

Jul/1

3

1.00

1.50

2.00

2.50

3.00

3.50

4.00Exchange rate R$/US$

49,9% valuation

Lehman Brothers

49,8% devaluation

Source: Brazilian Central Bank

8

AGENDA

Economic environment

Industry trends

Investment projections

Challenges

Strategic map of industry

9

Industry trends

Production with volatilityJa

n/11

Feb

/11

Mar

/11

Apr

/11

May

/11

Jun/

11

Jul/1

1

Aug

/11

Sep

/11

Oct

/11

Nov

/11

Dec

/11

Jan/

12

Feb

/12

Mar

/12

Apr

/12

May

/12

Jun/

12

Jul/1

2

Aug

/12

Sep

/12

Oct

/12

Nov

/12

Dec

/12

Jan/

13

Feb

/13

Mar

/13

Apr

/13

May

/13

Jun/

13

Jul/1

3

122

123

124

125

126

127

128

129

130

131

132

Industrial productionindex 2002 = 100 – S.A.

Source: IBGE

10

Industry trends

Industry operates with idleness

Feb/

10

Apr

/10

Jun/

10

Aug

/10

Oct

/10

Dec

/10

Feb/

11

Apr

/11

Jun/

11

Aug

/11

Oct

/11

Dec

/11

Feb/

12

Apr

/12

Jun/

12

Aug

/12

Oct

/12

Dec

/12

Feb/

13

Apr

/13

Jun/

13

Aug

/13

30

35

40

45

50

55 Efective-usual capacity utilization

Above usual

Below usual

i d l e n e s s

Source: CNIValues above 50 points indicate capacity utilization above usual for that month.Values below 50 points indicate capacity utilization below usual for that month

11

Industry trends

Industry confidence on the rise again

Optimism

PessimismJan11

Fev

Mar

Abr

Mai

Jun

Jul

Ago

Set

Out

Nov

Dez

Jan12

Fev

Mar

Abr

Mai

Jun

Jul

Ago

Set

Out

Nov

Dez

Jan13

Fev

Mar

Abr

Mai

Jun

Jul

Ago

Set

40

45

50

55

60

65

Business confidence

Source: CNI

12

AGENDA

Economic environment

Industry trends

Investment projections

Challenges

Strategic map of industry

13

Investment projections

Investments estimates for 2011-2014

2006-2009 2011-2014 variationin R$ billion in R$ billion in %

1. Total Infraestructure 247 381 54,3%Electric power 104 139 34%Telecommunications 62 72 16%Sanitation 26 41 58%Railways 20 60 200%Road transportation 30 51 70%Harbor 5 18 260%

2. Total Industry 378 603 59,5%Oil and gas 205 378 84%Mining 60 62 3%Steel mill 28 33 18%Chemicals 22 40 82%Vehicles 25 33 32%Electronics 20 29 45%Pulp and paper 18 28 56%

3. Buildings 353 607 72,0%

Total (1+2+3) 978 1591 62,7%

Sectores

Source: BNDES

14

AGENDA

Economic environment

Industry trends

Investment projections

Challenges

Strategic map of industry

15

Tax Infrastructure

Labor InnovationEducation

Challenges to increase competitiveness

Challenges

16

AGENDA

Economic environment

Industry trends

Investment projections

Challenges

Strategic map of industry

CNI estimates

17

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

Strategic map of industryCOMPETITIVENESS WITH SUSTAINABILITY

Source: CNI

18

AGENDA

Economic environment

Industry trends

Investment projections

Challenges

Strategic map of industry

CNI estimates

19

CNI estimates

GDP components Growth rate (%)Contribution

(p.p.)

Holsehold consumption 1,9 1,2

Government consumption 1,5 0,3

Gross fixed capital formation 8,0 1,5

Exports 0,0 0,0

(-) Imports 6,0 -0,8

Agriculture 11,0 0,6

Industry 1,4 0,4

Services 2,2 1,5

GDP 2,4

2013

Demand side

Supply side

XVI Committee Meeting ofEconomic Cooperation Brazil-Japan

ECONOMIC SITUATION & PERSPECTIVES

José Augusto Coelho Fernandes Confederação Nacional da Indústria