#1DEREX Department of Trade and Foreign Affairs BRAZILIAN ECONOMIC OVERVIEW FIESP CIESP#2INDUSTRY SYSTEM FIESP Represents 131 sector business associations which stands for about 130.000 state and national firms CIESP 42 regional offices throughout the state which represents about 10.000 associated firms IRS Roberto Simonsen Institute BRAZILIAN ECONOMY OVERVIEW Think tank specialized in industrial issues FIESP CIESP SES SEMAI#3INDUSTRY SYSTEM SESI 172 basic schools and more than 500.000 children. youth. adults and elderly people Provides industrial employee's families with social services. mainly education. culture. sports and health 171 technical schools and SENAI almost 800.000 students registrations Promotes professional education through technical schools providing qualified workforce to the industry BRAZILIAN ECONOMY OVERVIEW SEN OWN STOR Aviônicos Mobile School#4Federation of Industries of the State of São Paulo FIESP Regional Action Human Capital Competitiveness and Technology Economy Entrepreneurship Infrastructure and energy Foreign Affairs ➤ Legal Division Environment Small and Medium Companies Union and Labor Issues Social responsibility SCOPE DEREX • FOREIGN RELATIONS. TRADE AND INVESTMENT PROMOTION; INTERNATIONAL NEGOTIATION AND TRADE ECONOMIC RESEARCH; • TRADE REMEDIES; TRADE FACILITATION; • CERTIFICATE OF ORIGIN; BRAZILIAN ECONOMY OVERVIEW#5Brazilian Economic Growth drivers in the first decade of the 2000s ✓ Macroeconomic Balance: fiscal balance. stable inflation and trade surplus; ✓ Social Inclusion: credit and wage growth; ✓ Foreign Trade: agricultural and mineral commodities well performed; ✓ Infrastructure: renewable resources as base for the energy matrix; BRAZILIAN ECONOMY OVERVIEW The Economist OVER 36TH-20TH 2009 Economist.com The decline of music piracy Nigeria gets better Farmers v greens in America How drugs are being decriminalised Bland bosses Brazil takes off A 14-PAGE SPECIAL REPORT ON LATIN AMERICA'S BIG SUCCESS STOL The Economist cover on September the 28th, 2013.#6Brazil GDP per capita GDP per capita, PPP (current international $) (1.000 US$/year) 14.1 15.8 15.5 13.2 13.5 9.0 9.2 8.7 7.9 2.9 14.9 12.8 Brazil China Latin America and the Caribbean World 2000 2010 2014 Source: World Bank BRAZILIAN ECONOMY OVERVIEW#7Production Exports Brazil| Agribusiness: position in global ranking Orange Juice Sugar Coffee Beef Soy Complex Chicken Corn Pork 1º 1º 1º 1º 1º 1º 2º 4º 74% 46% 29% 21% 41% 34% 16% 8% 1º 1º 1º 2º 2º 3º 3º 4º 55% 27% 36% 17% 31% 15% 8% 3% Source: USDA (March 2015); DEAGRO/FIESP BRAZILIAN ECONOMY OVERVIEW#8Brazil | Production of grains. 1.5 58 38 16/06 91/92 Area (million hectares): +53% -O-Production (million tonnes): +261% 92/93 93/94 94/95 95/96 96/97 97/98 66/86 99/00 00/01 01/02 02/03 03/04 04/05 05/06 Productivity (tons/ha): + 136% Source: Conab (August 2015) and DEAGRO-Fiesp. (*) Note: estimate of Brazilian production for 2014/15 BRAZILIAN ECONOMY OVERVIEW Zo/90 07/08 60/80 09/10 10/11 11/12 12/13 vv/£u 58 14/15* 3.6 209#9Brazil Trade Flow: main partners 2000 2014 Country Part. Country Part. United States 23.7% China 17.2% Argentina 11.9% United States 13.7% Germany 6.3% Argentina 6.3% Japan 4.9% Germany 4.5% Italy 3.9% The Netherlands 3.6% France Netherlands 3.3% Japan 2.8% 3.2% South Korea 2.7% United Kingdom 2.5% India 2.5% Mexico 2.2% Nigeria 2.3% Belgium 2.1% Italy 2.3% Subtotal (top 10) 64.1% Subtotal (top 10) 57.7% Total 100.0% Total 100.0% Source: Ministry of Development. Industry and Trade (1) Main logistics hub of Europe BRAZILIAN ECONOMY OVERVIEW#10Brazil | Foreign Investment Main Investors 2015 (jan-aug) Annual net inward FDI (US$ billion) 17.1% 66.7 NLD1 65.3 64.0 62.5 16.0% ESP 12.6% 35.5 USA 5.2% FRA 2012 2013 2014 2015¹ 2011 Source: Central Bank of Brazil (1) Europe's main logistics hub (2) January to August 2015 BRAZILIAN ECONOMY OVERVIEW 4.5% JAP#11Brazil | Energy Matrix Non-renewable Energy Renewable Energy 1% Nuclear Energy Mineral coal 6% 4% Other 8% Firewood 13% 59% 41% Natural gas 13% Hydraulic 39% Oil Source: Brazil's Mines and Energy Ministry (2014) BRAZILIAN ECONOMY OVERVIEW 16% Sugarcane#12In spite of the improvements in the past years, the obstacles to the productive sector persist. Tax Burden costs bureaucracy Labor Relations costs legislation Cost of capital Labor Skilled Labor Infrastructure: logistics + energy Pension CUSTO BRASIL The new face of terror The Economist Obama's Iran gambit The Breaking Bad school of business On the edge of the helium cliff E-cigarettes: don't stub them out Has Brazil blown it? A 14-page special repo Political System The Economist cover on September the 28th, 2013. BRAZILIAN ECONOMY OVERVIEW#132004 BRAZILIAN ECONOMY OVERVIEW 2005 Brazil | GDP Growth Annual GDP growth rate (% YoY) 5.7 4.0 6.0 bull 3.2 2006 2007 Source: Central Bank of Brazil (1) Forecast: International Monetary Fund (IMF) 2008 2009 2010 -0.2 2011 7.6 5.0 3.9 2012 2013 2014 1.8 2.7 -3.0 0.1 -1.0 2.3#14Brazil | Investment (GFCF) Investment rate (Investment as % of GDP) 21.8 21.8 21.8 21.0 20.0 20.3 20.0 19.0 18.0 18.0 18.0 17.4 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015¹ Source: International Monetary Fund (1) Forecast: IMF BRAZILIAN ECONOMY OVERVIEW#15Brazil | Cost of capital and Industry Target interest rate (SELIC) and Industrial capacity utilization (NUCI) % change YoY 15 14 13 12 11 10 8 9676 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 NUCI Source: Central Bank of Brazil; National Confederation of Industry (CNI) BRAZILIAN ECONOMY OVERVIEW % of total installed 83.5 14.25 82.5 81.5 80.5 79.5 78.5 77.5 76.5 75.5 74.5 Apr-15 Jun-15 Aug-15 ⚫SELIC#16BRAZILIAN ECONOMY OVERVIEW Portugal 19.8% Australia 19.9% Canada 20.0% Finland 20.4% 21.7% Germany Netherlands Fonte: Bureau of Labor Statistics; Conference Board (2013) Brazil | Labor Labor Benefits and taxes (% of total manufacturing labor costs) 22.2% Greece 23.1% United States 23.9% Hungary 23.9% Spain 25.8% Austria 26.0% Estonia 26.1% Czech... 26.5% Slovakia 27.1% Italy 29.0% Mexico 30.4% France 30.4% Sweden 30.4% Brazil Belgium 31.9% 32.2%#1770 95 120 170 Brazil | Production and Sales Industrial production and Retail sales (2007=100) 145 BRAZILIAN ECONOMY OVERVIEW Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Industrial Production Source: Brazilian Institute of Geography and Statistics (IBGE) Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 IMPORTS 154.29 Aug-13 Retail Sales Feb-14 Aug-14 Feb-15 Aug-15 96.77#18Brazil | Trade Balance Trade balance by product categories (US$ billion) 90.4 84.2 79.7 78.0 66.2 52.9 41.4 43.2 Basic 29.8 21.0 23.1 16.2 Semi- 5.2 8.4 5.1 -9.2 -39.8 -36.5 -71.2 -91.8 -94.0 -104.3 -109.4 Manufactured -60.7 Manufactured 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015¹ Source: Ministry of Development, Industry and Trade (MDIC) (1) January to September 2015 BRAZILIAN ECONOMY OVERVIEW#19Brazil | Exports agenda 2000 Product Airplanes 2014 Part.(%) Product 6.2 Iron ores and concentrates Part.(%) 11.5 Iron ores and concentrates 5.5 Soybeans, whether or not broken 10.3 Soybeans, whether or not broken 4.0 Petroleum oils 7.3 Passenger car 3.2 Raw sugar 3.3 Transmitter or receiver devices 3.2 Soybean bran 3.1 Soybean bran 3.0 Frozen chicken meat 3.1 Chemical wood pulp 2.9 Coffee beans 2.7 Coffee beans 2.8 Frozen beef 2.6 Footwear and its parts 2.8 Chemical wood pulp 2.4 Semi-finished products of iron or steel 2.5 Corn 1.7 Subtotal (top 10) 36.1 Subtotal (top 10) 47.9 Total 100.0% Total 100.0% Source: MDIC BRAZILIAN ECONOMY OVERVIEW#20Brazil | Openness of the economy Economic openness of Brazil (US$ billion and % of GDP) 600 500 400 300 200 100 30% 25% 374.3 21% 20% 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015¹ Openness of the economy Trade flow Source: MDIC (1) Forecast: FIESP and IMF Note: Openness of the economy is the ratio of country's total trade to the country's gross domestic product. BRAZILIAN ECONOMY OVERVIEW 15% 10%#21Brazil | Trade Balance Brazilian trade balance (US$ billion) 300 250 200 150 100 44.9 46.5 50 40.0 33.8 25.0 25.3 29.8 20.1 19.4 11.5 2.6 0 -50 -4.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015¹ →Exports Imports Trade Balance Source: MDIC (1) Forecast: Fiesp - September 2015 BRAZILIAN ECONOMY OVERVIEW#22Brazil | Current Account Current account evolution (as % of GDP) 0.75 1.76 1.58 1.25 0.11 -1.49 -1.71 -2.2 -2.12 -2.41 -3.62 -4.05 -4.19 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Central Bank of Brazil (1) Forecast: IMF Nota: Current account consists of regular transactions with the rest of the world 2012 2013 2014 20151 BRAZILIAN ECONOMY OVERVIEW#23Brazil | International Reserves. 193.8 180.3 International reserves (US$ billion) 238.5 288.6 373.1 368.2 358.8 361.4 352.0 2007 2008 2009 2010 2011 2012 2013 2014 20151 Source: Central Bank of Brazil (1) January to September 2015 BRAZILIAN ECONOMY OVERVIEW#24CHALLENGES FOR THE INTERNATIONAL INDUSTRY AGENDA Regional Integration: MERCOSUR's development and bilateral agreements with other Latin American countries (Peru, Colombia); ✓ Extra-regional Integration: to reach agreements with countries with high technological development (United Stated, European Union e Japan); ✓ Multilateralism; ✓ Economic Partnerships: to develop policies of trade and investments with other countries; ✓ Institutional Structure: to strengthen CAMEX's role DOCUMENTO DE POSIÇÃO PROPOSTAGE INTEGRAÇÃO EXTERNA DA INDUSTRIA-2014 FIESP Proposals for the External Integration of Industry 2014 BRAZILIAN ECONOMY OVERVIEW#25BRAZILIAN TRADE OPPORTUNITIES 1 Market Access 2 Trade Promotion 3 Trade Facilitation 4 Trade Finance and Guarantees 5 Tax environment improvement Source: MDIC BRAZILIAN ECONOMY OVERVIEW 7 PLANO NACIONAL DE EXPORTAÇÕES 2015-2018#26National Export Plan | Scope: 1 2 3 Consumer Markets widening: removal of trade barriers and deeper connection to the world network of trade agreements Build, consolidate, sustain Market share for exports Simplification of Aduana laws and bureaucracy 4 5 Source: MDIC BRAZILIAN ECONOMY OVERVIEW Improvement of trade finance and guarantees mecanisms, according to the exporters needs Tax environment improvement to the exporter activity (e.g.: REINTEGRA)#27Brazil | Transport logistics .ə D I N 52% 30% 8% 5% 5% Road Railway Cabotage Waterway Pipeline Source: Brazil's Transport Ministry (2011) BRAZILIAN ECONOMY OVERVIEW#28Sao Paulo | Airline hub in South America Panama *Bogota Colombia Ecuador Quito Caracas Venezuela Guyana Suriname 6h French Guiana 5h 4h Brazil Peru 3h .Lima Brasilia Bolivia 2h La Paz Sao Paulo Paraguay Asuncion Chile BRAZILIAN ECONOMY OVERVIEW Santiago Buenos Aires Argentina Uruguay Montevideo#29Brazil | Investment Outlook INVESTMENTS INDUSTRY R$ billion 2014 SECTORS 2010-2013 2015-2018 Percentage change Oil and Gas 358 509 42.1% Automotive 58 59 0.4% Food 58 49 -15.8% Mineral Extraction 44 40 -8.0% Electronics 22 28 25.9% Sugar and Ethanol 41 25 -40.5% Chemical Industry 22 22 2.6% Pulp and Paper 20 21 2.5% Health Industry 12 13 11.9% Steel 25 12 -50.3% Aerospace Industry 4 12 187% Others 112 121 8.0% Total 775 909 17.3% Source: Brazilian Development Bank (BNDES) BRAZILIAN ECONOMY OVERVIEW#30Brazil | Investment Outlook INVESTMENT IN INFRASTRUCTURE R$ billion - 2014 SECTORS 2010-2013 2015-2018 Percentage change Telecommunications 102 141 37.8% Social Infrastructure 53 87 64.6% Roads 62 80 29.1% Railroads 23 45 98.9% Ports 15 36 141% Airports 11 16 49.5% Total 457 598 30.8% Source: BNDES BRAZILIAN ECONOMY OVERVIEW#31BRAZILIAN ECONOMY OVERVIEW Thank you! +55 11 3549-4635 / 4532 [email protected] General Director Thomaz Zanotto re Deputy Directors Antonio Fernando G. Bessa Eduardo de Paula Ribeiro Geraldo Haenel José Augusto Corrêa Mário Marconini Newton de Mello Vladimir Guilhamat