Petrobras' Energy Sector Outlook
CORPORATION
1. A reversal in global
economic recovery
2. The expansionary
monetary and fiscal
policies
... however, some risks will always prevail
A new recession cycle in central economies would likely be accompanied by higher
risk aversion to risk and lower investor appetite for emerging market investments.
For the past decade, government spending has exceeded GDP growth*. In the long-
term, government spending should converge to GDP growth or Brazil could become
too indebted to foreign investors.
Credit from public banks, namely National Development Bank BNDES, has grown
faster than private lending. Also private sector banks must carry their fare share.
Large monetary stimulus from the Central Bank was necessary to avert a financial
crunch in 4Q2008. Now that the economy is showing signs of a solid base, the CB has
started to withdraw surplus liquidity from the market through repurchase operations.
3. Further strenthening of
the Real (BRL)**
An
"excessively"
strong Brazilian
Real (BRL)
would favor
imports over
exports and
thus reduce
USDBRL
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
future GDP
growth.
Jan-00
00-10 C
10-ver
Jul-01
Jan-02
20-10C
Jul-03
CO-UPS
to-10 C
to-vec
CO-ID C
Jan-06
80-UBC
Jul-06
Jan-07-
Jul-07-
Current USDBRL rate:
1.74 (31-Dec-2009)
Jan-08
Jul-08-
-60-100
60-uer
- USDBRL
◆ GS forecast CS forecast
Jan-10-
Jul-10-
Jan-11-
Jul-11
On a real
effective trade
weighted basis,
the BRL has
strengthened by
26% in 2009
and is expected
to appreciate
even further.
USDBRL forecasts
2010
2011
GS 1.60
CS 1.60
1.80
Challenges facing Brazilian businesses are, amongst several; strong Real, high taxes, poor infrastructure, tight
labour market, bureaucracy, expensive credit and escalating costs amongst others
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