São Paulo Rio de Janeiro Brasília Curitiba Recife Belo Horizonte Campo Grande London Lisbon Shanghai Beijing Miami Buenos Aires Johannesburg BRAZIL S INVESTMENT CLIMATE - 2011 DURVAL DE NORONHA GOYOS JR. SENIOR PARTNER - NORONHA ADVOGADOS BRAZILIAN EMBASSY OCTOBER 17, 2011.
POINTS OF PRESENTATION 1. Brazil some geopolitical fundamentals 1.1 Map of Brazil; 1.2 Strategic Advantages; 1.3 Oil Production; 1.4 Ethanol Production and 1.5 Somes of Energy. 2. Brazil s economy 2.1 Population and income; 2.2 GDP; 2.3 External debt; 2.4 International reserves; 2.5 Inflation; 2.6 Exchange rates; 2.7 Interest rates and 2.8 Current account. 3. Brazil s foreign trade 3.1 Overview of Brazil s foreign trade; 3.2 Main suppliers; 3.3 Main buyers; 3.4 Main exports; 3.5 Main imports; 3.6 Main markets; 3.7 Exports by added value and 3.8 Trade in agricultural products. 4. Brazil s investment flows 4. 1 Inbound and 4. 2 Outbound 5. Conclusion: Brazilian Economy Under Dilma Roussef s administration
1.1 Map of Brazil
1.2 Strategic Advantages Arable land over 20 millions hectars UKR PKT Pop over 100 Million inhabitants KZT TUR IDN NIG BGL ARG AUS USA BRA CHI IND RUS MEX JPN CAN GDP, Population, Agriculture GER UK FRA SPN GDP over US$ 1 Trillion NLD KOR ITA Source:Fiesp
1.2 Oil Production Fundamentals 2005 1.85 million barrels a day 2006 Brazil achieves self sufficiency in oil 2007 Discovery of Tupi oilfield with estimated 10 billion of barrels of oil. The discovery could double the Brazilian reserves. 2008 Discovery of Carioca oilfield with estimated 70 billion barrels of oil. Discovery puts Brazil's oil reserves among the world's largest 1 2010 2.1 million barrels a day 2011 2.6 million barrels a day 2 Source: 1 - Financial Times, July 8 2008 2- Petrobras, February 2011 estimate
1.3 Ethanol Production Fundamentals 27 billion liters/year (2009) 70 billion liters/year (2020)* Estimate Increase in cultivated area by 67,000 hectares Creation of 20,000 direct jobs and 60,000 indirect jobs Investments in production chain estimated at around USD 1,5 billion for the next years CO 2 emission reduction by 3.5 million tons/year Source: Sugar Cane Industry Union - UNICA
1.4 Sources of Energy Fundamentals 86% 80 60 45% 55% 40 20 14% 0 World Renewable Brazil Non-Renewable Source: Brazilian Ministry of Mines and Energy
Brazil's Economy 2.1 a Brazil's Social Development: Division by Classes in 2009 % 30% 15% 55% Classes A/B Classe C Classes D/E Source: FGV
Brazil's Economy 2.1 b Middle Class in % of the Brazilian Population 1992/2011 60 50 45.08 49.96 47.06 53 55 40 32.52 36,52 37.39 36.37 38.69 37.64 37.64 30 30.98 20 10 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2.1 c Salaries Growth Brazil's Economy 25% 20% 20% 15% 15.38% 16.67% 12.05% 10% 8.33% 8.57% 9.21% 9.68% 6.86% 5% 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: DIEESE
Brazil's Economy 2.1 d Real Growth of the Minimum Wage 1996/2011 14.00% 12.40% 13.04% 12.00% 10.30% 10.00% 8.23% 8.00% 6.00% 4.00% 4.50% 4.70% 3.60% 5.10% 4.03% 5.79% 6.02% 2.00% 0.00% 1.50% 1.23% 1.19% -0.30% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-2.00% -4.00% -4.20% -6.00% Minimum Wage today in SP: R$ 600,00 Source: DIEESE
Brazil's Economy 2.1 e Poverty in % of the Brazilian Population 1992/2010 40.00 35.00 35.03 30.00 28.65 28.82 26.88 28.14 26.59 28.03 25.00 22.66 20.00 19.19 18.11 15.00 16.00 15.32 10.00 5.00 0.00 1993 1 1995 2 1996 3 1998 4 1999 5 2002 6 2003 7 2005 8 2006 9 2007 10 11 2009 2010 12 Source: CPS/FGV
Brazil's Economy 2.1 g Number of Minimum Wages Required to Acquire a Basic Car 180.0 160.0 158.8 140.0 136.4 123.3 120.0 100.0 80.0 103.8 108.9 97.4 84.3 79.0 76.0 63.0 60.0 51.3 40.0 20.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1 2 3 4 5 6 7 8 9 10 11 Source: FIPE
Brazil's Economy 2.2 a Brazil s GDP in US$ 2003 2004 2005 2006 2007 2008 2009 2010 GDP (Billion) Population (Million) GDP per capita (Thousand) 552 663.4 882 1,006 1,300 1,378 1,922 2,090 178.9 181.5 185.5 186.7 188.9 196.0 199 203 3,10 3,66 4,77 5,41 6,91 7,030 9,658 10,295 Source: Brazilian Institute of Geography and Statistics - IBGE
Brazil's Economy 2.2 b Economic Growth % (GDP) 8.00 7.50 7.00 6.00 5.70 6.10 5.20 5.00 4.00 3.20 4.00 4.00 3.00 2.00 1.00 1.10 0.00-1.00 2003 2004 2005 2006 2007 2008 2009 2010 2011-0.60 Source: Brazilian Institute of Geography and Statistics IBGE/IEDI * Estimate March, 2011
Brazil's Economy 2.2 c Brazil s GDP 1991 2011 8.00 7.5 7.00 6.00 5.7 5.7 5.3 5.1 5.00 4.00 4.7 4.4 3.4 4.3 3.2 4.0 4.0 3.00 2.00 1.00 0.00-1.00 2.7 2.1 1.3 1.0 1.1 0.3 0.0 0.0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-0.5 Source: MTE - CAGED
Brazil's Economy 2.2 d Biggest Economies - Projected 2011 - GDP US$ Trillion Source: The Economist
Brazil's Economy 2.3 Development of External Debt Year Gross Amount (US$ Billion) Net Amount (US$ Billion) 2000 216,9 2001 209,9 2002 210,7 2003 214,9 165,6 2004 201,4 148,4 2005 169,4 115,6 2006 172,6 86,76 2007 193,2 12,86 2008 200,2 (-28) 2009 201,4 (-62) 2010 288,6 (-51) 2011* 355 (-120) Source: Central Bank * April, 2011
Brazil's Economy 2.4 Brazilian International Reserves Year US$ Billion 2003 49,3 2004 52,9 2005 53,8 2006 85,8 2007 180,3 2008 193,8 2009 238,5 2010 288,6 *2011 355 Source: Central Bank *April, 2011
Brazil's Economy 2.4 a Brazilian International Reserves US$ Billion 400.0 355.0 350.0 300.0 250.0 200.0 180.3 193.8 238.5 288.6 150.0 100.0 50.0 49.3 52.9 53.8 85.8 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Central Bank *April, 2011
Brazil's Economy 2.5 a Brazilian Inflation Rates 14.00% 12.00% 12.53% 10.00% 9.30% 8.00% 7.60% 6.00% 5.69% 5.90% 5.91% 6.50% 4.46% 4.31% 4.00% 3.14% 2.00% 0.00% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Brazilian Institute of Geography and Statistics - IBGE
Fundamentals of Brazil's Economy 2.5 b Brazil s Inflation Rate Targeting 14.0 12.0 12.5 10.0 10.0 10.5 8.0 6.0 4.0 8.9 8.0 6.0 8.0 6.0 6.0 4.0 7.7 6.0 5.5 4.0 3.5 9.3 8.5 6.5 7.5 7.6 5.5 3.5 6.5 5.7 4.5 6.5 6.5 6.5 4.5 5.9 4.5 4.5 4.5 3.1 6.5 6.5 5.9 4.3 4.5 4.5 2.0 2.0 1.5 2.5 2.5 2.5 2.5 2.5 2.5 0.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0 2 4 6 8 10 12 14 Tolerância Mín. Tolerância Máx. IPCA META Source: Central Bank / IBGE
Brazil's Economy 2.6 Exchange Rates of the Real Against the US Dollar 2.500 2.332 2.000 1.813 1.775 1.770 1.500 1.595 2.312 1.961 1.883 1.819 1.805 1.779 1.802 1.736 1.754 1.755 1.690 1.701 1.665 1.660 1.741 1.7151.673 1.628 1.000 0.500 -
Brazil's Economy 2.7 World's Interest Rates Country Nominal Rate Inflation Real Rate Turkey 6,25% 4,16% 2,09% Russia 8,00% 9,50% -1,50% Brazil 12,00% 6,50% 5,50% South Africa 5,50% 3,70% 1,80% Mexico 4,50% 3,57% 0,93% India 5,75% 9,30% -3,55% Euro Area 1,00% 2,40% -1,40% China 6,06,% 6,01% 0,05% Japan 0,00% 0,00% 0,00% USA 0,25% 2,10% -1,85% Source: Trading Economics * Estimate 2011
Brazil's Economy 2.8 Brazil's Current Account 60 US$ Billion 40 42.200 20 0 13.985 13.643 11.679 4.177 1.551 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16-7.637-20 -23.502-30.452-33.416-25.335-24.225-23.215-28.192-24.302-40 -51.822-60 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Brazil's Economy 2.9 Main problems yet to be solved Taxes are not competitive; Interest rates are very high; Brazilian currency overvalued; Labour costs and Infrastructure.
Foreign Trade 3.1 Brazil s Balance of Trade 400 US$ Billion 350 300 250 200 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 2011 Exports Imports Balance Flow of Trade Source: Development, Industry and Trade Ministry - MDIC * June 30, 2011
Foreign Trade 3.2 Major Suppliers Countries to Brazil Source: Development, Industry and Trade Ministry - MDIC * June 30, 2011
Foreign Trade 3.3 Major Countries for Brazilian Exports Source: Development, Industry and Trade Ministry - MDIC * June 30, 2011
Foreign Trade 3.4 Main Products Exported Source: Development, Industry and Trade Ministry - MDIC * June 30, 2011
Foreign Trade 3.5 Main Products Imported Source: Development, Industry and Trade Ministry - MDIC * June 30, 2011
Foreign Trade 3.6 a Major Suppliers Markets to Brazil Source: Development, Industry and Trade Ministry - MDIC * June 30, 2011
Foreign Trade 3.6 b Major Markets for Brazilian Exports Source: Development, Industry and Trade Ministry - MDIC * June 30, 2011
Foreign Trade 3.7 Products Categories of Exports Source: Development, Industry and Trade Ministry - MDIC * June 30, 2011
Foreign Trade 3.8 Brazilian Trade in Agricultural products Products Position between main exporters % of Total Global Exports Orange juice 1º 81% Poultry 1º 35% Sugar 1º 33% Coffee 1º 30% Tobacco 1º 27% Bovine Meat 1º 24% Ethanol 1º 13% Soy 2º 32% Soy Oil 2º 28% Pork 4º 11% Cotton 5º 5% Source: MDIC * December 2010
Investment Flows 4.1 Foreign Direct Investment: Inflows 70.00 70,00 * 60.00 50.00 45.10 50.00 40.00 32.80 34.70 30.00 20.00 22.50 16.60 18.10 15.10 18.80 25.90 10.00 10.10 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Central Bank *Central Bank Estimate
Investment Flows 4.1 Foreign Direct Investments: Inflows by Country - 2008 US$ Billion USA United Kingdom France Canada China Spain Russia Germany Brazil Belgium Switzerland Italy Mexico Singapore Hong Kong Sweden Luxemburg 52 53 60 108 40 40 45 51 24 40 24 21 22 158 223 232 0 50 100 150 200 250 300 Source: Unctad, World Investment Report 2008
Investment Flows 4.2 Foreign Direct Investment: Outbound US$ Billion 35.00 34.10 30.00 29.30 29.60 28.00 25.00 22.30 20.00 15.00 11.10 10.00 5.00 3.20 2.80 3.10 2.00 4.00 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Central Bank
Investment Flows 4.2 Foreign Direct Investment: Outflows by Country - 2008 US$ Billion USA United Kingdom France Germany Spain Italy Japan Hong Kong Belgium Switzerland Russia Brazil Holland Canada China Belize Source: Unctad, World Investment Report 2008
Foreign Trade 5. Dilma Roussef s Administration: The Brazilian Economy and Foreign Trade Sound policies of Lula s government are to be sustained; Inflation targeting maintained; Interest rates policies are to be maintained; Over appreciation of Real is to be maintained; Some tax reforms will take place; Some reforms in Labour Law to take place; Public management to be improved; Foreign Trade balance to decrease; Current account deficit to grow; Economy to continue to grow at about 5% per year; and Brazil s economy is poised to overtake France s, Britain s and Germany s by the end of Roussef s administration. Source: Brazilian Ministry of Foreign Affairs
NORONHA ADVOGADOS Located in one of the main financial centers of the city, the São Paulo office is the head office of Noronha Advogados and the oldest, having been opened in June 1978. The London office, opened in 1987, has partners admitted in England and Wales, is regulated by the SRA and supports investments and business with Brazil. Address: 4 th floor, 193/195 Brompton Road London SW3 1NE England UK Phone: (44-20) 7581-5040 Fax: (44-20) 7581-8002 Contact: Vera Helena de Moraes Dantas Address: Av. Brig. Faria Lima, 1485 17º andar Torre Norte 01452-002 São Paulo SP Brasil Phone: (55-11) 5188-8090 Fax: (55-11) 5184-0097 Contact: Durval de Noronha Goyos Júnior Lilian Thomé
NORONHA ADVOGADOS
Durval de Noronha Goyos Jr. dng@noronhaadvogados.com.br www.noronhaadvogados.com.br