1/38 BRAZIL AND CANADA: TRADE FUNDAMENTALS AND PROSPECTS FOR FURTHER COOPERATION São Paulo, 23 April 2007 Durval de Noronha Goyos Jr. Noronha Advogados São Paulo, Rio de Janeiro, Brasília, Curitiba, Porto Alegre London, Lisbon, Miami, Los Angeles, Buenos Aires, Shanghai
POINTS OF PRESENTATION 2/38 1. Geographic Considerations 2. Political l Considerations 3. Macroeconomic Fundamentals 4. Trade Between Brazil and Canada
3/38 GEOGRAPHIC CONSIDERATIONS B RAZIL
4/38 POLITICAL CONSIDERATIONS Executive Power PRESIDENCY The President of the Federal Republic of Brazil is the head of state and the head of government elected to a mandate of four years. The President is also the supreme commander of the Brazilian Armed Forces. President Mr. Luiz Inácio Lula da Silva Mandate 2007-2010 2010 MINISTRIES - 23
5/38 POLITICAL CONSIDERATIONS Division i i of Power Palácio do Planalto Executive Power The President, who is elected to a fouryear term, with one re-election allowed National Congress Legislative Power Two separate chambers: Federal Senate and Federal Chamber of Deputies. Federal Supreme Court Judiciary Power Federal Supreme Court Brazilian legal system is based on Roman Law
6/38 POLITICAL CONSIDERATIONS Judiciary Power Brazilian Superior Courts STF Federal STJ Superior TST Superior TSE Superior Supreme Tribunal of Labor Electoral Court Justice Court Court
Political considerations EXECUTIVE POWER 7/38 Ministeries Avenue
8/38 POLITICAL CONSIDERATIONS The Financial Sector Central Bank
9/38 POLITICAL CONSIDERATIONS The Brazilian Financial i System National Monetary Council Bank of Brazil Central Bank BNDES Brazilian Securities Commission Financial Institutions Stock Exchanges Private Financial Institutions Development Commercial Investment Multiple Distributors Stockbrokerage Banks Banks Bank Banks Companies Houses
10/38 MACROECONOMIC FUNDAMENTALS The Brazilian Economy in the 21 st Century consolidation of democracy stabilisation ti of the economy trade liberalisation resumption in foreign direct investment massive privatization program pre-emptive strengthening of financial sector end of distinction between foreign and domestic companies resumption of economic growth end of monopoly in telecommunications, oil and gas great development of services sector leadership in agribusiness massive trade surplus
11/38 MACROECONOMIC FUNDAMENTALS Brazilian Achievements During the First Mandate of Lula s Presidency major investments on electricity production and transmission i resumption of train and ship industry aircraft industry exports reached US$ 11 billion in 2005 development of flex fuel engines cellular phone production jumped from 35 million in 2002 to 75 million in 2005 over 50 Brazilian companies opened branches and facilities in Europe and Ai Asia nearly 30 Brazilian companies opened business at the New York Stock Exchange Brazilian Risk Rating dropped almost 1,000 points reaching the lowest level in January 2006 (220 points) Brazilian inflation dropped from 30% (2002) to 5% (2005)
12/38 MACROECONOMIC FUNDAMENTALS Main problems yet tt to be solved taxes are not competitive; interest rates are very high; exchange rates are overestimated.
MACROECONOMIC FUNDAMENTALS 13/38 Brazil s GDP in US$ 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007* GDP 2002 2003 2004 2005 (US$ 534.0 550.0 456,5 506,8 599,0 174,6 177,9 181,5 2,61 2,85 3,32 552.0 531.1 594.2 503.9 456.5 552 663,4 882 1.006 652,5 million) Population (million) GDP per capita (US$) 161.3 163.7 166.2 169.7 171.2 173.8 176.3 178.9 181.5 185.5 186.7 188.9 3,310 3,359 3,321 3,129 3,470 2,899 2,589 3,085 3,655 4,754 5,388 3,311 Source: MDIC, Mercosul, IBGE and US Census database web site * estimate In yellow IBGE s new methodology March, 2007.
MACROECONOMIC FUNDAMENTALS 14/38 Brazil's GDP in purchase power parity Total purchase power parity is US$ 1.803 trillion Purchase power parity per capita is US$ 9.108 2002 2003 2004 2005 456,5 506,8 599,0 174,6 177,9 181,5 2,61 2,85 3,32 (2006) Purchase power parity per capita is US$ 9.531 (2007) Source: IMF
15/38 MACROECONOMIC FUNDAMENTALS Economic Growth 6,0 5,5 5,0 4,5 40 4,0 3,5 3,0 25 2,5 2,0 1,5 1,0 0,5 0,0 2000 2001 2002 2003 2004 2005 2006 2007* Source IBGE New Methodology March 2007 * estimate IMF
16/38 MACROECONOMIC FUNDAMENTALS Brazil: Foreign Direct ti Investment t 35,000 3 31,2 33,3 30,000 26,3 25,000 20,000000 17,9 21,0 18,7 20,2 21,5 22,7 15,000 12,9 10,000 9,6 5,000 3,9 0,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: Central Bank of Brazil / Treasury Department
MACROECONOMIC FUNDAMENTALS Brazil: Foreign Direct Investment 17/38 Canada Year Value (US$ Million) 2000 2.028 2001 441 2002 989 2003 117 2004 592 2005 1435 1.435 2006 1.285 Source: Central Bank of Brazil / Fiscalization Department
MACROECONOMIC FUNDAMENTALS 18/38 Brazil - Evolution of External Debt Source: IPEADATA Year Value (US$ Billion) 1998 233,8 1999 241,5 2000 236,2 2001 226,1 2002 227,7 2003 235,4 2004 220,2 2005 188,0 2006 192,0 2007 165,8 * * Estimate Central Bank of Brazil according JPMorgan, Mar/2007
19/38 MACROECONOMIC FUNDAMENTALS International Reserves in Billion Dollars 120,00 100,00 85,8 109,5 80,0000 60,00 52,9 53,8 40,00 20,0000 0,00 2004 2005 2006 March 2007 Source: Central Bank of Brazil / Treasury Department
MACROECONOMIC FUNDAMENTALS 20/38 Inflation 14% 12% 10% 8% 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007* Source: Portal Brasil and IBGE *value of the first two months of 2007
MACROECONOMIC FUNDAMENTALS 21/38 Oil Production 2005 1.85 million barrels a day 2006 Brazil achieves self sufficiency in oil 2010 3.4 million barrels a day* Source: Petrobrás * forecast: Petrobrás
Year MACROECONOMIC FUNDAMENTALS 22/38 Automotive production 2000-2007* 2007* Cars Light commercials Trucks Buses Total 2000 1,361,721 235,161 71,686 22,672 1,691,240 2001 1,501,586 214,936 77,431 23,163 1,817,116 2002 1,520,285 179,861 68,558 22,826 1,791,530 2003 1,505,139 216,702 78,960 26,990 1,827,791 2004 1,756,594 318,351 107,038 28,758 2,210,741 2005 2,009,494 365,648 117,892 35,266 2,528,300 2006 1,914,918 356,061 103,289 29,412 2,403,680 2007 313.656 47.303 15.692 4.297 380.948 Source: Anfavea * January and February 2007.
MACROECONOMIC FUNDAMENTALS 23/38 Airplane Trade (US$ Million FOB) 2000 2001 2002 2003 2004 2005 2006 Exports 3,574.5 3,553.6 2,799.2 2,050.0 3,371.3 3,302.8 3,442.5 Imports 1,073.3 807.6 685.0 591.3 888.3 967.7 1,234.5 Balance 2,501.1 2,745.9 2,114.2 1,458.6 2,482.6 2,335.1 2,208.0 Flow of Commerce 4,647.9 4,361.3 3,484.2 2,641.3 4,260.0 4,270.5 4,676.0 Source: MDIC
120 110 100 90 80 70 60 50 40 30 20 10 0 24/38 MACROECONOMIC FUNDAMENTALS Brazilian Trade in Billion Dollars 2000 2001 2002 2003 2004 2005 2006 Exports Imports Source: SECEX
25/38 MACROECONOMIC FUNDAMENTALS Brazil s Export Markets In 2006 USA Argentina China Netherlands Germany Mexico Chile Japan Italy Venezuela Others Source: SECEX
MACROECONOMIC FUNDAMENTALS 26/38 Sources of Brazil s Imports In 2006 Source: SECEX USA Argentina China Germany Nigeria Japan South Korea Chile France Italy Others
27/38 INTERNATIONAL TRADE Flow of trade between Brazil and selected economic blocs 21,30% NAFTA 57,31% 10,01% 22,06% EU MERCOSUR SACU ASEAN Others Source: SECEX 3,11% 0,83%
28/38 INTERNATIONAL TRADE Flow of trade between Brazil and NAFTA countries 21,30% 11,90% 7,17% EUA 80,93% México Canadá Source: SECEX
INTERNATIONAL TRADE 29/38 World, Brazil and Canada Trade Exports Imports Value Annual percentage change Value Annual percentage change World Brazil Canada 2000/ 2000/ 2006 2006 2004 2005 2006 2006 2006 2004 2005 2006 11762 11 22 14 15 12080 11 22 13 14 137 16 32 23 16 88 7 31 17 14 388 6 16 14 8 357 7 14 15 11 Values in US$ Billion dollars and percentage Source: WTO, WORLD TRADE 2006, PROSPECTS FOR 2007
30/38 MACROECONOMIC FUNDAMENTALS Foreign Trade prospects to Brazil Estimates to 2007 US$ Billion Estimate Imports 110.0 Exports 145.0 Bl Balance 35.0 Source: IPEA
31/38 MACROECONOMIC FUNDAMENTALS Foreign Trade January, February and March 2007 US$ Millions Value Imports 25.223 Exports 33.919 Bl Balance 8.696 Source: MDIC/SECEX
32/38 TRADE BETWEEN BRAZIL AND CANADA Outlook 2000 2001 2002 2003 2004 2005 2006 2007 * Exports 565.6 555.3 781.5 977.5 1,199.3 1,944.0 2,275.3 Imports 1,086.9 926.7 740.1 750.3 866.3 1,019.0 0 1,193.4193 277 197 Balance -521.3-371.4 41.4 227.2 333.0 924.9 1,081.8 80, Flow of 474 1,652.5 1,482.1 1,521.6 1,727.8 2,065.6 2,963.0 3,468.7 Commerce Source: MDIC/SECEX *January and February Values in US$ Million FOB
33/38 TRADE BETWEEN BRAZIL AND CANADA 3.500,00 3.000,00 2.500,00 2.000,00 1.500,00 1.000,00 500,00 0,00-500,00-1.000,00 2000 2001 2002 2003 2004 2005 2006 Source: SECEX Exports Imports Balance Flow of Trade
34/38 TRADE BETWEEN BRAZIL x CANADA Flow of Trade in US$ Million 4.000 3.500 3.000 2.500 2.000 1.500 1.000 500 0 1.653 1.482 1.522 1.728 2.066 2.963 2000 2001 2002 2003 2004 2005 2006 3.469 Source: SECEX
35/38 TRADE BETWEEN BRAZIL x CANADA Brazil Exports to Canada in US$ Million 2.500,00 2.275,30 2.000,00 1.500,00 1.199 1.944 1.000,00 500,00 0,00 566 555 782 978 2000 2001 2002 2003 2004 2005 2006 Source: SECEX
36/38 TRADE BETWEEN BRAZIL x CANADA Brazil Imports from Canada in US$ Million 1400 1.193,40193 1200 1000 800 600 1086,9 926,7 740,1 750,3 866,3 1019 400 200 0 2000 2001 2002 2003 2004 2005 2006 Source: SECEX
37/38 TRADE BETWEEN BRAZIL x CANADA Trade Balance 1200 1000 800 600 400 200 0-200 -400-600 -800 1.081,80 924,90 227,20 41,4 333,00 2000 2001 2002 2003 2004 2005 2006-371,4-521,3 Source: SECEX
38/38 TRADE BETWEEN CANADA AND BRAZIL Main products Brazil exported to Canada Product 2006 (Jan/Dec) 2005 (Jan/Dec) US$ FOB Participation US$ FOB Participation Airplanes 413,021 18.15% 437,084 22.48% Calcined alumina 340,914 14.98% 124,776 6.42% Cane sugar 224,674 9.87% 157,896 8.12% Iron/Steel billets 168,856 7.42% 159,794 2.91% Copper wire 74,579 3.28% 51,444 2.65% Non calcined bauxite 48,178 2.12% 6,581 0.34% Rolled Steel/Iron 44,862 1.97% 35,365 1.82% Coffee beans 41,744 1.83% 30,653 1.58% Automobiles 34,528 1.52% 30,726 1.58% Leather shoes 32,102 1.41% 32,238238 1.66% Source: SECEX
Product 39/38 TRADE BETWEEN CANADA AND BRAZIL Main products Brazil imported from Canada 2006 (Jan/Dec) 2005 (Jan/Dec) US$ FOB Participation US$ FOB Participation Potassium chloride 230,349349 19.30% 272,249249 26.72% Non agglomerated coal 155,335 13.02% 116,622 11.44% Newsprint in rolls 127,110110 10.65% 98,349 9.65% Brimstone 40.088 3.36% 36,988 3.63% Medicine with cyclosporine 39.744 3.33% 19,395 1.90% Bituminous coal 37,519 3.14% 19,126 1.88% Telephony yp printed circuits 29,794 2.50% 19,947 1.96% Copper wire 28,072 2.35% 5,211 0.51% Naphtha 16,445 1.38% --------------- ------------------ Other forms of nickel 13,643 1.14% 4,089 0.40% Source: SECEX
40/38 AGREEMENTS BETWEEN BRAZIL AND CANADA Brazil and Canada have many agreements in force. The major are: 1. Trade Agreement signed on 17 October, 1941; 2. Convention to Avoid Double Taxation on Income matters; 3. Agreement on Air Transportation; and 4. Memorandum of Understandings to establishing an 4. Memorandum of Understandings to establishing an Economic and Bilateral Trade Council
BRAZIL PROSPECTS FOR INTERNATIONAL TRADE 41/38 N egotiation on course for a m ultilateral agreem ent A tlantic O cean Possible P C onstitution ofthe Free Trade A rea of the A m ericas N egotiations for the adm ittance ofsouth A frica to the Southern C om m on M arket a e A Preferential A greem entw as signed betw een the Southern C om m on M arketand India ASSOCIATES MERCOSUL COUNTRIES APPLICATION FOR MEMBERSHIP
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