brazil: economic outlook and current challenges · 2017. 4. 7. · aldo mendes june 2011. title:...
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Brazil: Economic Outlook and
Current Challenges
Aldo MendesJune 2011
2
Agenda
Brazilian Social Achievements
Brazilian Economic Achievements
Short Term Economic Challenges
Brazilian Economy Prospects
3
Brazilian Social Achievements
More than 20 million Brazilians overcame the line of poverty
More than 36 million Brazilians were included in the middle-
income class
Reduction of unequality – in 2009 the Gini Index reached a
record low for the last 30 years
Formal job creation reached record levels
The Brazilian society has the best welfare level of the last 30
years
4
Social Classes
Social Mobility
Source: FGV * FGV estimate
0
20
40
60
80
100
120
140
160
180
200
2003 2009 2014*
E D C A/B
mill
ion
people
5
Gini Index - Brazil
Source: Ipeadata data until 2009
54%
56%
58%
60%
62%
64%
81 83 85 87 89 92 95 97 99 02 04 06 08
66
Unemployment Rate
Source: IBGE
Apr 116.0 %
5
6
7
8
9
10
11
12
13
14
jan 0
3
jan 0
4
jan 0
5
jan 0
6
jan 0
7
jan 0
8
jan 0
9
jan 1
0
jan 1
1
% (
seasonally
adju
ste
d)
7
Brazilian Economic Achievements
Net public debt-to-GDP ratio in downward trajectory
Negative net external debt – Brazil is currently an international
creditor
International reserves above US$ 330 billion
Credit market: almost 50% of GDP
Solid financial system and conservative prudential regulation
Brazil has an investment grade credit rating, with prospects of
further improvement
8
Debt-to-GDP Ratio
Source: BCB
quarterly
% o
fG
DP
28
34
40
46
52
58
64
4Q 01
3Q 02
2Q 03
1Q 04
4Q 04
3Q 05
2Q 06
1Q 07
4Q 07
3Q 08
2Q 09
1Q 10
4Q 10
2013
Jun 24:
39.18
market
expectations for
annual data
2015:
34.2
62.9
9
Net Public Forex Debt
Source: BCB
-280
-240
-200
-160
-120
-80
-40
0
40
80
120
jan 01
jul 01
jan 02
jul 02
jan 03
jul 03
jan 04
jul 04
jan 05
jul 05
jan 06
jul 06
jan 07
jul 07
jan 08
jul 08
jan 09
jul 09
jan 10
jul 10
jan 11
domestic
external
US
$ b
illio
n
-29.1
-243.9
Feb:
10
Net External Debt (Private and Public)
Sources: BCB and S&P
Country Ratings
US
$ b
illio
n
-80
-40
0
40
80
120
160
200
1Q 02
3Q 02
1Q 03
3Q 03
1Q 04
3Q 04
1Q 05
3Q 05
1Q 06
3Q 06
1Q 07
3Q 07
1Q 08
3Q 08
1Q 09
3Q 09
1Q 10
3Q 10
1Q 11
1Q03:
165.24Q04:
135.7
Mar
-64.5BBB-
BB+
BB
BB-
B+
BB-
11
International Reserves
Source: BCB
8 4 512 12
7 7 9 10 10 9
2432
39
5260
5245
36 33 36 3849 53 54
86
180
194
239
289
334,6
0
50
100
150
200
250
300
350
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
2009
2011*
US
$ b
ilhõ
es
*3/jun
12
25,8 26,024,6 25,7
28,330,9
35,2
40,5
44,446,4 46,6
0
5
10
15
20
25
30
35
40
45
50
01 02 03 04 05 06 07 08 09 10 11*
Credit/GDP
Source: BCB * Apr 11
% o
f G
DP
13
Basel Capital Ratio – Banking System
Source: BCB *February
%
6
8
10
12
14
16
18
20
00 01 02 03 04 05 06 07 08 09 10 11*
16.9
Brazilian rules:
11%
minimum capital
according to
Basel: 8%
14
Short Term Economic Challenges
Making inflation converge to the target midpoint, even
facing the strong increase of agricultural commodities and oil
prices in the international context
Dealing with the intense foreign capital flow, which is
inflationary. The inflow is a consequence of the Brazilian
economy positive prospects, but also of expansionist
monetary policies adopted by other countries
1515
Inflation – Convergence to Targets
Sources: BCB / IBGE
market
expectation
target (4.5%)
market expectation: June 10th
0
2
4
6
8ja
n 0
4
jan 0
5
jan 0
6
jan 0
7
jan 0
8
jan 0
9
jan 1
0
jan 1
1
jan 1
2
% y
oy
1616
CPI ex-Food and Beverage
Source: IBGE
0
2
4
6
8
10
12
14
16
18
jun 0
7
de
z 0
7
jun 0
8
dez 0
8
jun 0
9
dez 0
9
jun 1
0
dez 1
0
% 1
2 m
onth
s
IPCA Food and Beverage IPCA ex-food and beverage
17
Foreign Capital Inflow
Source: BCB
US$ billion
Jan – Apr
2008 2009 2010 2011*
FDI 12.67 8.75 7.76 21.07
Bonds 0.29 -2.60 4.05 9.33
Loans 7.03 -1.97 10.37 19.69
Stocks 3.84 0.61 8.57 0.93
Fixed Income 9.23 -1.59 5.74 -0.66
Total 33.05 3.19 36.49 50.37
* data until April 18th
18
Measures to Fight Inflation
Monetary Policy (Over-Selic rate – Copom decision)
+ 0.50 p.p. (January 19, 2011)
+ 0.50 p.p. (March 2, 2011)
+ 0.25 p.p. (April 20, 2011)
+ 0.25 p.p. (June 8, 2011)
Fiscal Consolidation
– Expenditure cuts: R$ 50 billion
– Primary Surplus in 2011: R$ 117 billion
19
Brazilian Economy Prospects
Strong and sustainable growth in the coming years
Broadening of the middle income class
Demographic bonus until 2025
Several investment opportunities
– Exploration of the Pre-Salt layer
– Infrastructure modernization and expansion
– Vast reserves of mineral commodities
– Potential for broadening the arable land (global exception)
and increasing the agricultural production
– Soccer World Cup and Olympic Games
20Sources: Petrobras and OGX * occurred
1,972,10
2,30
2,50
2,70
2,98
2,30
2,48
2,70
2,95
3,24
3,60
2009* 2010 2011 2012 2013 2014
oiloil and gas
mill
ion
bp
d
projection 2020 for oil and gas:
Petrobras: 5.1 million boepd
(1.1 million Pre-Salt)
OGX: 1.4 million boepd(OGX)
boepd
Oil and Gas Production
21
Investment Prospects – 2011-2014
Source: BNDES (Feb 2011)
Infrastructure R$ billion growth share
2006-2009 2011-2014 % %
Electricity 92 139 51.1 36.5
Telecommunications 62 70 16.1 18.9
Sanitation 26 41 57.7 10.8
Railways 20 60 200.0 15.7
Highways 30 51 70.0 13.4
Ports 5 18 260.0 4.7
Total 235 381 62.1 100.0
22
Investment Prospects – 2011-2014
Source: BNDES (Feb 2011)
Industry R$ billion growth share
2006-2009 2011-2014 % %
Oil and Gas 205 378 84.4 62.7
Mining 59 62 5.1 10.3
Steel 27 33 22.2 5.5
Petrochemical 20 40 100.0 6.6
Automobile 25 33 32.0 5.5
Electric/Electronics 16 29 81.3 4.8
Pulp and Paper 18 28 55.6 4.6
Total 370 603 63.0 100.0
Brazil: Economic Outlook and
Current Challenges
Aldo MendesJune 2011
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