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Early Warning ServiceCurrency Exchange The dollar ended October at R$2.03, a gain of only 0.03% for the month. With the Central Bank guar-anteeing that it will not allow the dollar to drop below R$2, the exchange fluctuation in October was minimal. In November, however, the market has been affected by concerns that the euro zone nations are again entering into a recession. This has driven the dollar to R$2.08, its highest level in three years.

Foreign Accounts Brazil’s foreign direct investment in September again topped the month’s current account deficit. FDI totaled US$4.39 billion versus the month’s deficit of US$2.59 billion. For the 12 months ending in September, FDI reached US$63.8 billion while the pe-riod’s current account deficit was US$49.9 billion. The current account deficit for the year now to-tals US$34.1 billion compared with US$36.7 billion for the same period last year. The services deficit in September was US$3.5 billion with foreign travel by Brazilians continuing to regis-ter a large deficit. The tourism account for the month was negative by US$1.3 billion, only 2.2% less than for Sep-tember 2011 despite this year’s appreciation of the dollar which has raised the cost of foreign travel for Brazilians. Equipment rental in September accounted for US$1.5 billion of the month’s services deficit, an increase of 9.4% from the same month last year. Profit and dividend remittances fell from US$2 billion in September 2011 to US$1.1 billion. For the first nine months of the year, these remittances declined by 32% versus the same period last year to US$19.6 bil-lion.

Interest Rates The Central Bank in October again lowered the Selic rate but also sent a clear message that the mon-etary easing has now ended. The bank’s monetary policy committee (Copom) voted five to three to lower the base interest rate from 7.50% a year to 7.25%. This was the tenth consecutive rate cut in a process that began in August of last year when the Selic was 12.50%. Brazil’s real rate, discount-ing inflation, is now 1.7%, the lowest on record. Analysts said they had no doubt that the Central

Bank will maintain the Selic rate unchanged for several months and is likely only to alter the rate should inflation start to climb in the second half of 2013. The Copom minutes showed that a majority of the Central Bank’s directors are not concerned with infla-tion. Their main worry continues to be with the global economic situation which they stated is deflationary. Analysts interpreted this as meaning that even if inflation were to increase next year, the Central Bank would not raise the Selic rate. Economists are divided as to the wisdom of this policy with some arguing that the base interest rate is already too low and should be raised. Others, however, support the Central Bank’s monetary easing, stating that it was necessary to combat the year’s economic slowdown. In a report on the global economy released by the International Monetary Fund, Brazil received special notice with concerns regarding the rapid expansion of credit. The IMF report warned that expanding credit and exploding real estate prices are issues of concern for Brazil and other emerging economies. According to the IMF, among emerging nations Brazil’s sovereign credit is one of the most vulnerable to the fiscal problems of Italy, Spain, Portugal and Ireland. The report added that Brazil is not in danger of capital flight problems. The principal concern, it conclud-ed, is with the expansion of credit which could result in massive defaults should the country suffer an economic downturn.

Trade Brazil in October posted a trade surplus of US$1.662 billion on exports of US$21.766 billion and im-ports of US$20.104 billion. The month’s exports fell 6% on a daily average from September and were down 10.6% versus October 2011. Imports declined 0.5% from September and 7.6% year-on-year. The month’s surplus was 29.5% below that of October 2011. For the year, Brazil’s trade surplus now totals US$17.386 billion on exports of US$202.362 billion and imports of US$184.976 billion. Exports for the year have fallen 5.5% versus the same period last year while im-ports are down 1.9% on a daily average. The surplus through October was 31.6% below that of the first ten months of 2011.

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CURRENCY EXCHANGE Period OfficialDollar(endof VariationMonth(%) BlackMarketDollar(endof VariationMonth(%) SpreadOfficial/Black(end period) period) ofmonth,in%)

2011 September 1.8544 16.83 2.000 17.65 7.8 October 1.6885 -8.95 1.800 -10.00 6.6 November 1.8109 7.25 1.930 7.22 6.5 December 1.8758 3.58 2.030 5.18 8.22012 January 1.7391 -7.29 1.860 -8.37 6.9 February 1.7092 -1.72 1.830 -1.61 7.0 March 1.8221 6.61 1.950 6.56 7.0 April 1.8918 3.83 2.020 3.59 6.7 May 2.0223 6.90 2.170 7.43 7.3 June 2.0213 -0.05 2.160 -0.46 6.8 July 2.0499 1.41 2.180 0.93 6.3 August 2.0372 -0.62 2.160 -0.92 6.0 September 2.0306 -0.32 2.190 1.39 7.8 October 2.0313 0.03 2.170 -0.91 6.8

2011Dec20.60618.924 1.681 40.49244.117 -3.625 -1.943

2012Jan19.28418.903 0.381 34.06327.162 6.902 7.283Feb18.83515.315 3.520 32.92530.741 2.185 5.705March22.71916.687 6.032 32.53832.830 -0.291 5.740April25.13817.611 7.527 37.76438.702 -0.939 6.588May22.18018.544 3.636 28.45734.784 -6.327 -2.691June17.25418.216 -0.962 28.90227.622 1.280 0.318July16.75617.156 -0.400 28.98027.639 1.341 0.942Aug17.70418.378 -0.674 26.56926.791 -0.222 -0.896Sept16.39318.132 -1.739 32.09930.895 1.205 -0.534

Oct18.00020.000 -2.000 29.00030.800 -1.800 -3.800Nov22.00021.000 1.000 28.00030.000 -2.000 -1.000Dec20.00022.000 -2.000 30.00031.000 -1.000 -3.000

2013Jan23.00020.000 3.000 35.00037.000 -2.000 1.000Feb17.00016.000 1.000 27.00026.000 1.000 2.000Mar19.00020.000 -1.000 30.00028.000 2.000 1.000Apr22.00020.000 2.000 31.00032.000 -1.000 1.000Mar20.00019.000 1.000 30.00032.000 -2.000 -1.000

Exports Imports Balance1 Purchase Sale Balance2 Balance1+2TRADEOPERATIONS FINANCIALOPERATIONS

(inUS$billion)MONTHLYMOVEMENTONTHEEXCHANGEMARKET

Projected

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Interest Inflation** Exchange

Rates* Correction

2011. 11.00 -0.1 3.5

2012

Jan 10.50 0.2 -7.2

Feb 10.50 -0.06 -1.7

March 9.75 0.4 6.6

April 9.00 0.8 3.8

May 8.50 1.0 6.9

June 8.50 0.6 -0.05

July 8.00 1.3 1.4

August 8.00 1.4 -0.6

Sept 7.50 0.9 -0.3

Oct 7.25 0.02 0.03

Nov 7.25 0.3 0.7

Dec 7.25 0.5 -1.2

2013

Jan 7.25 0.4 1.8

Feb 7.25 0.5 0.4

March 7.25 0.4 -0.5

April 7.25 0.6 0.4

May 7.25 0.4 -0.2

June 7.25 0.8 0.6

July 7.25 0.3 0.2

August 7.25 0.7 -0.6

RESERVES Period ReadyReserves(inUS$

millionatendofperiod)

1999 35,5542000 32,9492001 35,8442002 37,8232003 49,2962004 52,9352005 53,7992006 85,8392007 180,3342008 193,7832009 239.0542010 288,5752011 352,0122012 August 377,221 September 378,726 December* 380,000 March* 382,000 June* 384,000 September* 387,000*projectedendofperiod

Interest Rates vs Inflation vs Exchange

*Selic(annualrate)**monthlyrateoftheMarketPriceIndex(IGP-M)

Projected The year’s appreciation of the dollar has slowed imports while exports have suffered from the crisis in Eu-rope.

Capital Flow Brazil’s foreign capital flows in October were negative by US$3.8 billion, the largest net outflow since June 2010. This was the third straight month to register out-flows and was influenced by a sharp increase in profit remittances by multinational firms.

Reserves September ended with reserves at US$378.7 bil-lion, an increase of US$1.5 billion from August. Brazil’s total foreign debt in September was estimated by the Central Bank at US$309.2 billion, an increase of US$6.3 billion versus June. The long term debt rose US$6 billion to US$272 billion while the short-term debt increased by only US$263 million to US$37.2 billion.

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FOREIGN DIRECT INVESTMENT (in US$ Billion) Period Monthly Result Year-to-Date Last 12 months

2011March 6.787 17.535 60.530April 5.520 23.055 63.821May 3.973 27.028 64.204June 5.475 32.503 68.912July 5.982 38.485 72.260August 5.596 44.081 75.433September 6.305 50.386 76.314October 5.574 55.960 75.073November 4.056 60.016 75.389December 6.645 66.660 66.660

2012January 5.405 5.405 69.112February 3.646 9.051 64.963March 5.887 14.938 64.064April 5.243 19.607 63.788May 3.716 23.323 63.531June 5.822 29.145 63.878July 8.429 37.566 66.325August 5.034 42.600 65.763 September 4.393 46.993 63.851

Period Monthly Result Last 12 months Last 12 months (in US$ billion) (in US$ billion) (as % of GDP2011September -2.234 -48.595 -2.03October -3.157 -48.055 -1.98November -6.640 -49.967 -2.04December -6.008 -52.480 -2.12

2012January -7.046 -53.953 -2.20February -1.726 -52.211 -2.14March -3.282 -49.756 -2.05April -5.366 -51.523 -2.14May -3.428 -50.771 -2.13June -4.389 -51.683 -2.18July -3.739 -51.864 -2.21August -2.550 -49.566 -2.12September -2.596 -49.928 -2.15

CURRENT ACCOUNT

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Period Monthly Result Year-to-Date Last 12 months

2011March 6.787 17.535 60.530April 5.520 23.055 63.821May 3.973 27.028 64.204June 5.475 32.503 68.912July 5.982 38.485 72.260August 5.596 44.081 75.433September 6.305 50.386 76.314October 5.574 55.960 75.073November 4.056 60.016 75.389December 6.645 66.660 66.660

2012January 5.405 5.405 69.112February 3.646 9.051 64.963March 5.887 14.938 64.064April 5.243 19.607 63.788May 3.716 23.323 63.531June 5.822 29.145 63.878July 8.429 37.566 66.325August 5.034 42.600 65.763 September 4.393 46.993 63.851 2012 FOREIGN DEBT INTEREST MATURITIES (US$ million)

Aug Sept Oct Nov Dec YEAR

Non-financial public sector 230 262 258 171 92 4,395 Central Government 154 175 155 128 34 3,185 Bonds 154 175 155 128 34 3,185 Other public sector non-financial 76 87 103 44 57 1,210 Private sector 783 1,013 1,282 962 2,745 13,141

Total 1,013 1,274 1,540 1,133 2,837 17,536

Feb Mar April May June July

Non-financial public sector 283 203 356 234 184 1,020 Central Government 211 89 186 130 80 881 Bonds 211 89 186 130 80 881 Other public sector non-financial 72 113 170 104 104 138 Private sector 567 767 939 805 914 1,190

Total 850 970 1,295 1,039 1,098 2,210

2012 FOREIGN DEBT INTEREST MATURITIES (US$ million)

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DAILYVOLUMEONTHESAOPAULOSTOCKEXCHANGE(averagedailyvolume,inUS$millionforOctober)

MONTHLYVARIATIONOFTHECOMPOSITEINDEXOFTHESAOPAULOSTOCKEXCHANGE,INPERCENT

B

B

B

B

B

B

B

BB

B

B

-0.2

11.1

4.3

-1.9

-4.1

-11.8

-0.2

3.2

1.7

3.7

-3.5

D J F M A M J J A S O-16

-11

-6

-1

4

9

BBB

B BBBBB

B

B

B

B

BB

BB B B

B

B B

1 2 3 4 5 8 9 1011151617181922232425262930311000

2000

3000

4000

5000

6000

7000

8000

9000