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Brazilian Economic
OUTLOOK14 Special Edition | February | 2012
th
Ministry ofFinance
B R A Z I L I A N G O V E R N M E N T
Ministry of Finance
Special Edition | Year 2011
3
Foreword
Economic Activity
Employment and Income
Inflation
Interest Rates and Credit
Fiscal Policy
External Sector
International Overview
Special Section – Brazil: A Decade of Progress
Glossary
Summary
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9
33
45
57
75
91
109
135
154
NOTE
Brazilian Economic Outlook is published by the Ministry of Finance. The report consolidates and updates the main macroeconomic variables resulting from the economic policy conducted by the following Secretariats from the Ministry of Finance: Economic Policy Secretariat (SPE), National Treasury Secretariat (STN), International Affairs Secretariat (SAIN), Secretariat for Economic Monitoring (SEAE) and Federal Revenue Secretariat (RFB).Data used in this report were updated by February 2nd, 2012.
Ministry of Finance
Special Edition | Year 2011
7
Ministry of Finance
Foreword
7
2011 at a glance and prospects for 2012
In the global context, 2011 was affected by the worsening of the 2008 financial crisis, sovereign debt problems within the Eurozone and the political gridlocks in the U.S. The quantitative easing policy fostered by the United States and Europe turned out to put upward pressure on commodity prices, fueling global inflationary process and leading to the breaching of inflation targets in most inflation targeting countries.
The Brazilian government acted promptly to quell the acceleration of prices via macro-prudential and fiscal measures. It’s worth noting the fiscal consolidation program issued early in 2011, which helped to meet the full primary surplus at the end of the year and had a decisive role in the monetary easing process. In the FX market, the management of capital inflows has been recognized by international experts and agencies, and it has helped price stabilization policy in Brazil, in addition to financial stability.
In 2011, the success of the economic growth model adopted by the Brazilian government included several important measures, such as: new stages of “PAC” investment and strategy program, and “Minha Casa, Minha Vida” housing program; expansion of the “Bolsa Familia” conditional cash transfer program along with the “Brasil sem Miseria” program; the new industrial policy in the “Brasil Maior” plan; expansion of the “Simples” tax regime for microenterprises; “Pronatec” program aiming technical and professional qualification of workers and “Crescer”, a productive-oriented microcredit program. Furthermore, several measures of bureaucratic rightsizing and modernization were taken by the Internal Revenue Service and the National Treasury. It is still worth mentioning the consolidation of a long-term minimum wage increase policy, with a real increase of 66% since 2003, reaching R$ 622 in January 2012.
As a result of the growth model, Brazil has become the world’s 6th largest economy. Forecasts from international agencies indicate that the country may be the 5th largest world power in the near future. The year of 2012 has
Ministry of Finance
Special Edition | Year 2011
8
Ministry of Finance
Foreword
8
started with a more competitive exchange rate, lower interest rates, sound fiscal and financial institutions, low unemployment, controlled inflation, high consumer and business confidence, along with a strong portfolio of public and private investments for the coming years in various sectors of the economy.
For 2012, the Federal Government will work to support the well-succeeded growth model, encouraging public and private investments in infrastructure and industry, increasing professional qualification, and substantially reducing extreme poverty.
Brazilian Economy
OUTLOOK
Ministry ofFinance
B R A Z I L I A N G O V E R N M E N T
Economic Activity
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
10
By the third quarter of 2011, government policies and international crisis worsening have put the Brazilian economy into a process of accommodation. From that time on, policies have been gradually withdrawn, especially those for easing economic activity. Late in 2011, the country’s economic performance started to rebound even under the aggravation in the international landscape. Such recovery can be seen through the economic indicators such as Economic Activity Index of the Central Bank of Brazil, industrial production and energy consumption.
The quality in 2011 GDP growth has been even more important than its expansion pace. Investment has grown faster than household and government consumptions, which indicates increase in the productive capacity higher than demand in the coming years. Thus, the Government announced a set of measures in 2011 focusing on the strengthening of the domestic industry. Such policy is called “Plano Brasil Maior” filled with tax proposals, trade policy and a wide workforce qualification program.
It’s also worth mentioning the vigorous growth of “PAC” investment and strategy program, from R$ 29.7 billion in 2010 to R$ 35 billion in 2011. The disbursements of “Minha Casa, Minha Vida” housing program amounted to R$ 41.4 billion, compared to R$ 37.2 billion in 2010.
Economic growth even under worsening international crisis
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
11
GDP Growth (% YoY)
Data: % annual
* 2011: IBGE data accumulated in the first three quarters over the same period in 2010** Ministry of Finance estimates
Source: IBGE and Ministry of FinanceElaboration: Ministry of Finance
A sustainable economic growth in Brazil
The year of 2011 was important to consolidate the Brazilian long term growth path in an environment of international growth slowdown. After a lower growth in 2011, the Brazilian economy will grow faster in 2012. Since investments will come from both private and public sectors, the average growth rate until 2014 will be higher than previous four years.
5.2
2014**
2013**
2012**
2011*2010
20092008
20072006
20052004
20032002
20012000
19991998
3.5%Average
4.6%Average
4.8%Average
1.1
5.7
3.24.0
6.1
5.2
-0.3
7.5
0.00.3
4.3
1.3
2.73.2
InternationalCrisis
InternationalCrisis
InternationalCrisis
InternationalCrisis
4.5 5.5 6.0
1.7%Average
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
12
Economic Activity Index (index number, seasonally adjusted)
Data: index number, seasonally adjusted (2002=100)
Source: Central Bank of BrazilElaboration: Ministry of Finance
Index indicates growth in the economic activity
According to the IBC-BR (Economic Activity Index of Central Bank of Brazil), there has been a 1.15% expansion in November 2011 compared to the previous month. Therefore, a positive change is expected in the third and fourth quarters of the year.
90
105
120
135
150
Nov 2011
Apr 2011
May 2010
Jun 2009
Jul 2
008
Aug 2007
Sep 2006
Oct 2005
Nov 2004
Dec 2003
Jan 2003
140.19
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
13
Industrial Production Index (index number, seasonally adjusted)
Data: index number, seasonally adjusted (average 2002=100)
Source: IBGEElaboration: Ministry of Finance
Industrial production
Industrial production grew 0.3% in 2011 below the 10.5% posted in 2010. In the first three months of the year, there was a general increase in the level of production due to the expansion pace in 2010. In 2011, the main highlights are the transportation sector and the capital goods industry as a whole, with a 3.3% hike in annual terms.
80
91
102
113
124
135
Dec 20112011
20102009
Oct 2008
20082007
2006
127.7
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
14
Retail Sales Volume (%, 12-month basis)
Retail Monthly Survey Retail Monthly Survey (Broad)* Retail Sales Per Sector
Data: % in a 12-month basis up to November 2011
* Including automobiles, motorcycles, parts and pieces, and construction materials
Source: IBGEElaboration: Ministry of Finance
Retail sales growth slows down
In the accumulated 12 months up to November, retail sales grew 7.0% and broad retail sales grew 7.7%. For the whole 2011, the sector’s performance should be less than in 2010, when it accumulated respective increases of 10.9% and 12.2%.
7.0
7.7
0
2
4
6
8
10
12
14
16
Nov 2011
Aug 2011
Mar 2011
Sep 2010
Mar 2010
Sep 2009
Apr 2009
Nov 2008
Fuels and lubricants
Hypermarkets and supermarkets
Hyper&Supermkt, Food, Beverages and Tobacco
Other personal and household articles
Textiles, apparel and footwear
Vehicles, motorcycles, parts and accessories
Books, newspapers, magazines and stationery
Material of construction
Art Farm., Doctors. ort. of perf. and cosm
Furniture and household
Equip. and mat. to esc., inf. and communication 18.6
16.9
10.4
10.0
9.0
8.4
5.0
4.8
4.2
4.2
2.1
Total Per Sector
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
15
Installed Capacity Utilization Level (%, seasonally adjusted)
NUCI - CNI NUCI - FIESP* NUCI - FGV
Data: %, seasonally adjusted
* Covering the industry of São Paulo only
Source: CNI, Fiesp and FGVElaboration: Ministry of Finance
Capacity utilization slows down in 2011
In line with the slowdown in industrial activity throughout the year, indicators of the Installed Capacity Utilization (NUCI) showed some decline in 2011. For 2012, more positive economic performance figures are expected and are likely to be reflected in a more intense capacity utilization of the domestic industry.
75
77
79
81
83
85
87
89
Dec 2011
Nov 2011
May 2011
Jan 2011
Sep 2010
May 2010
Jan 2010
Sep 2009
May 2009
Jan 2009
Sep 2008
May 2008
Jan 2008
Sep 2007
May 2007
Jan 2007
Sep 2006
81.5 80.9
83.4
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
16
Installed Capacity Utilization Level per Sector (%, seasonally adjusted)
Data: %, seasonally adjusted
* Period: 2000-2011
Source: FGVElaboration: Ministry of Finance
Capacity utilization per sector
The process of accommodation of the economy had a slight decrease in its capacity utilization indexes. However, the sectoral levels have been within regular economic activity conditions.
NUCI per Setor Dec 2010 Dec 2011 Average by Sector*NUCI per Sector 84.9 83.4 82.6General Industry 90.3 88.6 84.6Construction material 91.2 87.1 84.5Non-metallic minerals 90.1 86.6 81.5Material of Transport 85.2 86.3 84.7Clothing and Footwear 89.2 85.9 80.8Durable goods 78.3 85.0 76.7Electrical equipment 85.2 84.5 82.0Mechanics 88.8 84.4 83.7Plastic products 84.5 83.3 80.4Capital goods 83.1 83.0 82.1Food 85.0 82.9 80.3Consumer goods 80.2 81.5 78.2Other products 74.5 69.9 69.5Pharmaceutical products 92.1 91.7 92.3Pulp and Paper 85.0 84.1 84.5Chemistry 85.9 83.8 86.2Intermediate goods 89.3 83.6 88.5Metallurgy 86.4 83.1 86.5Textiles 82.0 79.8 79.9Non-durable goods 75.1 75.8 77.8Furniture 75.1 75.8 77.8
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
17
Industry and Consumer Confidence Indexes (points, seasonally adjusted)
Consumer Confidence Index Industry Confidence Index
Data: points, seasonally adjusted
Source: FGVElaboration: Ministry of Finance
Confidence in the Brazilian economy remains positive
The Industry Confidence Index has stabilized since November, closing at 101.8 points in 2011. In January 2012, there was an even better performance (102.3 points). On the other hand, consumer confidence ended the year at 119.6 points and reached 116.0 in January. Despite the marginal decline, the indicator is still at optimistic levels and a gradual recovery for the industry is expected in 2012.
80
90
100
110
120
130
Jan 2012
Dec 2011
Nov 2011
Oct 2011
Sep 2011
Aug 2011
Jul 2
011
Jun 2011
May 2011
Apr 2011
Mar 2011
Feb 2011
Jan 2011
Dec 2010
Nov 2010
Oct 2010
Sep 2010
Aug 2010
Jul 2
010
Jun 2010
May 2010
Apr 2010
Mar 2010
Feb 2010
Jan 2010
OptimisticPessimistic
102.3
116.0
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
18
Brazilian Grain Crop - Cereal grains, vegetables and oilseeds (millions of tons)
Data: millions of tons
Source: CONAB/MAPAElaboration: Ministry of Finance
New record for the Brazilian harvest in 2011
The agricultural production in Brazil reached a record of 163 million tons of grains in 2011, an increase of 9.2% when compared to the previous year. The result consolidates Brazil as one of the world’s leading food producers.
50
100
150
200
2010/11
2009/10
2008/09
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
2001/02
96.8
123.2 119.1 114.7122.5
131.8144.1
135.1
149.3
163.0
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
19
Rural Financing Program (R$ billion)
Total Family Agriculture Commercial Agriculture
Data: R$ billion
* Including other credits
Source: CONAB/MAPAElaboration: Ministry of Finance
Harvest Plan fosters agricultural dynamism
The 2011/2012 Agriculture and Livestock Plan reached a total of R$ 123.2 billion, an increase of 6.2% compared to the previous crop. From this total, R$ 107.2 billion is directed to business agriculture and R$ 16 billion to family farming. The resources will be used to operation funding, investment, trading, insurance premium subsidy to rural areas and support to sustainable agronomic practices.
0
30
60
90
120
150
16.0
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07*
2005/06*
2004/05
2003/04
2002/03
24.732.6
46.556.9
63.070.0
78.0
108.0116.0
123.2
4.25.4
7.09.0
20.5 27.2 39.5 44.4 50.0 58.0
10.012.0
13.0
65.0
16.0
100.0
16.0
107.2
15.0
93.0
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
20
GDP and Investment – GFCF (% YoY)
Investment (GFCF) GDP
Data: % annual
* Ministry of Finance estimate
Source: IBGEElaboration: Ministry of Finance
Investments growing larger than GDP
Since 2004, investment growth rates have been higher than GDP growth, with the exception of 2009. The result is a higher production capacity able to meet an increasing domestic demand. For the following years, the growth model adopted by the Federal Government will give even greater emphasis on investment in all sectors of the economy.
-10
-5
0
5
10
15
20
25
2012**
2011*2010
20092008
2007 2006
20052004
2003
1.1
5.7 3.
2 4.0
6.1
5.2
-0.3
7.5 3.
2
4.5
-4.6
9.1 3.
6
9.8
13.9
13.6
-6.7
21.3
5.3
10.8
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
21
Investment – GFCF (% of GDP)
Data: % of GDP
* Ministry of Finance estimate
Source: IBGEElaboration: Ministry of Finance
Participation of investments in GDP on an upward trend
The opportunities in the Brazilian economy and the measures taken to encourage long-term investment will enlarge the contribution of investment to economic growth, which is expected to reach 20.8% of GDP in 2012.
0
5
10
15
20
25
2012*
2011*2010
20092008
20072006
20052004
20032002
16.4 15.3 16.1 15.9 16.4 17.4 19.1 18.1 19.5 19.6 20.8
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
22
PAC 2 (R$ billion)
Data: R$ billion
Source: MPOGElaboration: Ministry of Finance
Investments of PAC on a rise
The second stage of the Growth Acceleration Program (PAC 2) aims to provide infrastructure through investments near R$ 1 trillion within 2011-2014. Nearly 50% of the total will be directed to investments in energy and 30% in “Minha Casa, Minha Vida” housing program. Investments in energy and transportation sectors have already been established from 2014 on.
PAC 2
Axes 2011-2014 After 2014 Total
PAC Better city 57.1 57.1
PAC Citizenship Community 23.0 23.0
PAC My House My Life 278.2 278.2
PAC Water and Light for All 30.6 30.6
PAC Transportation 104.5 4.5 109.0
PAC Energy 461.6 626.9 1,088.5
Total 955.0 631.4 1,586.4
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
23
PAC: Committed nominal values (R$ billion)
Data: R$ billion
* LOA 2012
Source: STN/Ministry of FinanceElaboration: Ministry of Finance
PAC commitment will grow 20% in 2012
The amounts committed to PAC increased significantly, reaching R$ 35.4 billion in 2011. It represents a growth of almost 20%, when compared to 2010, and a 121.3% expansion between 2007 and 2011. In line with the economic growth model based upon investments, a 20.3% expansion has been estimated for 2012, reaching R$ 42.6 billion.
0
10
20
30
40
50
2012*2011
20102009
20082007
16.0 17.0 27.1 29.7 35.4 42.6
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
24
Disbursement of MCMV Program (R$ billion)
Data: R$ billion
* Caixa Econômica Federal estimate
Source: Caixa Econômica FederalElaboration: Ministry of Finance
“Minha Casa, Minha Vida”housing program: growth with social inclusion
Since 2009, disbursements for the MCMV housing program have grown by 431% reaching R$ 37.2 billion in 2011, which is equivalent to 480,000 new homes in 2011 alone. In the period 2011-2014, two million new units are expected to be built, with investments predicted to reach a total of R$ 142.3 billion.
0
10
20
30
40
50
2014*
2013*
2012*2011
20102009
7.0 30.4 37.2 31.6 32.241.3
Goal for the 2011 - 2014period (MCMV 2):2 million homesAccomplished 2011: 480 thousand homes
Minha Casa, Minha Vida 2
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
25
Investments to the 2014 World Soccer Cup (R$ billion)
Data: R$ billion
Source: Ministry of FinanceElaboration: Ministry of Finance
Investments for the World Soccer Cup
In the coming years, the country will rely on investments in several sectors, including sports. A total of R$ 33 billion will be allocated in the implementation of the infrastructure for the World Soccer Cup in 2014. Most will be directed to transportation projects, of which R$ 11.6 billion for urban mobility and R$ 5.5 billion for ports and airports.
Total Infrastructure
Hotels
Security and Health
Telecom and Energy
Civil Infrastructure (Total)
Ports and Airports
Urban Mobility
Stadiums 5.7
11.6
5.5
22.8
3.8
4.6
1.9
33.1
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
26
Nine Major Projects of Ports in the World* (US$ billion)
Data: US$ billion
* In the final stages of preparation or in progress
Source: CG-LA, Exame yearbook 2011-2012Elaboration: Ministry of Finance
Brazil stands out in port investments
Brazil has two of the largest projects of investment in ports in the world: the expansion of the Port of Santos and the construction of the Açu Port in Rio de Janeiro, the largest venture investment in port in Latin America.
Port of Sohar expansion
Açu Superport (RJ)
Ras La�an Port expansion
London Gateway Port
Port of Santos expansion (SP)
Yangtze River dredging
Port of Rotterdam expansion
Panama Canal expansion
Yangshan Port 8.06.5
4.03.6
2.92.5
2.01.8
1.0Oman
Brazil
Qatar
United Kingdom
Brazil
China
Netherlands
Panama
China
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
27
Ten Major Projects in the Oil and Gas Sectors in the World* (US$ billion)
Data: US$ billion
* In the final stages of preparation or in progress
Source: CG-LA, Exame yearbook 2011-2012Elaboration: Ministry of Finance
Investments in the Oil and Gas sectors
Petrobras investments in building platforms and ship-oil-platforms are also highlights in the Oil and Gas sectors. Together, they total US$ 40 billion.
Abadi gas �eldIndonesia
Nabucco gas pipelineTurkey
Petrobras platform ships (ES-RJ-SP)Brazil
Trans-Saharan gas pipelineNigeria
Keystone XL oil pipelineCanada
Petrobras oil platforms (RJ-ES-SP)Brazil
Ichthys gas �eldAustralia
Wheatstone gas �eldAustralia
Pilbara gas �eldAustralia
Gorgon gas �eldAustralia 44.035.0
30.030.0
25.020.020.0
15.011.3
10.0
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
28
Sixteen Major Transport Projects in the World* (US$ billion)
Data: US$ billion
* In the final stages of preparation or in progress
Source: CG-LA, Exame yearbook 2011-2012Elaboration: Ministry of Finance
Brazil has a wide investment program in transports
Among the 16 largest investment projects related to transportation in the world, four of them are in Brazil: two related to the expansion of its railway network, one for subway system and another to build highways throughout the country.
Transnordestina railroad (CE-PE-PI)BrazilHo Chi Minh City beltwayVietnamSão Paulo beltway, north sectionBrazilHau river underground railroadVietnam
São Paulo subway expansionBrazilShangai-Hangzhou trainChina
Detroit river international bridgeUSANha Trang railroadVietnam
Norte-Sul railroad (GO-MA-MG-MS-PA-SP-TO)BrazilRailroad transportation (Colorado)USA
Kuala Lumpur-Klang Valley railroadMalaysiaHong Kong-Zhuhai-Macau bridgeChinaHarbin-Dalian railroadChinaO´Hare airport modernization programUSANew Kunming AirportChina 23.1
15.014.0
10.710.3
6.96.7
5.75.3
5.04.3
4.03.83.7
3.4
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
29
Fifteen Major Projects in the the Electricity Sector in the World*(US$ billion)
Data: US$ billion
* In the final stages of preparation or in progress
Source: CG-LA, Exame yearbook 2011-2012Elaboration: Ministry of Finance
Significant investments in the electricity sector
The energy sector is also a priority for the Brazilian government. Among the fifteen largest sector projects in the world, six are located in Brazil, with emphasis on the construction of the Belo Monte power plant.
Jiuquan wind power base
Teles Pires (MT-PA) hydroelectric power plantPescadero hydroelectric power plant
Mundra thermal power plantAngra 3 nuclear plant
Xiangjiaba hydroelectric power plantRomaine hydroelectric power plantPace River hydroelectric power plantXiluodu hydroelectric power plantJirau (RO) hydroelectric power plantSanto Antônio (RO) hydroelectric power plantYangjiang nuclear plantGreen Power Express transmissionSão Luiz do Tapajós (PA) hydroelectric power plantBelo Monte (PA) hydroelectric power plant
18.216.0
12.612.0
10.210.0
8.26.8
6.66.5
6.36.3
4.23.0
2.5BrazilColombia
IndiaBrazilChina
CanadaCanada
ChinaBrazilBrazilChina
USABrazilBrazilChina
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
30
High-speed Train: Investment and its composition (R$ billion and % of total)
Data: R$ billion and % of total
* Estimated amounts subjected to changes
Source: STN/Ministry of FinanceElaboration: Ministry of Finance
Investments: High Speed Rail
Investments for the construction of high-speed train linking the cities of Rio de Janeiro, Sao Paulo and Campinas will total approximately R$ 35 billion. The model of transport will benefit the whole population.
Total: R$ 34.6 billion*
Phase 1
High SpeedTrain (TAV)
Phase 2
6.7 billion 27.9 billion
11.3% Expropriations9.8% Systems and Equipment
7.9% Trains71% Civil Works
* Estimate data from 2009, subject to changes.
Ministry of Finance
Special Edition | Year 2011Econom
ic Activity
31
Airport Concession: Planned Investments (R$ billion)
Data: R$ billion
Source: STN/Ministry of FinanceElaboration: Ministry of Finance
Airport concessions generate more investments in the sector
The investments scheduled for the airport sector in Brazil are close to R$ 3 billion, if only the concessions of the airports in Brasilia, Guarulhos and Viracopos are considered. The licensing system will be important for the private sector to take part in the growth process. The well-succeeded auction showed the great interest of the private sector and its potential for profit.
GuarulhosExpansion of passengersterminal, land transportnetworks, departuresand boarding area.
2012 - 2014
R$ 627 million
2012 - 2014
R$ 1.38 billion
2012 - 2014
R$ 873 million
New terminal building,new taxiway, departureexpansion.
ViracoposTerminal building (firstphase) and departureexpansion.
Brasilia
Planned Investments
Brazilian Economy
OUTLOOK
Ministry ofFinance
B R A Z I L I A N G O V E R N M E N T
Employment and Income
Ministry of Finance
Special Edition | Year 2011
34
Employm
ent and Income
The unemployment rate reached 4.7% in December 2011, the lowest level registered by IBGE (the Brazilian Bureau of Statistics). Growth of formalization in the labor market is equally important. Since 2003, the economy has created almost 17.3 million formal jobs. The performance is even more significant when contrasted with the adverse scenario of the labor market in the world’s largest economies.
Economic growth with social and productive inclusion has oriented Government policies. In 2011, 325,000 new households have started to collect the benefits from the “Bolsa Familia” conditional cash transfer program, totaling 13.3 million beneficiaries.
Social inclusion and job creation are the highlights in 2011
Ministry of Finance
Special Edition | Year 2011
35
Employm
ent and Income
Gini Income Index* (12- month moving average)
Data: 12-month moving average
* People over 10 years of age. Based upon the per capita income, considering the monthly income of all types of work effectively received
Source: IBGEElaboration: Ministry of Finance
Income inequality in a continuous decrease
The Gini index, used to measure income inequality, has been falling continuously in recent years. The explanation comes from the reduction of inequality in labor income and from the minimum wage increase policy, along with the income transfer programs and macro-economic stability.
0.540
0.545
0.550
0.555
0.560
0.565
Nov 2011
Aug 2011
Jun 2011
Apr 2011
Feb 2011
Dec 2010
Oct 2010
Aug 2010
Jun 2010
Apr 2010
Feb 2010
Dec 2009
Oct 2009
Aug 2009
Jun 2009
0.541
Ministry of Finance
Special Edition | Year 2011
36
Employm
ent and Income
“Bolsa Família” Income Transfer Program (% of GDP, R$ billion and million of households)
Bolsa Família (% of GDP) Bolsa Família (R$ billion) Number of Households (million)
Data: % of GDP, R$ billion and million households
Source: MDSElaboration: Ministry of Finance
“Bolsa Família” cash transfer program helps to fight inequality
“Bolsa Família” is considered one of the most efficient programs to reduce poverty focused on the poorest of the population. The program has contributed significantly to the reduction of inequality, encompassing, with a relative low cost, 13.3 million households in December 2011.
0.0
0.1
0.2
0.3
0.4
0.5
2011*2010200920082007200620052004
0.20 0.27 0.32 0.34 0.35 0.38 0.38 0.410
5
10
15
20
13.3
17.0
Ministry of Finance
Special Edition | Year 2011
37
Employm
ent and Income
Real Minimum Wage Evolution (R$ - annual average in 2011 prices)
Real minimum wage increased more than 66% in the past 10 years
The acceleration of economic growth in recent years has led to a relevant increase in the per capita income. As a result of the Government’s policy, the minimum wage had an even more significant rise of 66% between 2002 and 2012. In January 2012, it increased from R$ 545 to R$ 622, which will inject up to R$ 50 billion in the domestic market.
0
100
200
300
400
500
600
700
800
Jan 2012
Mar 2011
Jan 2011
Jan 2010
Feb 2009
Mar 2008
Apr 2007
Apr 2006
May 2005
May 2004
Apr 2003
Apr 2002
200 260 300 350 380 415 465 510 540 545 622240
Nominal growth 211% Real growth 66%
Data: R$ - Annual average in 2011 prices
Source: IPEAProduced by: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
38
Employm
ent and Income
Unemployment Rate (% of economically active population)
Data: % of economically active population
Source: IBGEElaboration: Ministry of Finance
A sharp decline in unemployment rate
Even in a scenario of low economic growth, there has been a good performance in the labor market. There was a decline of unemployment, which reached 4.7% in December 2011. It shows the dynamism of the Brazilian economy in a scenario rather different from advanced economies.
4
5
6
7
8
9
10
11
12
13
14
Dec 2011
Jan 2011
Jan 2010
Jan 2009
Jan 2008
Jan 2007
Jan 2006
Jan 2005
Jan 2004
Jan 2003
Dec 2002 4.70
Ministry of Finance
Special Edition | Year 2011
39
Employm
ent and Income
Regional Unemployment (% of economically active population)
Recife Salvador Belo Horizonte Rio de Janeiro São Paulo Porto Alegre
Data: % of economically active population
Source: IBGEElaboration: Ministry of Finance
An overall drop in regional unemployment rates
With regards to a regional analysis, it is important to highlight the unemployment rates in the cities of Porto Alegre (3.1%), Belo Horizonte (3.8%) in December 2011. It’s worth mentioning the 2.2 p.p. decrease in the unemployment rate in Recife, as a result of the new cycle of investments in Pernambuco state.
0
2
4
6
8
10
12
14
16
18
20
Dec 20112011
20102009
20082007
20062005
20042003
2002
7.7
4.74.74.9
3.83.1
Ministry of Finance
Special Edition | Year 2011
40
Employm
ent and Income
Formalization Rate (%)
Formally employed over the occupied population Contributors to social security over the occupied population
Data: %
Source: IBGEElaboration: Ministry of Finance
Improving the quality of labor force
A qualitative improvement of employment in Brazil contrasts with the increase in degree of formalization of the labor market. According to IBGE, the proportion of formally employed workers in relation to the total employed population rose to an annual average of 53.6% in 2011. Similarly, the proportion of contributors to social security in relation to the employed population reached 71.9% on the same basis of comparison, which shows greater social protection for more workers.
0
10
20
30
40
50
60
70
80
20112010
20092008
20072006
20052004
20032002
63.0
60.1
60.1
62.8
63.2
64.8
66.4
66.1
69.2
71.9
45.5
43.5
43.8
45.5
46.1
47.6
49.2
49.3
51.6
53.6
Ministry of Finance
Special Edition | Year 2011
41
Employm
ent and Income
Job Creation CLT (thousands of jobs)*
Data: Thousands of jobs covered by CLT (Consolidation of Labor Law)
* Not including information declared out of time
Source: MTEElaboration: Ministry of Finance
Formal employment records the third best performance of the series
Data from the Ministry of Labor and Employment reported the creation of 1.5 million formal jobs in 2011.It is one of the best performances in the time series. Adding the jobs generated in the public service, about 17.3 million jobs were created in Brazil from 2003 to 2011.
0
500
1,000
1,500
2,000
2,500
2011
2010
2009
2008'
2007
2006
2005
2004
2003
645 1,523 1,254 1,229 1,617 1,452 995 2,137 1,566
Ministry of Finance
Special Edition | Year 2011
42
Employm
ent and Income
Occupied Population by Educational Level (% of total)
2003 2011
Data: % of total
Source: IBGEElaboration: Ministry of Finance
Brazilian workers’ growing level of education
The increase in the educational level of the employed population provides an important explanation for the increase in productivity, which reduces production costs, raises wages and business profitability. In 2003, the occupied population with 11 or more years of schooling accounted for 46.7% of the total. The percentage jumped to 60.7% in 2011.
0
10
20
30
40
50
60
70
80
11 or more
years
of schoolin
g
8 to 10 years
of schoolin
g
4 to 7 years
of schoolin
g
1 to 3 y
ears
of schoolin
g
No schooling or
with le
ss than1 year
of schoolin
g
1.6 3.4 17.3 17.0 60.73.0 6.3 24.7 19.1 46.7
Ministry of Finance
Special Edition | Year 2011
43
Employm
ent and Income
Composition of Brazilian Social Classes (millions of people)
Data: millions of people
Source: FGVElaboration: Ministry of Finance
A middle-class nation
In addition to strengthening the domestic market and enhancing growth of the poorest regions in the country, the new cycle of economic development fosters the expansion of the new middle class. The growing middle class has been the result of a better income for the poorest since 2003.
A Class
B Class
C Class
D Class
E Class
2002 2009
9.6
10.4
95.0
44.5
28.9
7.2
7.3
67.5
46.1
46.6
Total: 175 million Total: 188 million
Ministry of Finance
Special Edition | Year 2011
44
Employm
ent and Income
Average Growth Rate of the per capita Income - 2001 to 2009
Data: Average growth rate (2001-2009)
* Estimates based on PNAD (2001 to 2009)
Source: IBGEElaboration: Ministry of Finance
Economic growth and income distribution
The economic growth of recent years has allowed all levels of per capita household income to record substantial growth. It’s noteworthy the 7.2% growth rate of per capita household income from the 10% poorest.
0
1
2
3
4
5
6
7
8
TenthNinth
Eighth
Seventh
SixthFift
hRoom
ThirdSecond
First
7,2 6,3 5,9 5,4 4,9 4,6 4,0 3,3 2,5 1,4
10%poorest
10% richest
Brazilian Average
Brazilian Economy
OUTLOOK
Ministry ofFinance
B R A Z I L I A N G O V E R N M E N T
Inflation
Ministry of Finance
Special Edition | Year 2011
46
Inflation
For seven consecutive years, the Brazilian inflation, measured by CPI inflation (IPCA index), has met the targets set by the National Monetary Council. Inflationary pressures in 2011 were predominantly caused by external factors, due to commodity price shocks in the first half of the year. As a result, many countries that adopt the inflation targeting regime recorded price rises above established limits.
The Brazilian Government–aware of the pressure from high prices–acted promptly, through its interest rate policy, the adoption of macro-prudential measures and a decisive fiscal consolidation program. As a result, prices have been far more behaved since mid-2011. The expectation is that consumer inflation will follow a downward trend toward the center of the target for 2012.
Inflation target is met in 2011
Ministry of Finance
Special Edition | Year 2011
47
Inflation
Inflation: IPCA (% YoY)
CPI inflation (IPCA index) Inflation target Upper and lower bounds
Data: % annual
* Central Bank of Brazil Inflation Report (December 2011)
Source: IBGE and Central Bank of BrazilElaboration: Ministry of Finance
Inflation within the target range
After a period of increases, price pressures observed in the first half of 2011 began to dissipate. There was a 12-month rate decline from October on. According to Central Bank of Brazil estimates*, the CPI inflation (IPCA index) will be around 4.7% in 2012, indicating convergence to the central target (4.5%).
0
2
4
6
8
10
12
14
2012*
2011*2010
20092008
20072006
20052004
20032002
20012000
1999
8.9 6.0 7.7 12.5 9.3 7.6 5.7 3.1 4.5 5.9 4.3 5.9 6.5 4.7
Ministry of Finance
Special Edition | Year 2011
48
Inflation
Inflation IPCA: Headline, Market Price and Managed Goods (% YoY)
Managed Goods Market Price Goods CPI inflation (IPCA index)
Data: % annual
Source: Central Bank of BrazilElaboration: Ministry of Finance
Market and managed prices slowdown
Increases in market prices began to fall in August, reaching 6.63% in 2011 and contributing to the decline in the overall CPI inflation (IPCA index) (6.50%). The downward trend observed in managed prices since October should continue in 2012, once adjustments to bus fares, concentrated in early 2011, should not repeat this year.
0
2
4
6
8
10
Dec 2011
Jul 2
011
Mar 2011
Nov 2010
Jul 2
010
Mar 2010
Nov 2009
Jul 2
009
Mar 2009
Nov 2008
Jul 2
008
Mar 2008
Nov 2007
Jul 2
007
6.506.20
6.63
Ministry of Finance
Special Edition | Year 2011
49
Inflation
Inflation: IPCA (% MoM)
2011 2010 2009
Data: % monthly
Source: IBGEElaboration: Ministry of Finance
Monthly consumer inflation decreasing since October
CPI inflation (IPCA index) has been decelerating significantly since May 2011, when compared to the figures observed at the beginning of the year. The increase in the consumer price monthly index in the second half of 2011 did not go as high as the levels observed in 2010.
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
DecNovOctSepAugJulJunMayAprMarFebJan
0.37
0.63
0.50
Ministry of Finance
Special Edition | Year 2011
50
Inflation
Inflation: IPCA (% MoM)
Inflation rates decline
Consumer prices showed an unusual increase in the first months of 2011, driven by high commodity prices. Such pressure faded away throughout the year and, in the second half of 2011, mainly CPI inflation (IPCA index) started to ease down significantly.
0.0
0.2
0.4
0.6
0.8
1.0
Dec 2011
Nov 2011
Oct 2011
Sep 2011
Aug 2011
Jul 2
011
Jun 2011
May 2011
Apr 2011
Mar 2011
Feb 2011
Jan 2011
Dec 2010
Nov 2010
Oct 2010
0.750.83
0.63
0.83 0.80 0.79 0.77
0.47
0.15 0.16
0.37
0.530.43
0.52 0.50
Monthly Average: 0.77%
Monthly Average: 0.39%
CPI inflation (IPCA index) Average
Data: % monthly
Source: FGVElaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
51
Inflation
IPCA: Major Contributions in 2011 (p.p.)
Data: percentage points
Source: IBGEElaboration: Ministry of Finance
CPI inflation (IPCA index): Main sources of pressure in 2011
The “Food and Beverage” group was the main source of pressure on the CPI inflation (IPCA index) in 2011, especially “Away-from-home” food. Also, fuel and transportation costs played an important role due to the increase of public transportation fares, especially bus fares and airline tickets. Personal expenses were important as well due to increases in costs related to household maids, recreation and housing (especially, rental costs). The ten items which most contributed to the CPI inflation (IPCA index) totaled 4.28 percentage points of the 6.5% recorded in 2011.
1.68
1.14
0.89
0.89
0.68
0.58
0.56
0.08
Household articles
Communication
Clothing
Education
Health and personal care
Housing
Personal expenses
Transportation
Food and beverage
Ministry of Finance
Special Edition | Year 2011
52
Inflation
Inflation IPCA: Food Prices (% MoM)
2009 2010 2011
Data: % monthly
Source: IBGEElaboration: Ministry of Finance
Food inflation
Food and beverage prices increased 7.19% in 2011. The last quarter of the year registered pressures from away-from-home eating and also from meat prices. Even so, towards the end of the year, monthly inflation was much lower when compared to 2010, which contributed decisively to the convergence of the CPI inflation (IPCA index) to the target set by the Monetary Policy Committee.
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
DecNovOctSepAugJulJunMayAprMarFebJan
1.32
0.24
1.23
Ministry of Finance
Special Edition | Year 2011
53
Inflation
Inflation: IGP-DI and Components (% YoY, 12-month basis)
IGP-DI IPA-DI INCC-DI IPC-Br
Data: % annual in a 12-month basis
* As of December 2011
Source: FGVElaboration: Ministry of Finance
General Price Index (IGP-DI) decelerates
The General Price Index (IGP-DI) took a downward trend throughout 2011 and ended the year with inflation at 5.00%. Such dynamics was mainly related to the behavior of PPI inflation (IPA index), which increased 4.12% due to the behavior of the exchange rate and commodity prices. Moreover, construction costs (INCC-DI) reflected the dynamism of the sector and rose 7.49% in 2011, affecting especially labor costs.
-6
-3
0
3
6
9
12
15
Dec 2011
Nov 2011
Oct 2011
Sep 2011
Aug 2011
Jul 2
011
Jun 2011
May 2011
Apr 2011
Mar 2011
Feb 2011
Jan 2011
Dec 2010
Nov 2010
Oct 2010
Sep 2010
Aug 2010
Jul 2
010
Jun 2010
May 2010
Apr 2010
Mar 2010
Feb 2010
Jan 2010
Dec 2009
Nov 2009
Oct 2009
Sep 2009
Aug 2009
Jul 2
009
7.496.365.004.12
Ministry of Finance
Special Edition | Year 2011
54
Inflation
IPCA Inflation: Market Expectations (% YoY, 12-month basis)
Data: % annual in a 12-month basis
* Data achieved by December 2011. After that, forecast from the FOCUS research of Central Bank of Brazil - Jan/20/2012.
Source: Central Bank of BrazilElaboration: Ministry of Finance
Consumer inflation is expected to ease
Following the downward trend started in October 2011, inflation expectations are showing a significant decrease in consumer prices during the first half of 2012. Such forecast was conducted by the Central Bank of Brazil in its market survey called Focus.
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
May 2012
Apr 2012
Dec 2011
Aug 2011
Apr 2011
Dec 2010
Aug 2010
Apr 2010
Dec 2009
Aug 2009
Apr 2009
Dec 2008
5.34
Ministry of Finance
Special Edition | Year 2011
55
Inflation
IPCA Inflation: Weighting and Classifications Structure (p.p.)
Previous Classification Actual Classification
Data: percentage points
Source: IBGE and Central Bank of BrazilElaboration: Ministry of Finance
Services weight on the new CPI inflation weighting structure
CPI inflation (IPCA index)´s new weighting structure has given more consideration to service costs. The main reason was related to the new rules followed by the Central Bank of Brazil, according to international standards recommended by the UN. For instance, away-from-home food was previously classified as a non-durable good, and it is now under the heading “services” and with 7.97 percentage points in the new weighting structure. Mobile phone and airline tickets, previously classified as managed prices, now weight 1.52 p.p. and 0.57 p.p. respectively.
0
5
10
15
20
25
30
35
Non-durableSemi-durableDurableServicesManaged
24.5 33.7 10.5 8.7 22.628.9 24.8 7.9 9.2 29.2
Ministry of Finance
Special Edition | Year 2011
56
Inflation
Inflation IPCA: Official versus Reweighted Results (% YoY)
Official results Reweighted results
Data: % annual
Source: IBGE and Ministry of FinanceElaboration: Ministry of Finance
Inflation would have been lower with new structure
Simulations considering CPI inflation (IPCA index)´s new weighting structure (POF 2008/09), applied to price variations collected from 2006 to 2011, show much lower results than the ones officially released and based on the IBGE’s Household Budget Survey (POF 2002/03).
0
1
2
3
4
5
6
7
8
201120102009200820072006
2.64
3.92
5.48
3.82
5.42
6.15
3.14
4.46
5.90
4.31
5.91
6.50
Brazilian Economy
OUTLOOK
Ministry ofFinance
B R A Z I L I A N G O V E R N M E N T
Interest Rates and Credit
Ministry of Finance
Special Edition | Year 2011
58
Interest Rates and Credit
The recent credit expansion has significantly contributed to boost domestic economic activity. It was as a result of economic stability, evolution of labor market and inclusion of a larger share of the Brazilian population into the banking system. The mass consumption market includes more people without compromising the solvency of Brazilian financial institutions. In 2011, credit to GDP ratio reached 49.1%, an increase of 3.9 pp compared to 2010.
The total percentage is consistent with an environment of moderate expansion in economic activity. The corporate segment increased by 17.4% when compared to 2010. Part of the expansion could be attributed to external funding access. The segment of individuals, on its turn, had a 20.8% increase, if compared to 2010. It’s important to underline that the cycle of monetary easing and credit measures carried out in the 2nd half of 2011, as the reduction of capital requirements for loans up to 60 months, should boost credit growth during 2012.
Credit growth consistent with the country’s degree of development
Ministry of Finance
Special Edition | Year 2011
59
Interest Rates and Credit
Nominal Interest Rate (Selic Target) and Real Ex-Ante Interest Rate* (% YoY)
Selic Interest Rate (Target) Real Ex-Ante Interest Rate
Data: % annual
* Real rate deflated by the 12-month ahead inflation expectations
Source: Central Bank of BrazilElaboration: Ministry of Finance
Real and nominal interest rates
After an upward interest rate cycle, Central Bank of Brazil reduced the benchmark interest rate (Selic) in 2.0 p.p, to 10.5%, by means of a 50bp pace reduction in August, October and November 2011, along with an additional one in January 2012.The decision took into consideration the macroeconomic fundamentals and the deterioration of the external outlook. The real interest rate reached 4.35% in January 2012. In its last report, the Central Bank of Brazil stated that Selic rate can drop below 10%.
0
5
10
15
20
25
30
Jan 2012
4.35
10.50
Nov 2011
Jan 2011
Jan 2010
Jan 2009
Jan 2008
Jan 2007
Jan 2006
Jan 2005
Jan 2004
Jan 2003
Jan 2002
Ministry of Finance
Special Edition | Year 2011
60
Interest Rates and Credit
Term Structure of Interest Rates (% YoY)
Jan 2013 Jan 2014 Jan 2016
Data: % annual
Source: Central Bank of BrazilElaboration: Ministry of Finance
The recent behavior of the term structure of interest rates
In the second half of 2011, there was an overall drop in one-day interbank deposit rates, after the Central Bank of Brazil’s decision to start an interest rate reduction cycle.
9.5
10.3
11.1
11.9
12.7
Jan 2012
Nov 2011
Oct 2011
Aug 2011
Jul 2
011
Jun 2011
May 2011
Apr 2011
Mar 2011
Feb 2011
Dec 2010
Nov 2010
Oct 2010
Sep 2010
Aug 2010
Jul 2
010
Jun 2010
May 2010
Apr 2010
Mar 2010
Feb 2010
Jan 2010
11.1
10.810.4
13.5
Ministry of Finance
Special Edition | Year 2011
61
Interest Rates and Credit
Brazilian Financial System: BNDES share of total credit (% of total)
Data: % of total
Source: Central Bank of BrazilElaboration: Ministry of Finance
The BNDES share in total credit remains at historical levels
In 2011, BNDES share in total credit reached 20.8%, a similar level as of 2010 (21.0%). The disbursements remain in line with the 20.6% historical average between 2000 and 2011.
0
5
10
15
20
25
20112010
20092008
20072006
20052004
20032002
20012000
18.9 21.0 24.3 24.0 22.1 20.4 19.0 17.1 17.1 20.0 21.0 21.0
Ministry of Finance
Special Edition | Year 2011
62
Interest Rates and Credit
Credit for Businesses (% accumulated in the period)
Average 2008 - 2011 Accumulated surplus in the period
2008 2009 2010 2011
Data: % accumulated in the period
Source: Central Bank of BrazilElaboration: Ministry of Finance
Banking credit to businesses
Banking credit for businesses grew 17.4% in 2011, compared to 19.2% in 2010. The moderate performance has been consistent with the reduction in the growth rate in the last 12 months.
-10
-5
0
5
10
15
20
25
30
35
DecNov
OctSep
AugJul
Jun
MayApr
MarFev
Jan
19.42
7.16 6.40
23.57
0
5
10
15
20
25
30
35
40
20112010
20092008
Average 21.2
36.1
12.0
19.2
17.4
Balance growth rate (% yoy) Change in balance over the year (% of total)
Ministry of Finance
Special Edition | Year 2011
63
Interest Rates and Credit
Credit for Individuals (% accumulated in the period)
Average 2008 - 2011 Accumulated surplus in the period
2008 2009 2010 2011
Data: % accumulated in the period
Source: Central Bank of BrazilElaboration: Ministry of Finance
Banking credit to individuals
Daily average credit disbursements to individuals have increased 20.8% in 2011 compared to 22.4% in 2010. The performance is consistent with an environment of moderate expansion in economic activity. Real estate financing, though, had a remarkable rise of 44.5% in the same period.
0
3
6
9
12
15
DecNov
OctSep
AugJul
Jun
MayApr
MarFeb
Jan
8.33
6.195.37
12.23
0
5
10
15
20
25
30
20112010
20092008
25.1
19.5
22.4
20.8
Balance growth rate (% yoy) Change in balance over the yer (% of total)
Average 21.9
Ministry of Finance
Special Edition | Year 2011
64
Interest Rates and Credit
Daily Average Credit Disbursements to Businesses* (R$ billion, constant prices, December 2011)
2009 2010 2011
Data: R$ billion, constant prices of December 2011 (IPCA)
* According to the Central Bank of Brazil Regulation n. 3445 (2009)
Source: Central Bank of BrazilElaboration: Ministry of Finance
Daily average credit disbursements to businesses
Daily average credit disbursements to businesses, at constant prices, reached R$ 5.76 billion at the end of 2011, an amount close to R$ 5.44 billion in 2010. The slight increase was consistent with the economic moderation in the last 12 months.
4.0
4.5
5.0
5.5
6.0
6.5
DecNovOctSepAugJulJunMayAprMarFebJan
5.765.445.41
Ministry of Finance
Special Edition | Year 2011
65
Interest Rates and Credit
Daily Average Credit Disbursements to Individuals* (R$ billion, constant prices, December 2011 (IPCA))
2009 2010 2011
Data: R$ billion, constant prices of December 2011 (IPCA)
* According to the Central Bank of Brazil Regulation n. 3445 (2009)
Source: Central Bank of BrazilElaboration: Ministry of Finance
Daily average credit disbursements to individuals
Daily average credit disbursements to individuals have shown relative stability in 2011. The monetary easing and credit measures taken in the second half of the year should have a greater impact on the total amount of credit during 2012.
2.5
3.0
3.5
4.0
4.5
DecNovOctSepAugJulJunMayAprMarFebJan
3.6
3.3 3.1
Ministry of Finance
Special Edition | Year 2011
66
Interest Rates and Credit
Credit Transactions with Earmarked and Non-Earmarked Resources (R$ billion and % of GDP)
Total (% of GDP) Earmarked Resources (R$ billion) Non-Earmarked Resources (R$ billion)
Data: R$ billion and % of GDP
Source: Central Bank of BrazilElaboration: Ministry of Finance
Earmarked credit at the forefront of credit expansion
Non-earmarked total credit amounted to R$ 1.3 trillion in December, with a 16.7% annual increase. Earmarked total credit had an even more robust expansion, totaling R$ 727 billion, an annual increase of 23.2%. In the last quarter, the retake has been driven mainly by public banks.
0
500
1,000
1,500
2,000
2,500
Dec 2011
Dec 2010
Dec 2009
Dec 2008
Dec 2007
Dec 2006
Dec 2005
Dec 2004
Dec 2003
Dec 2002
49.1%
45.2%
43.7%
40.5%
35.2%30.9%
28.3%25.7%24.6%26.0%
144.2 162.6 180.8203.3
234.3275.2
356.1459.8
589.8
726.6
240.2 255.6 317.9 403.7 498.3 660.8 871.2 954.5 1,116.1 1,303.1
Ministry of Finance
Special Edition | Year 2011
67
Interest Rates and Credit
Banking spread to individuals (% YoY)
Funding Interest Rate Lending Interest Rate
Data: % annual
Source: Central Bank of BrazilElaboration: Ministry of Finance
Banking spread to individuals
Banking spread to individuals, although still high in comparison with other economies, remains at historically lows. Over the past six years, it fell 9 p.p. to 34 p.p in December 2011. For 2012, due to the cycle of falling interest rates and some easing in macro-prudential measures announced in November 2011, a continuity of the spread reduction to individuals is expected.
0
20
40
60
80
100
43.75
10.07
SpreadSpread34 p.p
20112010
20092008
20072006
20052004
20032002
20012000
Ministry of Finance
Special Edition | Year 2011
68
Interest Rates and Credit
Banking Spread to Corporations (% YoY)
Funding Interest Rate Lending Interest Rate
Data: % annual
Source: Central Bank of BrazilElaboration: Ministry of Finance
Banking spread to businesses
The banking spread for businesses is still at a historically high level. Over the past two years it had a slight decline, i.e., a 0.2 pp in 2010 and 0.4 pp in 2011. The spread encourages Brazilian companies to access external funding via international markets.
5
10
15
20
25
30
35
40
20112010
20092008
20072006
20052004
20032002
20012000
28.23
10.28
Spread18 p.p
Ministry of Finance
Special Edition | Year 2011
69
Interest Rates and Credit
Average Term of Credit Operations (Days)
Individuals Corporations
Data: days
Source: Central Bank of BrazilElaboration: Ministry of Finance
Credit average term for individuals
In 2011, the average term of credit operations for individuals increased 41 days, from 559 to 600 days. In the last 6 years, it expanded 311 days, as a result of the favorable evolution in the labor market. Nevertheless, the average term in the business segment have remained somewhat stable in 2011.
100
200
300
400
500
600 600
403
20112010
20092008
20072006
20052004
20032002
20012000
Ministry of Finance
Special Edition | Year 2011
70
Interest Rates and Credit
Default Rates (% of total)
Individuals Corporations
Data: % of total
Source: Central Bank of BrazilElaboration: Ministry of Finance
Default rates within historical levels
Despite its recent rise, credit for individuals default rates have remained at historical average. As for the business segment, it has also remained stable, at around 4% since mid-2009.
0
2
4
6
8
10
7.26
3.88
20112010
20092008
20072006
20052004
20032002
20012000
Ministry of Finance
Special Edition | Year 2011
71
Interest Rates and Credit
Credit to the Private Sector in 2010* (% of GDP)
Data: % of GDP
* Financial resources provided to the private sector, such as loans, equity purchase (except stocks), commercial credit and other receivables. Data released by the World Bank include financial sector asset categories not considered as credit to the private sector by the Central Bank of Brazil.
Source: World Bank and Central bank of BrazilElaboration: Ministry of Finance
Room to prudent credit growth
Despite its recent expansion and potential growth, domestic credit to the private sector in Brazil remains low, as opposed to other economies. In China and South Africa, for instance, it goes beyond 120% of GDP. So, there is room for expansion in the coming years, which will happen in a prudent way and without increase in risk taking.
2,09 5,88 1,54 48,46 105,743 7,76
0
50
100
150
200
250
15
Brazil
Argentin
a
Mexico
Turkey
Latin Americ
a
and Caribbean
RussiaIndia
Germany
China
Eurozone
East Asia
South Afri
caOECD
Japan
United Sta
tes
202 169 162 145 136 134 130 108 49 45 44 44 25 15
57
Ministry of Finance
Special Edition | Year 2011
72
Interest Rates and Credit
Credit Transactions for Individuals (R$ billion)
Automotive Housing Payroll
Data: R$ billion
Source: Central Bank of BrazilElaboration: Ministry of Finance
Housing credit stands out
Housing credit has presented an outstanding performance in recent years by encouraging investment, growth and employment in the construction sector and other segments of the economy. Only in 2011, total amount allocated for housing finance grew by R$ 58 billion, far above other modalities.
0
25
50
75
100
125
150
175
200
225
250
Dec 20112011
20102009
2008
200.5200.6
158.6
Ministry of Finance
Special Edition | Year 2011
73
Interest Rates and Credit
Real Estate Financing: Main Funding Sources (R$ billion)
Disbursements 2010
Disbursements 2011
Data: R$ billion
* SBPE: Brazilian System of Saving and Lending
FAR: Residential Leasing Fund
OGU: Union General Budget
Source: Caixa Econômica FederalElaboration: Ministry of Finance
Funding to real estate
The expansion of new housing supply has benefited millions of Brazilian population over the past few years. The Guarantee Fund for Long Working Service (FGTS) - with disbursements amounting to R$ 33.4 billion in 2011, as compared to R$ 24.4 billion in 2010 - and savings, with an increase of around R$ 5 billion between 2010 and 2011, were the main funding sources.
0
10
20
30
40
50
60
70
80
Total SBPEFGTS **FAR0
10
20
30
40
50
60
70
80
Total SBPEFGTS **FAR
6.0
24.4
25.5
55.8 6.
6
33.4
30.3
70.2
Ministry of Finance
Special Edition | Year 2011
74
Interest Rates and Credit
“Crescer” Microcredit Program: General Numbers and Regions (R$ million)
Data: R$ million
Source: STN/Ministry of FinanceElaboration: Ministry of Finance
Microcredit program benefits 600,000 people
The “Crescer” program, a productive-oriented microcredit initiative, focus on stimulating job creation and income among the micro entrepreneurs. In just four months, more than 600,000 transactions have been made, with a per capita average amount around R$ 1,200, totaling R$ 745 million.
Acomplished in 2011
Number of Transactions Total Amount Total Average Amount
606.638 R$ 745.5 million R$ 1.229
Percentage of Total amount Per Region
Northeast79%
Southeast12%
South6%
Mid-West2%
North1%
Brazilian Economy
OUTLOOK
Ministry ofFinance
B R A Z I L I A N G O V E R N M E N T
Fiscal Policy
Ministry of Finance
Special Edition | Year 2011
76
Fiscal PolicyFiscal policy in Brazil was plenty of success in 2011. At the beginning of the year, the removal of fiscal stimuli given during the financial crisis was accomplished without jeopardizing the performance of the many sectors in the economy. It was also a fiscal policy role to smooth economic growth pace and enhance the primary result, in order to differentiate Brazil within a context of international fiscal fragility. All these measures were implemented without compromising social gains achieved in recent years.
Throughout 2011, along with good performance in revenues and reduction of social security deficit, it was possible to retain expenditures at the beginning of the year. It was also possible to raise the central government primary surplus target by R$ 10 billion, in a clear demonstration of commitment to fiscal soundness.
Fiscal results could be noticed not only by the improvement in fiscal sustainability, but also by market recognition related to economic policy management. Brazil has paid the lowest yield on the country’s sovereign bond ever issued in the international capital markets and has also been upgraded by all major rating agencies, whereas some developed countries have been downgraded.
Fiscal policy soundness stands out internationally
Ministry of Finance
Special Edition | Year 2011
77
Fiscal Policy
Central Government Primary Fiscal Balance (R$ billion and % of target)*
Primary surplus Primary surplus / Year target
Data: R$ billion and % share
* Not including state-owned, companies and authorized, reductions in the Budget Law
Source: STN/Ministry of FinanceElaboration: Ministry of Finance
Primary surplus larger than predicted
The main challenge for fiscal policy during last year was the strengthening of the primary result in terms of the economic growth smoothing. The Central Government exceeded the primary surplus target, which had been increased from R$ 10 billion in August, by R$ 1.27 billion. In 2012, the goal is to meet the full target again (R$ 139.7 billion).
0
20
40
60
80
100
20112010
20092008
20072006
20052004
200350
70
90
110
130
150
99.1
125.9
119.4
95.6
112.1114.3
63.8
106.0
101.3
38.7 52.4 55.7 51.4 59.4 71.3 78.7 93.0
42.4
99.1
125.9119.4
95.6
112.1 114.3
63.8
106.0101.3
Ministry of Finance
Special Edition | Year 2011
78
Fiscal Policy
Public Sector Fiscal Balance (% of GDP)
Public Sector Primary Result Central Government Primary Result Subnational Entities Primary Result (States and Municipalities) State-owned Companies Primary Result Public Sector Nominal Result
Data: % of GDP
Source: Central Bank of BrazilElaboration: Ministry of Finance
Economic growth with fiscal consolidation
One of the Brazilian economic policy guidelines is to pursue the fiscal target in line with fiscal responsibility principles. On that sense, the public sector primary result has increased by over 0.4 percentage point in 2011 compared to 2010. The 3.1% of GDP primary surplus will remain the target for 2012.
-6
-5
-4
-3
-2
-1
0
1
2
3
4
-0.0
51.
12
1.01
2.16 2.28 2.
70
2.60
2.17
2.23 2.35
1.31
2.09 2.25
20112010
20092008
20072006
20052004
2003 2002
3.3
PrimárioTotal
2.16
2.28
2.70
2.60
2.17
2.23
2.35
1.31
2.09
2.25
0.72
0.81
0.90 0.99
0.83
0.65
0.55 0.
80
0.34
0.18
0.12
0.20
0.20
0.06
0.04
0.06
0.07
3.2 3.3 3.7 3.83.2 3.3 3.4
2.02.7
3.1
-4.4-5.2
-2.9-3.6 -3.6
-2.8
-2.0
-3.3
-2.5 -2.6
Ministry of Finance
Special Edition | Year 2011
79
Fiscal Policy
2011 Fiscal Contraction: Spending Components (R$ million)
Data: R$ million, constant prices (IPCA)
* Not including expenses with judicial verdicts, judicial deposits, redundance payments, reimbursements and other charges** Transfers to States, Municipalities and private-owned companies
Source: SIAFI/STNElaboration: Ministry of Finance
Fiscal consolidation
After the fiscal consolidation review in February, the Government has significantly diminished its spending, with a special focus on business trips and per diem. Despite the well-known difficulties of reducing those expenses, there was a real reduction of 2% in total Government intermediate consumption and consumption transfers in 2011.
R$ Million - Constant Prices (IPCA) 2010 2011 Var. %Intermediate Consumption* 47,104 46,293 -1.70%Supplies 11,369 11,338 -0.30%Material for free distribution 1,478 1,934 30.90%Cultural, scientific and other awards 124 79 -36.40%Tickets, transportation and commuting expenditure 1,062 653 -38.50%Per diem 1,377 836 -39.30%Short-term labour contract 1,216 515 -57.60%Labour lease and Outsourced contract 4,163 4,750 14.10%Outsourcing services - individual 1,827 1,649 -9.70%Outsourcing services - commpany 24,259 24,273 0.10%Consulting services 228 265 16.30%Consumption Transfers** 58,488 57,144 -2.30%Contributions 55,530 53,459 -3.70%Previous years expenditures 2,957 3,685 24.60%Total 105,591 103,437 -2.00%
Ministry of Finance
Special Edition | Year 2011
80
Fiscal Policy
Central Government Fiscal Balance – Above the Line (% of GDP)
Data: % of GDP
* Including social security benefits, allowance and unemployment insurance, assistential benefits (LOAS and RMV) and Bolsa Família Program. * Including the Sovereign Wealth Fund constitution (2008) and the capitalization operation of PETROBRAS (2010)
Source: STN/Ministry of Finance; Siga-Brasil/Federal SenateElaboration: Ministry of Finance
Improvement on public spending profile
The Central Government balance has been going through considerable changes since 2002, due to the formalization of the economy and the focus on reducing inequalities. As occurred in 2011, the increased net revenues should be allocated into income transfers to households and public investment in 2012.
% of GDP 2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Gross revenue 21.7 21.0 21.6 22.7 22.9 23.3 23.6 22.8 22.4 24.0Transfers to states and municipalties 3.8 3.5 3.5 3.9 3.9 4.0 4.4 3.9 3.7 4.2Net revenue 17.9 17.4 18.1 18.8 19.0 19.3 19.2 18.9 18.7 19.8
Primary expenditure 15.7 15.1 15.6 16.4 17.0 17.1 16.4 17.7 17.4 17.5 Payroll 4.8 4.5 4.3 4.3 4.5 4.4 4.3 4.7 4.4 4.3 Income transfers to households** 6.8 7.2 7.6 8.1 8.4 8.5 8.1 8.7 8.5 8.6 Investments 0.8 0.3 0.5 0.5 0.6 0.7 0.9 1.0 1.2 1.0 Health and education 1.7 1.6 1.7 1.8 1.7 1.8 1.7 1.9 2.0 2.0 Other expenses 1.6 1.6 1.5 1.8 1.8 1.8 1.4 1.4 1.4 1.5
Primary result without sovereign wealth fund and onerous assignment 2.1 2.3 2.5 2.5 2.1 2.2 2.8 1.2 1.2 2.3
Impact of sovereign wealth fund and onerous assignment** 0.0 0.0 0.0 0.0 0.0 0.0 -0.5 0.0 0.8 0.0
Final primary result (above the line) 2.1 2.3 2.5 2.5 2.1 2.2 2.4 1.2 2.1 2.3
Net revenue minus income transfers 11.1 10.3 10.5 10.8 10.6 10.8 11.1 10.2 10.2 11.1
Ministry of Finance
Special Edition | Year 2011
81
Fiscal Policy
Public expenditures (% of GDP)
Investments Transfers to households Payroll
Data: % of GDP
Source: STN/Ministry of Finance; Siga-Brasil/Federal SenateElaboration: Ministry of Finance
Fiscal consolidation program
In the last years, there has been efforts to enhance the workforce of the civil servants. In 2011, payroll costs have reached 4.3% of GDP, below the average for the past 10 years. The constraint was important to the fiscal consolidation dynamics last year.
0.8
4
5
6
7
8
9
10
0.2
0.4
0.6
0.8
1.0
1.2
1.4
6.8
7.2
7.6
8.1
8.48.5
8.1
8.7
8.58.6
4.8
4.5
4.3 4.3
4.54.4
4.3
4.7
4.44.3
0.3
0.5 0.5
0.6
0.7
0.9
1.0
1.2
1.0
20112010
20092008
20072006
20052004
20032002
6.8
7.27.6
8.18.4 8.5
8.1
8.78.5 8.6
4.84.5 4.3 4.3
4.5 4.4 4.34.7
4.4 4.3
0.3
0.50.6
0.7
0.91.0
1.2
1.0
0.5
Ministry of Finance
Special Edition | Year 2011
82
Fiscal Policy
Social Security (% of GDP)
Revenue Benefits Deficit
Contributors/ occupied population
Data: % of GDP and % of occupied population
Source: STN/Ministry of FinanceElaboration: Ministry of Finance
Job creation helps social security balance
The social security deficit declined to 0.86% of GDP, the lowest level in the last ten years, contributing critically to the primary balance in 2011. In part, such performance derives from more rigid rules for benefits concessions. Growth on Social Security revenues and the formalization process within the labor market are the most important factors. For instance, the number of Social Security contributors registered a record of 71% of the occupied population in December 2011.
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
0.5
1.0
1.5
2.0
2011*2010
20092008
20072006
2005
0.86
5.1
5.2
5.3
5.4
5.6
5.6
5.9
6.8
7.0
7.0
6.6
6.9
6.8
6.8 5.
6
7.5
8.1
50
54
58
62
66
70
Dec 2011
Dec 2010
Dec 2009
Dec 2008
Dec 2007
Dec 2006
Dec 2005
62.2
63.0
64.2
65.8
66.8
68.4
71.0
Ministry of Finance
Special Edition | Year 2011
83
Fiscal Policy
Composition of Central Government Spending (% of GDP)
Data: % of GDP
* LOAS/RMV
Source: STN/Ministry of Finance; Siga-Brasil/Federal SenateElaboration: Ministry of Finance
Fiscal consolidation with income transfers
From 2002 to 2011, primary spending rose from 15.7% of GDP to 17.5% of GDP. The increase is mainly explained by income transfers, which increased 1.8 pp in the period, and should be raised more in 2012 due to the minimum wage raises. Investment and education spending also grew respectively by 0.2 pp and 0.3 pp of GDP since 2002. On the other hand, payroll costs and other expenses have been reduced.
% of GDP 2002 (% of GDP)
2011* (% of GDP)
Change 2011 -2002
(p.p. of GDP)
Contribution to growth
(% of Total)Primary expenditures 15.7 17.5 1.8 -Payroll 4.8 4.3 -0.5 -26.4Income transfers 6.8 8.6 1.8 102.0
Social security benefits 6.0 6.8 0.9 47.3Allowance and Unemployment insurance 0.5 0.8 0.3 18.9Social assistance benefits (LOAS and RMV)** 0.2 0.6 0.4 20.6“Bolsa Família” program 0.1 0.4 0.3 15.2
Investments 0.8 1.0 0.2 10.2Consumption 3.3 3.5 0.3 14.2
Health 1.4 1.4 0.0 0.9Education 0.3 0.6 0.3 16.0Others 1.6 1.5 0.1 -2.7
Ministry of Finance
Special Edition | Year 2011
84
Fiscal Policy
Gross General Government Debt and Net Public Sector Debt (% of GDP)
Gross General Government Debt* Net Public Sector Debt**
Data: % of GDP
* Methodology since 2008** Excluding assets and liabilities of Petrobras and Eletrobras
Source: Central Bank of BrazilElaboration: Ministry of Finance
Public debt drops to pre-crisis levels
In 2011, fiscal policy in Brazil resulted in a strong decline of public debt (% of GDP), a trend of the post-crisis period. For instance, Gross General Government Debt went from 63.1% in October 2009 to 54.3% in December 2011, whereas Net Public Sector Debt went from 42.9% to 36.5% in the same period, the lowest value of the series initiated in 2001.
0
10
20
30
40
50
60
70
80
Dec 2011
Oct 2011
Jul 2
011
Apr 2011
Jan 2011
Oct 2010
Jul 2
010
Apr 2010
Jan 2010
Oct 2009
Jul 2
009
Apr 2009
Jan 2009
Oct 2008
Jul 2
008
Apr 2008
Jan 2008
Oct 2007
Jul 2
007
Apr 2007
Jan 2007
57.1
46.7
36.5
54.3
63.1
42.9
Ministry of Finance
Special Edition | Year 2011
85
Fiscal Policy
Federal Public Debt Profile (% of total debt)
Fixed Rate Inflation Linked Floating Rate* Exchange Rate
Data: % of total debt
* Including SELIC, TR and others ** Including domestic and external debts managed by the National Treasury.
Source: STN/Ministry of FinanceElaboration: Ministry of Finance
Federal Public Debt profile improving
The profile of the Federal Public Debt has shown an increase in the share of fixed rate bonds (from 33.1% in Jan/2011 to 37.2% in Dec/2011) and a decline in the floating-rate ones (from 33.5% to 30.1% in the same period). Refinancing and market risks have also been prevented by the lengthening of the debt’s average maturity and the reduction of its percentage maturing in 12 months.
0
10
20
30
40
50
Dez 20112011
20102009
20082007
20062005
2004
37.2
30.1
4.3
28.2
Indicadores 2004 2006 2009 2010 2011Estoque da DPF** em Mercado (R$ bilhões)
1.013.9 1.237.0 1.497.4 1.694.0 1.866.4
DPF: Prazo Médio (anos) 2.9 3.0 3.5 3.5 3.6DPF: Vincendo em 12 meses 39.3% 32.4% 23.6% 23.9% 21.9%
Indicators** 2004 2006 2009 2010 2011
Stock of FDP held by the public 1,013.9 1,237.0 1,497.4 1,694.0 1,866.4
FDP: Average Maturity (years) 2.9 3.0 3.5 3.5 3.6
FDP: Percentage Maturing in 12 months 39.3% 32.4% 23.6% 23.9% 21.9%
Ministry of Finance
Special Edition | Year 2011
86
Fiscal Policy
Federal Public Debt Holders* (% of total)
Fixed Rate Floating Rate Inflation Linked Other
Data: % of total
* Including funds administered by the Federal Government
Source: STN/Ministry of FinanceElaboration: Ministry of Finance
A diversified investor base helps mitigate risks
A diversified investor base, with respect to investment terms, risks preferences and reasons for trading assets, is essential for stimulating transactions, increasing the liquidity of public bonds and obtaining government financing under various economic scenarios. The data below show that non-resident investors demand much more fixed rate bonds, while pension funds, for instance, prefer inflation-linked bonds.
0
20
40
60
80
100
120
53.3 23.7 18.7 80.9 19.9 20.8
27.3
51.6 10.9
4.2
63.0 24.8
14.817.924.7
70.3
17.2 54.4
1.5
InsuranceGovernmentNon-Resident
Social Security
FundsBanks
Ministry of Finance
Special Edition | Year 2011
87
Fiscal Policy
Non-resident Share in Federal Public Debt (% of total domestic debt)
Data: % of domestic debt
Source: STN/Ministry of FinanceElaboration: Ministry of Finance
Non-resident investors in Brazilian public debt
In 2011, Brazilian domestic public bonds remained attractive to foreigners. Typical non-resident investors have distinct characteristics from domestic ones: they demand more fixed rate bonds and have more appetite for longer maturities, which contributes to the improvement of the DPMFi profile. The 6% IOF taxation enhanced the longer term profile of Brazilian bonds by foreign investors.
0
2
4
6
8
10
12
Dec 2011
Oct 2011
Jul 2
011
Mar 2011
Oct 2010
Jul 2
010
Mar 2010
Nov 2009
Jul 2
009
Mar 2009
Oct 2008
Jul 2
008
Mar 2008
Nov 2007
Jul 2
007
Mar 2007
IOF 1.5% onForeign Investment In�ow Tax
IOF 2.0% onForeign Investment In�ow Tax
IOF: 6.0% Foreign Investment In�ow Tax
11.3511.80
Ministry of Finance
Special Edition | Year 2011
88
Fiscal Policy
Yield at the issuance of 10-year Brazilian bonds (% YoY)
Issuance Date Yield
Data: % annual
Source: STN/Ministry of FinanceElaboration: Ministry of Finance
Brazil pays the lowest yield on 10-year bond
The Brazilian National Treasury carried out, on last January 3rd, the reopening of its 10-year benchmark bond, the Global Bond 2021, in the amount of US$ 825 million. The bond was priced at 110.997 per cent of its face value, resulting in a 3.449 per cent per year yield, the lowest rate for a Brazilian Global bond issuance.
Jan, 3
rd 2012
Jul, 7
th 2011
Jul, 2
7th 2010
Apr, 15th
2010
Dec, 15th
2009
May, 7th
2009
Jan, 6
th 2009
May, 7th
2008
Apr, 3rd
2007
Nov, 7th
2006
Nov, 9th
2005
Jun, 2
1st 2005
Feb, 28th
2005
Dec, 8th
2004
Jul, 1
4th 2004
Jun, 1
7th 2003
Jan, 1
1th 2002
Oct, 25th
1999
Global2009
Global2012
Global2013
Global2014
Global2014 Global
2015Global2015 Global
2015Global2017 Global
2017 Global2017
Global2019N
Global2019N
Global2019N
Global2021 Global
2021 Global2021 Global
2021
0
3
6
9
12
15
18
5.314.6 12.6 10.6 10.8 8.2 7.9 7.7 7.8 6.2 5.9 6.1 5.8 4.8 5.0 4.6 4.2 3.5
Ministry of Finance
Special Edition | Year 2011
89
Fiscal Policy
Rating on Sovereign Risk of Brazil
Data: Rating
Source: Risk agenciesElaboration: Ministry of Finance
Continuous improvement in risk assessment by rating agencies
The degree of investment in Brazil is the result of solid macroeconomic fundamentals, which include improvements in federal debt profile, maintenance of a responsible fiscal policy and monetary policy credibility. The policy, kept in a context of high volatility, has ensured upgrades from all the major credit rating agencies.
20112011
DCCCCCC
B-BB+BB-BBBB+BBB-BBBBBB+
A-AA+AA-AAAA+AAA
DCCCCCC
B-BB+BB-BBBB+BBB-BBBBBB+
A-AA+AA-AAAA+AAA
CCaCaa3Caa2Caa1
B3B2B1Ba3Ba2Ba1
Baa3Baa2Baa1
A3A2A1Aa3Aa2Aa1Aaa
Fitch Ratings Standard & Poor’s Moody’s
2011
Signi�cance in scale
Investment gradeHigh quality andlow risk
Investment gradeAverage quality
Speculative grade and lowquality
High risk ofdefault andlow demand
Brazilian Economy
OUTLOOK
Ministry ofFinance
B R A Z I L I A N G O V E R N M E N T
External Sector
Ministry of Finance
Special Edition | Year 2011
92
External Sector
The results of the Brazilian external sector in 2011 have shown the perception of foreign investors regarding the country’s macroeconomic fundamentals and its ability to manage and absorb external shocks.
Trade surplus ended 2011 at US$ 29.8 billion, almost US$ 10 billion more than the balance of 2010. The robust result outweighed the increase in net spending on services and remittances of profits, and generated a fall in current account deficit in 2011 to 2.12% of GDP, compared to 2.21% of GDP in 2010.
Under a positive perspective on a dynamic and sustainable domestic market, there was a record amount of investments in the country in 2011. Foreign direct investment reached US$ 66.7 billion, which is more than enough to finance the current account deficit (US$ 52.6 billion).
Trade balance and foreign investment with a positive performance
Ministry of Finance
Special Edition | Year 2011
93
External Sector
Trade Balance (US$ billion, accumulated in the year)
Exports Imports Trade Balance
Data: US$ billion, accumulated in the year
Source: MDICElaboration: Ministry of Finance
Successive records in foreign trade
Exports reached US$ 256 billion in 2011, the highest amount ever exported by Brazil in yearly terms, a 26.8% annual rise. The increase in exports is associated with the continued diversification of markets and rising commodity prices. Imports, on its turn, totaled US$ 226 billion and the total value of trade reached US$ 482 billion. As regards to trade balance, the country accomplished a US$ 29,8 billion surplus, a 46.9% annual rise.
0
60
120
180
240
300
20112010
20092008
20072006
20052004
20032002
20012000
19991998
19971996
19951994
-10
2
14
26
38
50
29.8
33 50
53 60
58 49 56 56 47 48 63 74 91 121
173
128
182
226
44 46
48 53
51 48 55 58 60 73 97 118
138
161
198
153
202
256
Ministry of Finance
Special Edition | Year 2011
94
External Sector
Percentage Share of Major Trading Partners (% of total exported)
1990 1998 2004 2011
Data: % of total exported
Source: MDICElaboration: Ministry of Finance
More diversified exports
Market diversification has played a pivotal role to growth in exports from Brazil. The exports share to China and Mercosur markets has grown up importance in recent years. Over the last twenty years, Chinese participation rose from 1.2% to 17.3% of the total, while Mercosur increased from 4.2% to 10.9%.
0
5
10
15
20
25
30
35
MercosurEUUnited StatesChina
17.3
1
10.0
8
20.6
8
10.8
85.63
20.7
9
25.5
2
9.24
1.77
19.0
6
29.8
3
17.3
6
1.22
24.1
7
33.7
3
4.20
Ministry of Finance
Special Edition | Year 2011
95
External Sector
Trade Balance of Service (US$ billion, annual)
Services Equipment rental International travels
Data: US$ billion, in an annual basis
Source: Central Bank of BrazilElaboration: Ministry of Finance
Services pushed current account deficit
Net imports of services amounted to US$ 38 billion in 2011, the major result of the series. It is consistent with the growth path followed by the country in recent years. Equipment rentals and international travel expenses pressured the net expenses due to the increase in investment and income in the country.
-14.5-16.7
-40
-35
-30
-25
-20
-15
-10
-5
0
20112010
20092008
20072006
20052004
20032002
20012000
-37.9
Ministry of Finance
Special Edition | Year 2011
96
External Sector
FDI Composition (US$ billion)
Foreign Direct Investment Equity participation Intercompany lending
Data: US$ billion
Source: Central Bank of BrazilElaboration: Ministry of Finance
Record flows of foreign direct investments
The increase in foreign direct investment in 2011 was mainly due to the large increase in equity markets. It shows that the Government’s measures were effective in improving the profile of foreign capital in the country, widening the FDI and also lengthening the period of funding for loans and securities in foreign markets.
0
10
-10
20
30
40
50
60
70
80
15.0
11.2
20112010200920082007200620052004
18.1
34.618.8
15.1
25.9
45.1
66.7
48.4
0.0
3.58.5
15.0
6.0
8.3
11.9
18.615.0
15.4 26.1 30.1 19.9 40.1 54.8
-0.4
Ministry of Finance
Special Edition | Year 2011
97
External Sector
Manufactured Trade Balance (US$ billion)
Manufactured exports Manufactured imports Manufactured trade balance
Data: US$ billion
Source: FuncexElaboration: Ministry of Finance
External crisis and currency dynamics damage manufacturing
Anticompetitive conduct and monetary policies - which depreciated currencies to increase earnings from exports - influenced the deterioration of trade balance of manufactured goods. From 2005 to 2011, Brazil has gone from a US$ 8.5 billion balance surplus in the manufacturing sector to a US$ 92 billion deficit. In order to change this perspective, the Brazilian Government has taken some measures, such as the “Brasil Maior” industry enhancing program, aimed at slowing these effects and promoting employment, local production and technological innovation.
20112010
20092008
20072006
20052004
20032002
20012000
19991998
1997-200
-150
-100
-50
0
50
100
150
-92.1
91.8
-183.9
Ministry of Finance
Special Edition | Year 2011
98
External Sector
Current Account Balance (US$ billion and % of GDP)
Current Account Balance Current Account/GDP in 12 months (%)
Data: US$ billion and % of GDP
Source: Central Bank of BrazilElaboration: Ministry of Finance
A stable current account deficit to GDP ratio
In 2011, the current account deficit as remained at the same level as in 2010 in terms of GDP. The foreign trade performance has partially offset the deficits of services and income accounts. It’s worth noting the expansion of income transfers, especially for remittances of profits and dividends, reflecting Foreign Direct Investment (FDI) growth and predominant participation among the options of foreign investments.
-60
-50
-40
-30
-20
-10
0
10
20
-5
-4
-3
-2
-1
0
1
2
20112010
20092008
20072006
20052004
20032002
20012000
19991998
19971996
4.21.6
-23.5 -30.5 -33.4 -25.3 -24.2 -23.2 -7.611.7 14.0 13.6
-28.2 -24.3 -47.3 -52.6
-2.8
-3.5-4.0
-4.3-3.8
-4.2
-1.5
0.8
1.8 1.61.3
0.1
-1.7 -1.5
-2.2 -2.1
Ministry of Finance
Special Edition | Year 2011
99
External Sector
FDI in 2011 – Selected Countries (US$ billion)*
Data: US$ billion
* Global Investments Trend Monitor, January 2012
** Including Hong Kong
Source: UnctadElaboration: Ministry of Finance
Brazil as one of the main foreign direct investment destinations
According to Unctad survey, Brazil is among the economies which received major amounts of FDI in 2011. It was ranked at the fourth position, only behind the United Sates, China and United Kingdom.
0
50
100
150
200
250
SwedenSpain
Luxembourg
Germany
Italy
India
France
Singapore
BelgiumRussia
Ireland
Brazil
United Kingdom
China **
United Sta
tes
210.
7
202.
4
77.1
65.5
53.0
50.8
41.1
41.0
40.0
34.0
33.1
32.3
27.2
25.0
22.0
Ministry of Finance
Special Edition | Year 2011
100
External Sector
Main Destinations of FDI: 2010-2012 (number of citations)*
Data: number of citations
* World Investment Prospects Survey, 2010-2012
Source: UnctadElaboration: Ministry of Finance
And it must continue attracting higher FDI flows
Unctad survey shows that, for the first time, the four major emerging economies are among the five most cited as attractive destinations for FDI by major transnational corporations in the period 2010-2012. Brazil ranks third, only behind China and India.
0
20
40
60
80
100
120
26.0
PeruSpain
South Afri
caChile
CanadaJa
pan
Malaysia
France
Australia
Poland
Thailand
Germany
Indonesia
Vietnam
United Kingdom
Mexico
RussiaUSA
Brazil
IndiaChina
24.0
23.0
20.0
19.0
18.0
17.0
16.0
16.0
15.0
15.0
14.0
13.0
11.0
110.
0
70.0
67.0
66.0
35.0
30.0
28.0
Ministry of Finance
Special Edition | Year 2011
101
External Sector
Foreign Investments (FDI and Portfolio) and Current Account Balance (% of GDP)
Foreign Direct Investments Foreign Portfolio Investments Current Account
Data: % of GDP
* As of December 2011
Source: Central Bank of BrazilElaboration: Ministry of Finance
Different dynamics for direct and portfolio investments
In 2011, foreign investment profile changed in Brazil. Portfolio investments decreased substantially, reaching 0.7% of GDP at the end of 2011 and FDI grew, reaching 3.2% of GDP in October, and 2.7% at year end.
-3
-2
-1
0
1
2
3
4
Dec 2011
Sep 2011
Dec 2010
May 2010
Oct 2009
Mar 2009
Aug 2008
Jan 2008
-2.1
0.7
2.7
Ministry of Finance
Special Edition | Year 2011
102
External Sector
Private Capital Flow to Emerging Countries (US$ billion)*
Emerging Asia Emerging Europe Brazil Latin America Africa/Middle East
Data: US$ billion
*IFF Research Note as of January 24, 2012
Source: IIFElaboration: Ministry of Finance
Brazil at the forefront positions with regards to private capital flows
According to the Institute of International Finance (IIF) forecast, private capital flows to emerging economies are expected to fall from US$ 910 billion in 2011 to US$ 746 billion in 2012. However, the private capital volume estimated for Brazil should rise from US$ 137 billion in 2011 to US$ 142 billion in 2012, maintaining the upward trend since 2009.
0
100
200
300
400
500
2013*
2012*2011
20102009
20082007
20062005
20042003
Ministry of Finance
Special Edition | Year 2011
103
External Sector
International Reserves (US$ billion)
Data: US$ billion, international liquidity concept
Source: Central Bank of BrazilElaboration: Ministry of Finance
International reserves on rise
The accumulation of international reserves has been a pillar of Brazilian economic policy to reduce external vulnerability. In December, reserves totaled US$ 352 billion (about 14.2 of GDP). International reserves continued to outperform total external debt, keeping the country as net external creditor.
0
50
100
150
200
250
300
350
400
20112010
20092008
20072006
20052004
20032002
20012000
19991998
19971996
19951994
38.8 51
.8
60.1
52.2
44.6
36.3
33.0
35.9
37.8
49.3
52.9
53.8
85.8
180.
3
193.
8
238.
5
288.
6
352.
0
Ministry of Finance
Special Edition | Year 2011
104
External Sector
External Debt and International Reserves (US$ billion)
Data: US$ billion
* Estimated position to December 2011
Source: Central Bank of BrazilElaboration: Ministry of Finance
External debt profile
Total external debt to reserves ratio dropped from 89% in 2010 to 84.5% in 2011, and the net debt to GDP ratio, from -2.4% to -3.2%. Following the decline, there was an increasing participation of long-term debt relative to total debt—from 77.7% to 86.9%, respectively. The rise in international reserves helped to maintain good levels of solvency of the economy. Furthermore, external debt is predominantly private, around two thirds of the total. Though not immune, the profile states the country much less vulnerable to external shocks.
External Debt and International ReservesUS$ billion
2010 2011*Reserves 288.6 352.0Total Debt 256.8 297.3Long Term 77.7% 86.9%Short Term 22.3% 13.1%Public 36.9% 34.5%Private 63.1% 65.5%
Debt Indexes (%)Total Debt/Reserves 89.0% 84.5%Long term debt/Reserves 69.1% 73.4%Short Term/Reserves 19.9% 11.1%Net External Debt/GDP -2.4% -3.2%
Ministry of Finance
Special Edition | Year 2011
105
External Sector
Composition of External Liabilities (%)
Other liabilities Fixed income Stocks Direct Investment
Data: %
Source: Central Bank of BrazilElaboration: Ministry of Finance
External debt mostly comprised of FDI
On the composition of foreign investments, FDI and stocks prevail in the country’s external liability, exceeding the amount related to debt. The profile states there is more flexibility to transfers of income abroad and strengthens the pro-cyclical nature of the current account.
0
20
40
60
80
100
26.4 26.4 30.6 26.5 22.4 14.2 13.4 11.0 16.8 10.9 11.0 13.9
30.4 30.9 32.1 27.8 24.121.5 18.0 15.8
19.917.2 15.0 16.1
11.6 9.97.9
13.117.3
25.1 30.739.6
21.634.9 29.1 23.9
36.1 39.2 37.9 41.637.1
44.9 46.0
201120102009200820072006200520042003200220012000
31.6 32.8 29.4 32.7 36.1 39.2 37.9 33.6 41.6 37.1 44.9 46.0
11.6 9.97.9 13.1
17.325.1
30.739.6
21.634.9 29.1
23.930.4 30.9
32.127.8
24.121.5 18.0 15.8
19.917.2 15.0 16.1
26.4 26.4 30.6 26.5 22.4 14.2 13.4 11.0 16.8 10.9 11.0 13.9
Ministry of Finance
Special Edition | Year 2011
106
External Sector
External Vulnerability Indicator (% of GDP)
Total external debt International reserves Current account
Data: % of GDP
Source: Central Bank of BrazilElaboration: Ministry of Finance
External vulnerability indicators point to a drop
Low external vulnerability conditions prevailed in 2011. Total amount of international reserves far exceeded the external debt. And yet, the current account deficit has remained stable at a safely financed level, i.e., long-maturing investments. The scenario is quite different from that observed in previous periods, when the external weakness prevailed in the Brazilian economy.
-10
0
10
20
30
40
50
201120081998198719821974
18.1 31.5 42.9 26.5 12.0 12.04.8 1.5 2.6 5.3 11.7 14.2
-6.8 -6.0 -0.5 -4.0 -1.7 -2.1
First Oil ShockImpact
Debt Crisis External DebtDefault
Before FloatingExchange
Rate Regime
InternationalFinancial Crisis
(subprime)Current
Situation
Ministry of Finance
Special Edition | Year 2011
107
External Sector
FDI by Country* (% of total)
Data: % of total
* Survey of foreign capital in Brazil 2011, base year 2010
Source: Central Bank of BrazilElaboration: Ministry of Finance
U.S. and Spain at the forefront of direct investments in Brazil
Foreign capital survey in Brazil has shown that the United States and Spain are the main investors in the final investor criteria, with inventories of US$ 104.7 billion (18% of total) and US$ 85.3 billion (15% of total), respectively. There is a relative diversification, if types of industry are considered, particularly for investments in financial services, beverages, telecommunications, extraction of oil and natural gas.
28%18%
15%
9%
7%5%
5%5%
3%3%
2%Netherlands
Mexico
ItalyJapan
Germany FranceUnited Kingdom
Belgium
Spain
United States
Others
Ministry of Finance
Special Edition | Year 2011
108
External Sector
Nominal Exchange Rate (R$/US$)
Data: R$/US$
Source: Central Bank of BrazilElaboration: Ministry of Finance
Exchange rate dynamics in Brazil
In 2011, after a period of continued exchange rate appreciation of the Brazilian real, the dollar returned back to the R$ 1,80 range and R$ 1.87 at year-end. Macroprudential measures, along with the accumulation of foreign reserves, contributed to the reduction of exchange volatility, in spite of some confidence crisis caused by international financial instability in Europe. Under the floating regime, the Government has acted to ensure a competitive exchange rate for the country.
1.40
1.63
1.86
2.09
2.32
2.55
1.76
2.50
CompulsoryRequirementson Exchange
IOF overForeignLoans
Selic TaxReduction
IOF TaxIncrease
IOF TaxIncrease
DerivativesTaxation
1.70
Jan, 2
4th 2012
Dec 2011
Oct 2011
Aug, 31st 2
011
Jul, 2
6th 2011
Apr 2011
Mar, 29th
2011
Mar 2011
Jan, 7
th 2011
Nov 2010
Oct, 19th
2010
Oct, 5th
2010
Sep 2010
Jul 2
010
May 2010
Mar 2010
Jan 2010
Nov 2009
Oct, 19th
2009
Sep 2009
Jul 2
009
May 2009
Mar 2009
Jan 2009
Nov 2008
Sep 2008
Jul 2
008
May 2008
Mar 2008
Jan 2008
Jan 2011
1.53
IOF TaxIncrease
Brazilian Economy
OUTLOOK
Ministry ofFinance
B R A Z I L I A N G O V E R N M E N T
International Overview
Ministry of Finance
Special Edition | Year 2011
110
International Overview
The poor performance of the advanced economies and the slow recovery estimated to last for a few more years –given the complexity of financial and fiscal imbalances in Europe – were the economic facts that marked the world scene in 2011. The IMF reduced its world economic growth forecast to 3.3% in 2012, a drop of 0.7% in the last estimate for the same year. GDP contraction in the Eurozone (-0.5% in 2012) and low growth in the U.S. (1.8%) are some of the reasons for an increase of only 1.2% in advanced economies, as opposed to the 5.4 % in emerging economies.
In the short term, it is worth pointing the high concentration of debt maturity in key European economies in the first half of 2012. It could raise some attention on the subject. In the medium term, global economic growth perspective is about to be driven by the dynamism of some emerging markets like Brazil.
A solution to the crisis is expected in advanced economies
Ministry of Finance
Special Edition | Year 2011
111
International Overview
Growth forecasts for G20 countries
2011
2012
GDP (% YoY)
SaudiArabia
Brazil**
Russia
Argentina*
India
China
Indonesia*
SouthKortea
Italy
France
Germany
Australia*
Japan United States
South Africa
Turkey
Mexico
CanadaUnited
Kingdom
0.6
4.5
4.6
3.5
2.5
3.67.0
2.2-2.2
0.2 3.3
4.4
6.3
8.2
3.3
1.71.8
1.7 0.30.9
3.2
3.1
6.60.4
1.6
6.57.4
4.1
-0.9
3.9
9.2
6.4
1.88.0
4.1
1.8
2.33.0
* WEO/IMF September 2011
** 2011: IBGE data accumulated in the first three quarters over the same period in 2010 and for 2012: Ministry of Finance estimates
Source: IMFElaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
112
International Overview
Data: % of GDP
Source: IMFElaboration: Ministry of Finance
Fiscal results forecasts for G20 countries
20112012
Fiscal Result(% of GDP)
SaudiArabia
Brazil
Russia
Argentina
India
China
Indonesia
SouthKorea
Italy
France
Germany
Australia
Japan United States
South Africa
Turkey
Mexico
CanadaUnited
Kingdom
-4.7
-2.7
-2.5
3.6
-3.4
3.6-8.0
-1.5-1.1
-2.8 -1.8
2.4
-1.3
-0.9
-1.8
-7.6-5.0
-1.9 -0.9
-2.9
-3.7
-2.1-2.6
-3.8
6.5-8.3
-0.3
-8.1
2.1
-1.8
-1.7
-3.7-2.9
3.8
-6.4
-3.0-1.4
-6.3
Ministry of Finance
Special Edition | Year 2011
113
International Overview
Data: % of GDP
Source: IMFElaboration: Ministry of Finance
Current account balance forecasts for G20 countries
20112012
Current account (% of GDP)
SaudiArabia
Brazil
Russia
Argentina
India
China
Indonesia
South Korea
Italy
France
Germany
Australia
Japan United States
South Africa
Turkey
Mexico
CanadaUnited
Kingdom
-2.3
-2.5
-0.9
-0.9
-3.7
14.2-2.2
-7.4-3.0
-2.5 3.5
1.4
-0.4
5.6
-4.7
2.8-2.1
-3.8 4.9
-2.1
-2.8
-10.3-3.5
-2.7
20.6-2.2
5.5
2.5
1.5
5.2
0.2
-2.2-0.3
-1.0
-3.1
-3.35.0
-2.7
Ministry of Finance
Special Edition | Year 2011
114
International Overview
2011: realized inflation
2012: inflation expectation
* As of September 2011
** As of November 2011
Source: IMF and Central BanksElaboration: Ministry of Finance
Inflation forecasts for G20 countries
20112012
In�ation(% YoY)
SaudiArabia
Brazil
Russia
Argentina
India
China
Indonesia
SouthKorea
Italy
France
Germany
Australia
Japan United States
South Africa
Turkey
Mexico
CanadaUnited
Kingdom
4.7
11.8
3.1
5.0
5.38.6
6.91.6
1.4 7.3
3.5
6.5
3.3
3.3
-0.51.2
2.1 1.32.4
6.5
6.1
10.53.3-2.5
5.39.1**
6.1
-0.5**
4.2
4.1
3.8
3.5*9.5
3.8
3.0
2.32.1
4.2
Ministry of Finance
Special Edition | Year 2011
115
International Overview
Difference between the Inflation Target and the Observed Inflation in 2011 (p.p.)
Data: Percentage Points
Source: BloombergElaboration: Ministry of Finance
Rising inflation as a global phenomenon in 2011
In 2011, the contagion of global inflation in commodity prices contributed to the breach of inflation targets by the majority of inflation targeters. Turkey and Peru had faced major impacts. In Brazil, the Government acted promptly, taming the acceleration of prices and its distribution, while keeping the CPI inflation (IPCA index) within the ranges of the target.
TurkeyIceland
PeruUnited Kingdom
PolandBrazil
South AfricaChile
South KoreaHungaryThailand
MexicoColombiaAustralia 0.6
0.70.80.91.11.21.41.62.02.12.22.22.85.0
Target
Center
2.53.03.01.83.03.03.04.54.52.52.02.02.55.5
Percentage points above the central in�ation target
Ministry of Finance
Special Edition | Year 2011
116
International Overview
GDP 2011* and 2012** (US$ trillion and % YoY)
Data: 2011: US$ trillion and 2012: % YoY
* 2011 GDP: IMF
** GDP growth in 2012: WEO/IMF updated in January 2012. For Brazil, Ministry of Finance estimates
Source: IMF and The EconomistElaboration: Ministry of Finance
Brazil amongst the world major economies
Prominent emerging economies (Brazil, China, India, Russia) are among the most dynamic economies in the world. Recently Brazil is ranked at the 6th place among the major economies of the globe.
India
Russia
Italy
United Kingdom
Brazil
France
Germany
Japan
China
United States
GDP of 2011*, in US$ trilllion GDP growth in 2012**, in % p.a.
15.1
7.0
5.9
3.6
2.8
2.6
2.5
2.2
1.9
1.8
1.8
8.2
1.7
0.3
0.2
4.5
0.6
-2.2
3.3
7.0
Ministry of Finance
Special Edition | Year 2011
117
International Overview
Unemployment Rate: Selected Countries – December 2011 (%)
Data: %
Source: BloombergElaboration: Ministry of Finance
Brazilian unemployment rate among the lowest in the world
The 4.7% unemployment rate as of December 2011, is among the lowest in the world. Advanced countries such as France, USA, UK and Canada, are facing higher unemployment rates than Brazil.
0
5
10
15
20
25
South Kore
a
Switzerla
ndChina
Japan
Brazil
Netherla
nds
Mexico
Australia
Germany
Russia
Canada
United
Kingdom*USAIta
ly
Turkey
India
France
Spain
22.9
9.9
9.4
9.3
8.9
8.5
8.4
7.5
6.1
5.5
5.2
5.0
4.9
4.7
4.6
4.1
3.3
3.1
Ministry of Finance
Special Edition | Year 2011
118
International Overview
ISM and PMI Indicators (points)
China PMI Global PMI ISM Index
Data: points
Source: BloombergElaboration: Ministry of Finance
Global activity stabilizes
PMI (Purchasing Managers Index) and ISM (Institute of Supply Management) indicators are important to measure the economic conditions of countries and regions. In early 2011, rates have declined in the U.S. and China, and so has the overall index. Some global activity stabilization is expected.
30
35
40
45
50
55
60
65
Dec 2011
Oct 2011
May 2011
Dec 2010
Jul 2
010
Feb 2010
Sep 2009
Apr 2009
Nov 2008
Jun 2008
Jan 2008
50.3050.00
50.80
Ministry of Finance
Special Edition | Year 2011
119
International Overview
Confidence Indexes - USA and Eurozone (points)
Consumer Confidence Index – USA Economic Sentiment Indicator - Eurozone
Data: points
Source: Eurostat and Conference BoardElaboration: Ministry of Finance
Confidence falls in Europe, but starts to recover in the U.S.
Confidence indicators in the U.S. and Europe show distinct signs. In Europe, consumer sentiment has been in decline since early 2011. In the U.S., though, the North American consumer confidence showed signs of recovery in the last two months of 2011.
20
40
60
80
100
120
Dec 2011
Jul 2
011
Jan 2011
Jul 2
010
Jan 2010
Jul 2
009
Jan 2009
Jul 2
008
Jan 2008
64.5
93.3
Ministry of Finance
Special Edition | Year 2011
120
International Overview
USA: Economic Activity (index)
Chicago Fed Philadelphia Fed Richmond Fed
Data: index
Source: BloombergElaboration: Ministry of Finance
Economic activity in the United States
Economic activity in the United States shows signs of recovery. The Philadelphia Fed Manufacturing index reached 6.8 points in December and 7.3 in January 2012. The Richmond Fed index reached 12 points in January, a 9 points rise over the previous month. Chicago’s Fed National Activity Index reported 0.17 in December 2011.
-50
-40
-30
-20
-10
0
10
20
30
40
Jan 2012
Dec 2011
May 2011
Dec 2010
Jul 2
010
Feb 2010
Sep 2009
Apr 2009
Nov 2008
Jun 2008
Jan 2008 -5
-4
-3
-2
0
10.17
7.312
Ministry of Finance
Special Edition | Year 2011
121
International Overview
USA: Unemployment Rate (%)
Data: %
Source: BloombergElaboration: Ministry of Finance
Unemployment rate is declining in the U.S.
There has been a decrease in the American unemployment rate in recent months. But the unemployment rate remains well above than in the past. Estimates of the Federal Reserve indicate that, at least until 2014, the unemployment rate will still be above the long-term trend.
2
4
6
8
10
Dec 2011
Dec 2010
Aug 2009
Apr 2008
Dec 2006
Aug 2005
Mar 2004
Oct 2002
Jun 2001
Jan 2000
8.50
Ministry of Finance
Special Edition | Year 2011
122
International Overview
Unemployment Rate: Euro Zone and Selected Countries (%)
Data: %
* As of October 2011
Source: EurostatElaboration: Ministry of Finance
Unemployment rate in the euro zone
One of the most perverse consequences of the economic crisis in Europe has been the steady increase in unemployment throughout the region, reaching 10.4% in the euro zone as a whole. In disaggregated terms, figures in Spain (22.9%) and Greece (19.2%) stand out.
10.4
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
Dec 2011
Sep 2011
Jan 2011
Jul 2
010
Jan 2010
Jul 2
009
Jan 2009
Jul 2
008
Jan 2008
Jul 2
007
Jan 2007
Jul 2
006
Jan 2006
Jul 2
005
Jan 2005
Spain
Greece*
Ireland
Portugal
Eurozone
France
Italy
Finland
Belgium
Germany
Luxembourg
Netherlands
Austria
UnemploymentEurozone
4.1
4.9
5.2
5.5
7.2
7.6
8.9
9.9
10.4
13.6
14.5
19.2
22.9
Ministry of Finance
Special Edition | Year 2011
123
International Overview
GDP Growth (% YoY) Consumer Inflation (% YoY)
GDP real growth Inflation
Data: % annual
* WEO/IMF January 2012 forecast
* WEO/IMF September 2011 forecast
Source: IMFElaboration: Ministry of Finance
China and the global economic activity
China has an important role in global economic activity. Although the country has grown over 9% in 2011, a slowdown has been estimated for 2012 due to low growth forecasts for advanced economies which will affect the Chinese exports performance. Likewise, the inflation forecast points to a slowdown, with a 4.1% estimated for the end of 2012.
4.1
0
3
6
9
12
15
2012*2011
20102009
20082007
20062005
20042003
20022001
2000-1
0
1
2
3
4
5
6
7
8
2011**
20102009
20082007
20062005
20042003
20022001
2000
8.4
8.3
9.1
10.0
10.1
11.3
12.7
14.2
9.6
9.2
10.4
9.2
8.5
Ministry of Finance
Special Edition | Year 2011
124
International Overview
Five-Year CDS Spreads: Selected G20 Countries (b.p.)
Data: basis points
* As of Oct/25/2011
Source: BloombergElaboration: Ministry of Finance
Risk of default of the G20
A Credit Default Swap (CDS) contract is a protection against a possible default and, therefore, indicates the financial market’s perception over risks related to sovereign debt. Within 2008 and 2012 period, an increasing risk perception can be seen on European nations while there was a downward one for emerging markets.
Five-year CDS Spreads as of 12/31/2008
AustraliaUnited Kingdom
IndonesiaJapan
South AfricaRussia
ItalyIndia
South KoreaFrance
MexicoGermany
United States*China
TurkeyBrazil
AustraliaUnited Kingdom
IndonesiaJapan
South AfricaRussia
ItalyIndia***
South Korea**France
MexicoGermany
United StatesChina*Turkey
Brazil
Five-year CDS Spreads as of 01/16/2008
300.5
408.7
201.2
46.8
292.6
55.7
333.0
360.6
164.0
741.2
393.6
46.4
691.4
106.0
127.7
20.1
164.3
323.1
146.7
48.9
103.9
155.3
217.8
164.7
283.5
519.6
259.8
210.4
147.9
214.0
93.0
83.0
Ministry of Finance
Special Edition | Year 2011
125
International Overview
Risk Rating: Standard and Poor’s
Data: risk rating
Source: BloombergElaboration: Ministry of Finance
Downgrade for advanced economies
There has been an increase in the lack of confidence among the economic agents. It is reflected in the recent risk rating changes of most countries of the Euro zone, and the United States. Greece, Portugal, Ireland and Spain suffered major downgrades, which has also somewhat hit France. In the opposite direction, Brazil has achieved constant upgrades issued by the rating agencies.
Jan 2012Aug to Nov 2011
Jul 2011Mar 2011Dec 2010Dec 2009Dec 2004Dec 2003
High quality and lower risk*
InvestmentGrade
SpeculativeGrade
High defaultrisk
Ireland
Spain
Greece
Portugal
Brazil
FranceAAAAA+
AAAA-A+
AA-
BBB+BBB
BBB-BB+
BBBB-B+
BB-
CCCCC
CD
Italy
USA
Ministry of Finance
Special Edition | Year 2011
126
International Overview
Commodity Research Bureau (CRB) Index (index number, 1951=100)
CRB Spot CRB Foodstuff CRB Metals
Data: index number, 1951=100
Source: BloombergElaboration: Ministry of Finance
Commodity prices behavior
The evolution of commodity prices has been characterized by the decoupling of metal commodities until the 2008 crisis, when metals had been strongly devalued. The world economic recovery led to a new decoupling. Again, the recent crisis affects the prices of metal commodities.
0
200
400
600
800
1,000
1,200
Jan 2012
Sep 2011
Feb 2011
Jul 2
010
Dez 2009
May 2009
Oct 2008
Mar 2008
Aug 2007
Jan 2007
Jun 2006
Nov 2005
Apr 2005
Sep 2004
Feb 2004
Jul 2
003
Dec 2002
May 2002
Oct 2001
Mar 2001
Aug 2000
Jan 2000
908.81
433.20
312.85
Ministry of Finance
Special Edition | Year 2011
127
International Overview
VIX Index – USA and ITRAXX Index (points and basis points)
ITRAXX VIX
Data: points and basis points
Source: BloombergElaboration: Ministry of Finance
Stock exchange in the U.S. and risk in Europe
The VIX index measures the expected volatility of 30 days in the stock market, based on the price volatility of options on the S&P 500. Itraxx, on its turn, is an average risk index, covering regions such as Europe, Australia and Japan. The most recent levels denote the worsening of the market perception related to the fiscal crisis in the U.S. and in Europe. Since the end of 2011, though, there has been an improvement in such indexes.
0
20
40
60
80
100
Jan 2012
20112010
20092008
2007 50
100
150
200
250
19.8
151.1
Ministry of Finance
Special Edition | Year 2011
128
International Overview
Brent Oil Price (US$/barrel)
Constant Prices (US$ from December 2011) Current Prices (US$)
Data: US$/barrel
Source: U.S Energy Information Administration and BloombergElaboration: Ministry of Finance
International oil prices overview
Oil price moves are almost always linked to the dynamics of global economic activity, international liquidity availability, and the existing political tensions in key producing countries located in the Middle East. Since mid-2011, oil prices have remained at high levels due to the lack of investments caused by Middle East crises and by the demand from some countries.
102030405060708090
100110120130140150
2011 2010
20092008
20072006
20052004
20032002
20012000
19991998
19971996
1995 1994
19931992
19911990
19891988
19871986
19851984
19831982
19811980
107.8
107.8
Current Prices (US$)
Ministry of Finance
Special Edition | Year 2011
129
International Overview
G20 Countries: Change in Stock Market in 2011 (% accumulated in the period)
Data: % accumulated in the period
Source: BloombergElaboration: Ministry of Finance
Stock market dynamics in the G20
Stock exchanges all over the world have also undergone through the impact of European financial crisis. Regarding the G20 countries, losses in 2011 were substantial, especially late in the year, when losses were more concentrated. However, since November 2011, there has been some recovery of stock market indexes, especially in Germany, France and Brazil.
Fluctuation from 01/03/2011 to 01/20/2012
ItalyArgentina
TurkeyIndia
RussiaFrance
Euro ZoneJapan
China (Hong Kong)Australia
BrazilGermany
CanadaSouth KoreaSaudi Arabia
MexicoUnited Kingdom
USA - S&P500USA - Nasdaq
South AfricaIndonesia
USA - Dow Jones
GermanyFrance
BrazilEuro ZoneIndonesia
USA - Dow JonesSaudi ArabiaSouth Africa
USA - S&P500United Kingdom
ArgentinaSouth Korea
China (Hong Kong)USA - Nasdaq
JapanMexico
ItalyCanada
AustraliaTurkey
IndiaRussia
Fluctuation from 11/08/2011 to 01/20/2012
-2.9-3.2-3.4-5.8-7.8-8.4
-10.9-11.2-14.2-14.3-14.5-14.9-15.5-18.6-18.8-21.0-23.5
9.06.94.33.53.4
-5.3-4.7-2.3-1.2
-0.7-0.2
0.11.32.22.22.52.72.93.13.23.84.54.85.45.65.77.4
Ministry of Finance
Special Edition | Year 2011
130
International Overview
Real Effective Exchange Rate* (index number, 2005=100)
USA Euro zone China Brazil
Data: index number, 2005=100
* Deflator: Consumer Price Index from each country. A rise means exchange appreciation and a fall means depreciation
Source: BISElaboration: Ministry of Finance
Real effective exchange rate
The real effective exchange rate is a reference to the level of investment and trade between a country and its commercial partners. The U.S. dollar has shown a continuous decreasing trend, bringing upheavals to the international economic outlook, both in terms of trade, and also in the financial standpoint.
60
70
80
90
100
110
120
Dec 2011
Jul 2
011
Jan 2011
Jul 2
010
Jan 2010
Jul 2
009
Jan 2009
Jul 2
008
Jan 2008
Jul 2
007
Jan 2007
Jul 2
006
Jan 2006
Jul 2
005
Jan 2005
98.597.5397.56
107.97
Ministry of Finance
Special Edition | Year 2011
131
International Overview
G20 Countries: Exchange Rate Variation* (%)
Data: %
* Positive changes mean currency depreciation and negative changes mean currency appreciation
Source: ReutersElaboration: Ministry of Finance
Exchange rate dynamics in the G20
The behavior of the exchange rate in the G20 countries has shown a more pronounced variation due to the worsening of the financial crisis in the eurozone. More recently—since mid-December 2011 up to mid-January 2012—the exchange rate trend reverted. Not only Brazil, but several other countries are going through an appreciation of the exchange rate.
IndiaAustralia
BrazilSouth Africa
MexicoSouth Korea
CanadaRussia
IndonesiaJapanChina
United KingdomEuro
Argentina
Fluctuation from 12/15/2011 to 01/20/2012
0.89
0.65
-0.40
-0.58
-1.09
-1.57
-1.64
-2.12
-2.47
-5.27
-5.55
-5.64
-5.66
-6.17
Fluctuation from 01/20/2011 to 01/20/2012
8.614.022.02-3.79-7.23-1.274.391.591.169.39
12.294.88-6.2110.54
Ministry of Finance
Special Edition | Year 2011
132
International Overview
Maturing Debt of European Countries in Crises (€ million)
Data: € million
Source: BloombergElaboration: Ministry of Finance
European agreement aims to contain fiscal imbalances
In January 2012, a new European agreement to curb fiscal imbalances was settled. It will be achieved by maintaining the structural government deficit below 0.5% of nominal GDP. If a member state breaks the rule, an automatic correction will be triggered. There is also a penalty for noncompliance.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Dec 2012
Nov 2012
Oct 2012
Sep 2012
Aug 2012
Jul 2
012
Jun 2012
May 2012
Apr 2012
Mar 2012
Feb 2012
Jan 2012
22,9
69
74,0
99
77,0
31
72,3
38
38,2
61
38,6
13
52,8
26
34,2
90
26,5
80
55,8
08
21,1
10
48,8
74
Ministry of Finance
Special Edition | Year 2011
133
International Overview
European Central Bank’s balance (€ billion)
Data: billion of euros
Source: BloombergElaboration: Ministry of Finance
European Central Bank’s balance
The ECB’s balance sheet reached a € 2.7 trillion record at the end of last year due to the increase of loans to banks in Europe. It has acted as a lender of last resort as it did during the 2008 turmoil.
500
1,000
1,500
2,000
2,500
3,000
Jan 2012
Dec 2011
Jul 2
011
Jan 2011
Jul 2
010
Jan 2010
Jul 2
009
Jan 2009
Jul 2
008
Jan 2008
Jul 2
007
Jan 2007
Jul 2
006
Jan 2006
Jul 2
005
Oct 2004
2,706.2
Brazilian Economy
OUTLOOK
Ministry ofFinance
B R A Z I L I A N G O V E R N M E N T
Special Section
Ministry of Finance
Special Edition | Year 2011
136
Special
After two decades of low economic dynamism, the progress of the Brazilian economy has been considerable in recent years. The economy entered a period of robust expansion, based on a development model focused on domestic market strengthening, with job creation and income distribution, promoting investment and expanding credit market, with inflation under control, and outstanding sound fiscal and financial systems. Thus, Brazil has reached high levels of growth, combined—in an unprecedented manner—with justice and social development.
Far different from the former financial and currency crises, Brazil has vigorously faced one of the most serious and profound ongoing global crises. In the past, same magnitude crises have driven the economy into imbalances in the balance of payments, public debt increases and higher country risk perception, inhibiting new investments and damaging economic growth. Nowadays, the macroeconomic results are worthy to be recorded. From 2002 to 2012, average inflation has fallen from 15% to less than 5% per year, public debt to GDP ratio has declined by almost half, exports have risen by more than five times, poverty has shrunk by more than 50%, and the country grows twice as much as experienced in previous decades.
For the period 2012-2014, the Federal Government is committed to stimulate the economy towards a 4.8% annual growth rate, with investment rate reaching 24% of GDP, inflation under control and low level of insolvency risk. According to international organisms’ estimates, the country shall be the 5th largest world economy in 2016. By then, more than eight million workers will have gone through professional training, and another 16 million people will have climbed the ladder out of extreme poverty.
Brazil: a decade of progress
Ministry of Finance
Special Edition | Year 2011
137
Special
* IMF forecast
Source: IBGEElaboration: Ministry of Finance
Brazil stands out in the international scene
2002
2012*
US$ 500 billion
US$ 2.6 trillion
6th World's largest economy
2002
2012*
US$ 2,800
US$ 13,300
Gross Domestic Product (GDP)
GDP per Capita
Ministry of Finance
Special Edition | Year 2011
138
Special
Elaboration: Ministry of Finance
Auto industry and agriculture are also growing internationally in importance
Source: MDA-MAPA
Automobile production “Plano Safra”Rural Financing Program
2011/20122002/2003
R$ 123.2 billion
R$ 24,7 billion
Source: MDA-MAPA, CONAB, FAO
163.0 million tons
1stWorld’s leader in sugarcane production Runner-up in soybean production
20112002
96.8 million tons
Source: ANFAVEA (Yearbook of the Brazilian Automotive Industry, 2011)
20112002
3.4 million units
6th
The world's sixth-largest Autoproducer in 2011
1.8 million units
The Brazilian harvest (millions of tons of grains)
Ministry of Finance
Special Edition | Year 2011
139
Special
Investments are crucial for the country´s development and growth
2002
2012*
16.4% of GDP
20.8% of GDP
Source: IBGE
2011 US$ 66.6 billion
2002 US$ 16.5 billionFourth place in Foreign Direct Investment in�ows Source: UNCTADSource: Central Bank of Brazil
4th
Investment Rate (in % of GDP)
Foreign Direct Investment (in US$ billion)
* Ministry of Finance estimates
Elaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
140
Special
Within a decade, inflation rate has fallen considerably
Source: IBGE Source: IBGE
12.5%
4.7%
2002
2012*
Source: FGV
25.3%
5.0%
2002
2012**
In�ation IPCA-Managed, % YoY
15.32%
4.0%
2002
2012**
In�ation IPCA, % YoY
In�ation IGP-M, % YoY
* Central Bank of Brazil Projections - Inflation Report Dec/2011** Focus Report Projections: Jan/27/2012
Elaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
141
Special
Elaboration: Ministry of Finance
Job creation: millions of people in the formal labor market
Unemployment Rate (%)
Unemployment rate observed in December 2011 is the lowest in history
Source: IBGE/PME
Source: IBGE/PME
Source: CAGED/MTE
Mar 2002Dec 2011
12.9%
4.7%
Formalization Rate (% formally employed over the occupied population)
20022011
45.5%
53.2%
Over 18 million jobs created between 2002 and 2011
20022011
1.49 million jobs
1.94 million jobs
Job creation over the years
Ministry of Finance
Special Edition | Year 2011
142
Special
Higher income has decreased poverty in Brazil
2002
2012
R$ 200
R$ 622Real Increase of 66%
2002
2012
26.7%
12.8%Source: FGV
2002
2011
0.589
0.541Source: IPEA 8.9%
Decrease of
Decrease of
52%
Minimum Wage at current prices Gini Income Index
Poverty rate *
Source: MTE
* Share of total population belonging to E class
Elaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
143
Special
Elaboration: Ministry of Finance
In the last decade, middle class jumped from 37% to 50% of total population
2002
2009
Middle Class37% of total population
Middle Class50% of total population
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Special
Elaboration: Ministry of Finance
The strong emphasis on expanding access to higher education (technical and university level) has been a priority, without leaving aside basic education
20122002Source: MEC
Number of registrations in professional education
565 thousand
924 thousand
20122002Source: MEC
Number of seats o�ered by Federal Colleges and Universities
124 thousand
248 thousand
20112002Source: IBGE
Percentage of labor force with 11 years of formal education or more
44.7 %
60.5 %
Quali�cationQuali�cation
Ministry of Finance
Special Edition | Year 2011
145
Special
* PNPG projections 2011-2020
Elaboration: Ministry of Finance
Scholarship granting for postgraduate studies triples, leading to the increase of Masters and Doctorate degrees
Quali�cation
2012* 41,396
2002 23,445
Source: CAPES PNPG 2011-2020
Number of Master’s Degree Graduates
Number of scholarships for Masters and Doctorate provided by Capes and CNPq
2010 74,000 scholarships
2002 35,000 scholarships
105,000 scholarships
Source: CNPQ, CAPES PNPG 2011-2020
2012* 13,304
2002 6,894
Source: CAPES PNPG 2011-2020
Number of DoctorateGraduates
2013*
Ministry of Finance
Special Edition | Year 2011
146
Special
Brazil has established itself as a safe and promising place for investments
Nov 2011 BBB (Investment Grade)
Jul 2002 B+ (Speculative Grade)
Rating Classi�cation (S&P)
2011 R$ 1,605 bi
2002 R$ 136 bi
Source: BM&F Bovespa
Trading Volume on BM&F BOVESPA (in R$ billion)
Source: S&P
Jan 2012 (average) 220 points
2002 (year average) 1,372 points
Country Risk(EMBI+)
Source: JP Morgan
Jan 2012 (average) 157 points
2002 (year average) 1,910 points
Country Risk (Credit Default Swap – CDS)
Source: Bloomberg
Elaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
147
Special
Elaboration: Ministry of Finance
In the last decade, Brazil has become an international lender
Total Net Foreign Debt
International Reserves
Source: Central Bank of Brazil
Source: Central Bank of Brazil
Total Net Debt = Short-term debt + Long-term debt - - International Reserves - - Brazilian credits abroad - - Commercial banks Assets
2002 US$ 165 bi
Dec 2011 US$ -79,1 bi
Jan 2002 US$ 36 bi
Jan 2012 US$ 353 bi
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Special Edition | Year 2011
148
Special
Even within a currency war scenario, Brazilian exports have quadrupled in a decade
2011
US$ 60 bi
2002
US$ 256 bi
Source: Central Bank of Brazil
Exports
US$ 29.8 bi
2011
US$ 13.1 bi
2002
Source: Central Bank of Brazil
2011
US$ 108 bi
2002
US$ 482 bi
Source: MDIC
Value of total trade *Trade balance
* Exports plus Imports
Elaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
149
Special
Domestic real interest rates, as well as interest rates paid abroad, have reached minimum historical levels
Source: Central Bank of Brazil
Jan 2002 10.99% YoY
Dec 2011 4.14% YoY
Real Interest (Selic) Rate (% YoY)*
Dec/31/2002 25.0% YoY
Jan/31/2012 10.5% YoYSource: Central Bank of Brazil
Nominal Interest (Selic) Rate (% YoY)
Jan 2002 12.6% YoY
Jan 2012 3.5% YoYSource: STN/MF
10-year Treasury Bond (Issuance Yield)(% YoY)
*Ex-post interest rate: the ratio between the Selic rate and annualized IPCA
Elaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
150
Special
Within a decade, credit to GDP ratio doubles in Brazil. Housing credit has also reached record highs recently
Financial System Credit Operations (% GDP)
Housing Credit (O�cial Bank CAIXA)
R$ 4.4 bi
R$ 84.3 bi2012*2002
26.0% GDP
49.1% GDP20112002
BNDES Disbursement
R$ 37.4 bi
R$ 103.4 bi20112002
Source: Central Bank of Brazil
Source: Central Bank of Brazil Source: CAIXA
* CAIXA estimates
Elaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
151
Special
Fiscal solvency has been guaranteed by the continuing decline of the public debt, as well as by the improvement of the debt profile
Percentage of debt indexed to the interest rate, reference interest rate (TR) and others
Dec 2002Dec 2011
Source: STN/MF
43.89%
30.14%
20022012
Source: Central Bank of Brazil
Federal Public Debt:Percentage maturing in 12 months
Percentage of debt indexed to the exchange rate
Public Sector Net Debt (% GDP)
Dec 2002Dec 2011
Source: STN/MF
Source: STN
Percentage of �xed rate debt + price indexes
60.4%
45.83%Dec 2002Dec 2011 65.50%
Source: STN/MF
10.28%
Dec 2006*Dec 2011
32.42%
4.37%
21.89% 36.9%
* Focus Report Projections: Jan/27/2012** 2006 data are used because the current methodology is not retroactive to previous years
Elaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
152
Special
A larger increase in expenses, in relation to revenues, is justified by income transfers and spending related to health and education
Total Net Revenue (% GDP) Primary expenditure (% GDP)
Source: STN/Ministry of Finance and “Siga-Brasil”/Federal Senate
15.7% of GDP
17.5% of GDP
Source: STN/Ministry of Finance and “Siga-Brasil”/Federal Senate
20122002
Income transfers to households
6.8% of GDP
8.6% of GDP
Source: STN/Ministry of Finance and”Siga-Brasil”/Federal Senate
20112002
17.9% of GDP
19.8% of GDP 20112002
Federal Government Spending in Education
in constant prices of January 2012
Federal Government spending in Healthcare
in constant prices of January 2012
222% growth in real terms
Source: STN and Budget Guidelines Law (LOA) 2012
R$ 36.0 billion
R$ 85.4 billion
107% growth in real termsSource: STN and Budget Guidelines Law (LOA) 2012
2012*2002
R$ 18.7 billion
R$ 68.6 billion 2012*
2002
* LOA 2012
Elaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
153
Special
On the other hand, payroll expenditures decreased
Payroll expenditures (% GDP)
2012*2002
4.8% GDP
4.4% GDP
Source: STN/Ministry of Finance and “Siga-Brasil”/Federal Senate
* Predicted Value - Budget Guidelines Law 2012 (12.595 – Jan/19/2012)
Elaboration: Ministry of Finance
Ministry of Finance
Special Edition | Year 2011
154
Glossary - Institutions
ANFAVEA National Association of Automobile Manufacturers
BC Central Bank of Brazil
BIS Bank for International Settlements
BNDES National Bank of Economic and Social Development
CG-LA Competitiveness Group Long-Term Assets
CNI National Industry Confederation
CNPq National Council for Scientific and Technological Development
FAO United Nations Food and Agriculture
FED Federal Reserve Bank
FGV Getulio Vargas Foundation
FIESP Federation of Industries of the State of São Paulo
IBGE Brazilian Institute of Geography and Statistics
IMF International Monetary Fund
MDA Ministry of Agrarian Development
MDIC Ministry of Development, Industry and Foreign Trade
MDS Ministry of Social Development and Fight against Hunger
MEC Ministry of Education
MPOG Ministry of Planning, Budgeting and Management
MTE Ministry of Labor and Employment
NASDAQ National Association of Security Dealers Automated Quotation
RFB Federal Revenue Secretariat
S&P Standard & Poor's
SAE/PR Secretariat for Strategic Affairs
SAIN International Affairs Secretariat
SEAE Secretariat for Economic Monitoring
SPE Economic Policy Secretariat
STN National Treasury Secretariat
UNCTAD United Nations Conference on Trade and Development
Ministry of Finance
Special Edition | Year 2011
155
Glossary - Terms
CAGED General Register of Employed and Unemployed
CAPES Coordination of Improvement of Higher Education Personnel
CDS Credit Default Swap
CLT Consolidation of Labor Laws
CRB Commodity Research Bureau
DI Interbank Deposits
DPMFi Domestic Federal Public Securities Debt
EMBI+ Emerging Markets Bond Index Plus
FAT Worker Support Fund
FBCF Gross Fixed Capital
FGTS Severance Pay Indemnity Fund
FSB Sovereign Fund of Brazil
IBC-Br Economic Activity Index
IED Foreign Direct Investment
IGP-DI General Price Index – Internal Supply / FGV
IGP-M General Price Index Market
INCC-DI National Construction Cost Index – Internal Supply / FGV
IOF Financial Transaction Tax
IPA-DI Producer Price Index – Internal Supply / FGV
IPC Consumer Price Index / FGV
IPCA Broad Consumer Price Index / IBGE
ISM Institute of Supply Management
LDO Budgetary Guidelines Law
LOAS Organic Law of Social Assistance
NUCI Installed Utilization Capacity Level
PAC Growth Acceleration Program
PIB Gross Domestic Product
PMC Monthly Retail Survey / IBGE
PME Monthly Employment Survey / IBGE
PMI Purchasing Managers' Index
PNAD National Household Sample Survey
PNPG National Plan of Graduate Studies
PRONATEC National Program for Access to Technical Education and Employment
RMV Lifetime Monthly Income
Selic Brazilian Benchmark Interest Rate
SIAFI Integrated Financial Management System
TR Reference Rate
WEO World Economic Outlook/IMF
Ministry of Finance
Special Edition | Year 2011
154
President of the Republic: Dilma Vana RousseffMinister of Finance: Guido MantegaDeputy Minister of Finance: Nelson BarbosaSecretary of Economic Policy: Márcio Holland Chief of Staff: Marcelo Fiche
Production and ExecutionEconomic Policy SecretariatAdvisory to the Minister of Finance on Economic Affairs
Editorial BoardAdriano SeabraCleomar GomesFabio Graner José Gilberto Scandiucci FilhoLígia Ourives
Technical SupportNational Treasury Secretariat - STNInternational Affairs Secretariat - SAINSecretariat for Economic Monitoring - SEAEFederal Service of Data Processing - SERPRO
www.fazenda.gov.brFinished in February 8th, 2012
Ministry ofFinance
B R A Z I L I A N G O V E R N M E N T
ArtVisual Project and Final Art: Viviane BarrosCover: André Nóbrega Layout Development: Alline Luz and Viviane BarrosDesign Trainee: Letícia Lopes and Weslei LopesEconomics Trainee: Andrea Motta