brics country economy indicators presentation by pedro nunez

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BRICS

Country Economy Indicators

from CY-2006 through CY-2018

January, 2016

Corporate Headquarters

• Brazil

• Russian Federation

• India

• China

• South Africa

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Note from the author - disclaimer The purpose of releasing the following work related to BRICS presence in the current worldwide economy is to contribute with some part of my research and to motivate other professionals from different disciplines to create and to add value to the BRICS influence as a economy leaders now and in the future. If somebody makes any decision based on the numbers provided; it will be its own responsibility.

Any opinion expressed in this document or any difference related to the amounts that, for reasons out of my hands might not be accurate to the cent or to any other official or private report; are the sole responsibility of the author, and do not necessarily represent

the official position of any of the countries mentioned on this work. The idea is to present the facts and trends, and, on that regard the accuracy is very close.

This paper is a summary of my own research on BRICS matters, and it is a part of a large presentation I made to the corporate officers to show them the fortress and weaknesses of BRICS and its commercial partners, to develop a new strategy effort.

The recommendations at the end of this paper represents a general frame, however more specific recommendations based on the company regional investments have been properly delivered.

If someone from this or any other professional forum needs assistance or consulting on these matters , please, do not hesitate to contact me.

Pedro Nunez

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Acknowledgements

1/15/2016 Presented by Pedro Nunez

Corporate Offices

To Gabriel for helping me to notice my mistakes and for inspire me to fight

the good battle. I have no words to tell you how much I admire you and

how proud I feel about you.

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BRICS Introduction


Corporate Offices

• Brazil, Russia, India, China and South Africa are leading Emerging Markets Economies and Political powers at the Regional and International levels.

• BRICS are causing changes in the architecture of International Development Cooperation, not only with regard to Trade and Financial flows but also as Emerging Leaders.

• BRICS have been consolidating within the last 10 years, and expanded their strong position in the world economy.

• BRICS have started to constitute a strategic alliance with institutionalized meetings on ministerial and presidential level.

• Growth in BRICS (except China) is soft and has increasingly diverged. Falling oil prices and geopolitical sanctions have been accompanied by a sheer slowdown in 2014 and as it was expected it resulted in a contraction in the Russian Federation in 2015.

Facts

Main Stronghold

• The exceptional size of their Territories and Economies. • Strong growth rates(despite some setbacks), leading to increasing significance in

the World Economy. • The claim for a stronger Political Voice in International governance structures in

the Economic and Political fields.

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Corporate Offices

• Brazil has faced a technical recession in 2015, because a fragile confidence, increases in administered prices, and low commodity prices . The country will have a modest recovery in 2016 and 2017.

• Brazilian Real GDP went down to -3.7% in 2015 following a decline since 2013. • Brazilian Real (BRL) will hold a crumbly tone through the early months of 2016,

following a 13-month 40% depreciation trend against the US dollar (USD). • Brazil inflation targeting has helped the country overcome its history of indexation

by building credibility in the conception that inflation will remain attached to the target and that temporary inflation shocks will rapidly dissipate.

BRICS finances - Brazil

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Corporate Offices

• In Russia, economic sanctions and higher borrowing costs contributed to a particularly sharp slowdown in credit growth.

• Russian GDP went down to -3.8%, the lowest since 2009, and declining since 2011. • Russia as an oil exporter country has suffered the impact of the low prices which

has brought real effective exchange rates closer to their long-term averages. • Russia has suffered the negative impact of weak commodity prices compounded by

weak global trade, forecasts for shrinking global financial conditions, failing public finances, and political concerns. Consequently, this whole scenario have contributed to some ratings downgrades since 2013, including Russia, Brazil and South Africa

BRICS finances - Russia

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Corporate Offices

• Indian Real GDP kept a steady 7.3% in 2015, and the country will surpass China as the world’s fastest growing major economy in 2015 and 2016.

• India’s top two export destinations are the US and the Euro area; accordingly, strengthening domestic demand combined with stronger external sector performance will likely drive the country’s GDP output gains to 7.5% in 2016.

• India and China are the main importers of oil in the region, but also the primary exporters of goods from the region to the world.

• The Indian Agency for Partnership in Development (IAPD) has been established since 2012, with an estimated budget of USD $15B for the next 5 to 7 years.

BRICS finances - India

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Corporate Offices

BRICS finances - China

• China is the biggest and most influential member among BRICS concerning to international development cooperation.

• China’s real GDP growth will likely average 6.4% YoY in 2015 - 2016 with positive forecast.

• Chinese investment in the resource sector and infrastructure projects constitutes the biggest proportion, followed by manufacturing and service industries.

• China has also signed debt relief contracts with 50 countries from Asia, Africa and Latin America amounting to 25.6B Yuan (USD $4B).

• The signing of development related agreements with Asian, African or Latin American countries is oriented to develop a business partnership.

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Corporate Offices

BRICS finances - South Africa

• South African’s growth is likely to average less than 2% annually in 2016 - 2017. • South African’s economy recovered slightly in the 2015, although GDP recorded at

1.4% still weak in comparison to previous periods • Low commodity prices are weighing heavily on mining companies and industry.

Officials estimate that there will be over 50,000 job cuts in the sector. • South Africa, gets its revenue from some of the country’s largest exports by

value, like gold, diamonds, platinum, coal and iron. While its largest import is petroleum.

• Furthermore, a moderation in Chinese demand and low commodity prices will weigh on the South Africa Economy growth.

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Appendix

Presented by Pedro Nunez

Corporate Offices 1/15/2016

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BRICS Gross Domestic Product

Real GDP Growth (%)


Corporate Offices

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Corporate Offices

BRICS & World - Real GDP Growth (%)

Country / Groups 2013 2014 2015e 2016f 2017f 2018f

BRICS Real GDP Growth (%) 5.7% 5.1% 3.9% 4.6% 5.3% 5%

World Total Real GDP (%) 2.4% 2.6% 2.4% 2.9% 3.1% 3.1%

BRICS GDP Contribution to the World overall GDP

• The possibility that Brazil, Russia, India, China and South Africa (BRICS) economies could all face problems simultaneously would put in jeopardy the chances of a pick-up in growth in the years to come, however, economy setbacks happened before to the G-7 & G-20, and they are still in business. BRICS is still a good bet.

http://www.theguardian.com/business/brics

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Corporate Offices

BRICS & Brazil - Real GDP Contribution (%)

Brazil GDP Contribution to the BRICS overall GDP

• The recession in Brazil in 2015 will spill over into Argentina, Uruguay and Paraguay and have a very minor effect on the other countries in Latin America.

• It was in 1930 and 1931, when Brazil had back-to-back years of recession, and since then, has never had one as deep as that forecasted for 2015 and 2016 combined.

Country 2013 2014 2015e 2016f 2017f 2018f

BRICS Real GDP Growth (%) 5.7% 5.1% 3.9% 4.6% 5.3% 5.4%Brazil Real GDP (%) 2.7% 0.1% -3.7% -1.0% 2.3% 2.4%

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Corporate Offices

BRICS & Russia - Real GDP Contribution (%)

Russia GDP Contribution to the BRICS overall GDP

• Russia has battered crises before, including a 2008 oil price plunge and a 1998 sovereign debt default. In those cases, robust growth returned within a year or two.

• Energy is crucial for the Russian economy, with nearly half of the government revenue coming from the oil and gas exports.

Country 2013 2014 2015e 2016f 2017f 2018f

BRICS Real GDP Growth (%) 5.7% 5.1% 3.9% 4.6% 5.3% 5.4%Russia Real GDP (%) 1.3% 0.6% -3.8% -0.6% 1.0% 1.5%

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Corporate Offices

BRICS & India - Real GDP Contribution (%)

India GDP Contribution to the BRICS overall GDP

• In 2016, India is expected a net increase in economy of 7.5%. • Even with various world-wide setbacks, India is finding many ways to progress. • It is projected that there will be significantly more jobs in India during 2016.

Country 2013 2014 2015e 2016f 2017f 2018f

BRICS Real GDP Growth (%) 5.7% 5.1% 3.9% 4.6% 5.3% 5.4%India Real GDP (%) 6.9% 7.3% 7.3% 7.5% 7.5% 7.6%

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Corporate Offices

BRICS & China - Real GDP Contribution (%)

China GDP Contribution to the BRICS overall GDP

• China’s Central Bank stepped up efforts to cushion its economic slowdown amid plunging stock prices and a weakening currency, cutting the amount of cash the nation’s lenders must lock away.

Country 2013 2014 2015e 2016f 2017f 2018f

BRICS Real GDP Growth (%) 5.7% 5.1% 3.9% 4.6% 5.3% 5.4%China Real GDP (%) 7.7% 7.3% 6.8% 6.3% 6.0% 6.1%

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Corporate Offices

BRICS & South Africa - Real GDP Contribution (%)

South Africa GDP Contribution to the BRICS overall GDP

• South Africa has faced slower economic growth and a weaker currency as the commodity slump follows on from a decade of mainly price increases and investment into extraction. The country exports minerals like gold, diamonds, platinum, coal and iron. Its revenue depends on it.

Country 2013 2014 2015e 2016f 2017f 2018f

BRICS Real GDP Growth (%) 5.7% 5.1% 3.9% 4.6% 5.3% 5.4%South Africa Real GDP (%) 2.2% 1.5% 1.4% 1.3% 2.1% 2.5%

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BRICS International Reserves

Expressed in USD Dollars


Corporate Offices

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Brazil International Reserves – USD (Excluding Gold)


Corporate Offices

Year USD Billions

2005 53.25$

2006 85.16$

2007 179.43$

2008 192.84$

2009 237.36$

2010 287.06$

2011 350.36$

2012 369.57$

2013 356.21$

2014 360.96$

2015 371.00$

• Brazil as of 2016 has sufficient international reserves in USD to not have any problem, due to the setbacks on the economy or commodities/energy low prices worldwide. This will allow the country to better plan its come back.

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Corporate Offices

Russia International Reserves – USD (Excluding Gold)

Year USD Billions

2005 175.89$

2006 295.57$

2007 466.75$

2008 411.75$

2009 416.65$

2010 443.59$

2011 453.95$

2012 486.58$

2013 469.60$

2014 339.37$

2015 379.00$

• Russian international reserves in USD, as of the 2016 are still a good back up to face the problems derived from low oil prices

• The social instability might be a concern to start working a new strategy to avoid internal distress.

• Russia gets nearly half of its revenue from oil and gas, and the government is struggling to finance a RUB 1.5T (USD $19.2B) hole in its budget.

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Corporate Offices

India International Reserves – USD (Excluding Gold)

Year USD Billions

2005 131.92$

2006 170.74$

2007 266.99$

2008 247.42$

2009 265.18$

2010 275.28$

2011 271.29$

2012 270.59$

2013 276.49$

2014 303.45$

2015 351.83$

• India has been one world’s fastest-growing economy in 2015. But India also has the best growth prospects for the coming decade, based on the increasing variety and sophistication of the products it exports.

• The primary reason for the hike in reserves can be attributed to the Reserve Bank of India (RBI) buying US dollars to prevent Rupee from causing damage to the country exports.

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Corporate Offices

China International Reserves – USD (Excluding Gold)

Year USD Trillions

2005 0.72$

2006 0.95$

2007 1.34$

2008 1.80$

2009 2.16$

2010 2.58$

2011 3.18$

2012 3.30$

2013 3.59$

2014 3.94$

2015 3.99$

• China's foreign exchange reserves remain sufficient and provides to the country the necessary angle to maneuver in the world current changes, without having to cause distress to the country economy.

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Corporate Offices

South Africa International Reserves – USD (Excluding Gold)

Year USD Trillions

2005 18.58$

2006 23.06$

2007 29.59$

2008 30.58$

2009 35.24$

2010 38.18$

2011 42.60$

2012 44.00$

2013 44.86$

2014 44.27$

2015 45.00$

• The South African Bank said that the increase in its International Reserves mainly reflected the a combination of depreciation of the USD against major currencies, foreign-exchange swaps conducted for liquidity management purposes and foreign-exchange transactions concluded on behalf of clients.

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BRICS Foreign Exchange Trends


Corporate Offices

Compared as of :

• USD/BRL for the country of Brazil • USD/RUB for the country of Russia • USD/INR for the country of India • USD/CNY for the country of China • USD/ZAR for the country of South Africa

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Corporate Offices

Brazil yearly Foreign Exchange Rates trends – USD/BRL

Brazil FX Forecasted numbers for January 2016

Year USD/BRL

2016 3.96

2015 3.94

2014 2.67

2013 2.36

2012 2.05

2011 1.87

2010 1.66

2009 1.74

2008 2.33

2007 1.77

2006 2.14

2005 2.33

• The Brazilian currency (BRL) will continue a trade expectation of 4 Reales per 1 US Dollar or above in the near term.

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Corporate Offices

Russia yearly Foreign Exchange Rates trends – USD/RUB

Russia FX Forecasted numbers for January 2016

Year USD/RUB

2016 76.33

2015 73.26

2014 58.26

2013 32.84

2012 30.43

2011 32.11

2010 30.52

2009 30.23

2008 29.77

2007 24.55

2006 26.34

2005 28.76

• A combination of weak oil prices, low commodity trade, prospects of US monetary tightening, capital outflows from external debt redemption at the end of 2015 and the anticipated rise in US interest rates; might weaken the Russian currency (RUB) further in 2016.

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Corporate Offices

India yearly Foreign Exchange Rates trends – USD/INR

India FX Forecasted numbers for January 2016

Year USD/INR

2016 68.61

2015 66.23

2014 63.47

2013 61.76

2012 54.84

2011 54.48

2010 45.35

2009 46.77

2008 49.50

2007 39.42

2006 44.29

2005 45.13

• The Indian currency Rupee (INR) will be tested to weaken in 2016 by external variables like the pace of the US Federal Reserve’s monetary tightening over the coming quarters and subsequent adjustments to emerging market exposure by global investors .

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Corporate Offices

China yearly Foreign Exchange Rates trends – USD/CNY

China FX Forecasted numbers for January 2016

Year USD/CNY

2016 6.53

2015 6.49

2014 6.15

2013 6.11

2012 6.31

2011 6.36

2010 6.60

2009 6.83

2008 6.83

2007 7.30

2006 7.81

2005 8.07

• The Chinese currency Yuan (CNY), has been keeping a steady value against the USD by not depreciating dramatically. It is expected to not surpass the current barrier.

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Corporate Offices

South Africa yearly Foreign Exchange Rates trends – USD/ZAR

South Africa FX Forecasted numbers for January 2016

Year USD/ZAR

2016 15.54

2015 15.49

2014 11.58

2013 10.48

2012 8.48

2011 8.15

2010 6.63

2009 7.40

2008 9.40

2007 6.83

2006 7.01

2005 6.34

• Although the South African currency (ZAR)had been weakening steadily all year due to increasingly negative economic fundamentals, but, it was in December 2015 that it took its worst hit, after the government dismissed the country’s Finance Minister, following the news that the country’s credit rating had been down-graded.

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1/15/2016

BRICS Summary

Presented by Pedro Nunez

Corporate Offices

• BRICS members (Brazil, Russia, India, China and South Africa) met for the first time in 2009, launching the bloc's cooperation mechanism. Since then, the BRICS have shown vitality and innovation through cooperation, with deepened participation in global governance.

• On July 15th 2014, the first day of the 6th BRICS summit held in Fortaleza, Brazil, the BRICS states signed the Agreement on the New Development Bank (NDB), and stipulates the total capital of USD $100B.

• The 7th BRICS summit in July 2015 in Russia marked the entry into force of the Agreement.

• The NDB shows that the BRICS bloc has transformed from a political concept to a real force for reform in the international community.

• The BRICS has become an important platform for exchanges and cooperation among the world's major Emerging Economies. It has brought real benefits for the member states, and also earned a good reputation among the international community.

• Both the purpose of, and the need for the NDB are intrinsically linked to the imperative of efficiently channeling global savings into infrastructure and sustainable development. (Global savings were calculated to be USD $17T in 2012)

• It is worth noting that the share in global savings of the BRICS countries is now larger than that of the United States, Japan and the European Union, combined.

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Recommendations


Corporate Offices

• The Company needs to address the changes and challenges that currently BRICS are under. Planning and Strategy team to be in charge.

• Since the company has investments in the related BRICS area; the strategy needs to be reoriented to release some assets and buy others with more strategical advantages to the general planning. Merging & Acquisitions team to be in charge.

• The Planning and Strategy team needs to be reorganized into a solid one entity to have one leader, and from that standpoint create the regional strategy.

• The Predictive & Analytics team has to be in charge of the whole forecast and budgeting, for the whole company, working with all regional, divisional and local teams as a ruling entity. Furthermore, it needs to consolidate its influence and ties with global pricing, regional pricing and local pricing to provide tools and the power of opportune response.

• The team in charge of the processes of cost reduction that have been implemented, need to develop a new plan based on the facts of some setbacks and new financial and commercial opportunities. FP&A team is currently in charge.

• The Research and Development team needs to work very close with the Predictive & Analytics team to use their resources related to the current numbers and future trends, to consolidate the presence of the company current and future products or services.

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Pedro Nunez

Business and Financial Analyst

End of the presentation

Thanks


Corporate Offices

brics country economy indicators presentation by pedro nunez

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