current economic situation in brazil - ahk...
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Current economic situation in Brazil
(June 2014)
Oliver Döhne
Representative in Brazil
Germany Trade & Invest
03.06.2014
www.gtai.com
Germany Trade & Invest is the economic development agency of the Federal
Republic of Germany.
The organization promotes Germany as a business and technology location and
supports companies based in Germany with global market information.
About us
Germany Trade & Invest
03.06.2014 2
www.gtai.com
Between hype and crisis – which is it?
Brazil in the international perception
03.06.2014 3
Is Brazil ready to be a global champion?
www.gtai.com
Short term
03.06.2014 4
www.gtai.com
Current economic situation
GDP variation (4. quarters, in %)
Slow down
Quelle: Bras. Zentralbank
03.06.2014 5
3,7
2,7
1,9
1,2
0,91,0
1,3
2,0
2,3 2,3
2,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
3. Q.2011
4. Q.2011
1. Q.2012
2. Q.2012
3. Q.2012
4. Q.2012
1. Q.2013
2. Q.2013
3. Q.2013
4. Q.2013
1. Q.2014
www.gtai.com
� End of tax incentives (IPI)
� Fear of losing job
� Inflation
� Higher interest rate
� Less credits
The boom is over (for now)
*Prognose
Consumption
03.06.2014 6
6,9
4,1
3,1
2,31,9
2,3
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0Growth of consumption
(in %)
www.gtai.com
Industry
Confidence index among industrial firms (0-100)
Doubts about the next 6 months
Quelle: CNI
03/06/2014 7
Optim
ism
Pessim
ism45
50
55
60
65
70
jan/10 jun/10 nov/10 abr/11 set/11 fev/12 jul/12 dez/12 mai/13 out/13 mar/14
www.gtai.com
Foreign trade
Exchange rates (in R$) Trade flow (in Mrd. US$)
Oscillation of exchange rate complicates planning
Quelle: Zentralbank
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0
50
100
150
200
250
2,2245
3,0296
1,50
1,70
1,90
2,10
2,30
2,50
2,70
2,90
3,10
3,30
R$/US$
R$/Euro
www.gtai.com
� Billions for Sport events, but little improvment in daily life
� Slow projects in public transport
� Bottlenecks in health care
� Corruption scandals
� Difficult access to good education
� Growing violence
Climate of frustration and anger
Street protests
03.06.2014 9
www.gtai.com
� Ad Hoc-actions instead of long term agenda by government
� Election year (President, Parlament, Governors) in Oktober
� Less working days (late carnival, World Cup, many holidays during the week)
� Energy and water shortage
� Protecionist actions (Inovar Auto, Local Content etc.)
� Custo/Susto Brasil
2014 as a undynamic transition year
Overall business climate
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www.gtai.com
Long term
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www.gtai.com
� Extremely fertile ground
� Favourable climate
� Huge adicional areas for agriculture
� Vast mineral reserves
� Offshore petroleum
� Big water supply
� Much Wind, Sun, Water und Biomass
as energy sources
� Creative, multikultural and consumption friendly
population
The right preconditions
Success factors
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www.gtai.com
� Lessons of the past were learned
� Stability is the key
Success factors
Stable policy
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FHC (1995-2002) Lula (2003-2010)
Stability policy (since 1995):
� Anti-Inflation
� Strict rules for financial
market
� Solid public accounts
� Flexibler Wechselkurs
� Internvention only when
necessary
Dilma (seit 2011)
5 terms continuity
Stability Internal market Competitiveness
www.gtai.com
Success factors
Current Inflation (IPCA, 12 monts, %)
Anti-Inflation-Policy still valid
Quellen: Zentralbank, IMF, IBGE
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6,15
11
2
3
4
5
6
7
8
9
10
11
12
13
nov/10abr/11set/11 fev/12 jul/12 dez/12 Mai Okto März
Limit
Inflation (IPCA)
0
1000
2000
3000
1989 1993 1997 2001 2005 2009
Hyperinflation of the past (IPCA, p.a.,
%)
Target
Leitzins
www.gtai.com
The internal market
Success factors
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Income
Consumption
Invesment
Jobs
Spending mentality
New middle class
Back log
Tax reduction
More credit access
Social programs
Minimum wage
Local Content
stabile conditions
Investment incentives
Infrastructure
World Cup/Olympia
Pre Sal
Importnachfrage
Low unemployment
New jobs
www.gtai.com
Success factors
A,B 26,4 Mio.
C
62,7 Mio.
D,E92,9 Mio.
Income classes 2005
AB42,4 Mio.
Income classes 2011
Social upward mobility
Quelle: O Observador
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D,E
45,2 Mio.
C103,1 Mio.
A,B>6.780 R$
C>2.712 R$
www.gtai.com
Success factors
Inhab./car
USA 1,2
Italy 1,4
Japan 1,7
France 1,7
UK 1,7
Germany 1,9
Korea (Rep.) 2,6
Mexiko 3,6
Brazil 5,7
Low market penetration
Quelle: Anfavea (Daten von 2011)
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Vehicle density
www.gtai.com
Success factors
Energy sources (2013, Anteil in %)
Variety of energy sources
Quelle: Energieministerium
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Petroleum39,2
Gas11,5
Coal5,4
Nuclear1,5
Sugarcane15,4
Hydro13,8
Wood9,1
Other Renewables
4,1
www.gtai.com
Energy
Capacity of electricity generation (in GW)
Dominating hydro power, expanding wind power
Quellen: EPE, Aneel
03.06.2014 19
Percentage, March 2014
Big Hydro
Small Hydro
Windpower
Solar Power
Nuclear
Gas
Coal
Petrol/Diesel
0 20 40 60 80 100 120
2022
2012
Hydro68,0
Wind1,8
Thermi-sche 28,6
Nuclear
1,6
www.gtai.com
Success factors
Import (2013, Anteil in %)
VR China19,0
USA10,3
Argentinien8,1
Nieder-lande7,2
Japan3,3
Deutsch-land2,7
Venezuela2,0
Korea (Rep.)
1,9
Andere45,5
Export (2013, Anteil in %)
Diversified Foreign Trade
Source: MDIC
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VR China15,6
USA; 15,0
Argentinien; 6,9
Deutschland6,3
Nigeria4,0
Korea (Rep.)
4,0
Japan3,0
Italien2,8
Frankreich2,7
Andere29,7
www.gtai.com
Dynamics
6,16,5
8,7
12,0
9,9
12,6
15,214,2
15,2
0
5
10
15
20
Imported Goods Import from Germany (in bill. US$)
Growing demand for industrial goods
Quelle: GTAI
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Erdöl14%
Maschinen14%
Elektro11%
Kfz 10%
Chemikalien5%
Düngemittel4%
Arzneimittel3%
Kunststoffe3%
EDV 3%
Kohle 2%
Eisen/Stahl2%
Andere 29%
www.gtai.com
FDI
Destination of german direct investment (percentage of stock in %)
Brazil is a traditional destination for German investment
Quelle: Zentralbank
03.06.2014 22
Kfz36,7
Chemie18,9
Maschinen-bau12,4
Finanzen6,8
Andere25,2
www.gtai.com
Capital flows
FDI vs. current account deficit (in bill.
US$)
Reserves vs. Import und Foreign Debt
(in bill. US$)
Brazil has become more dependend on short term inflow
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0
100
200
300
400
500
2009 2010 2011 2012 2013 2014
Reserves
Import
Foreign Debt
=more stable
0
10
20
30
40
50
60
70
80
90
2009 2010 2011 2012 2013 2014 2015
FDI CA-Deficit
=less stable
www.gtai.com
The “Custo Brasil”
• Infrastructure bottleneck
• Shortage of qualified labor
• Red tape
• intranparency
• High loan rates
• Complex tax system
• Expensive primary material
The true brakes are....
GDP-Change (% p.a.)
...structural
Quellen: GTAI, Zentralbank, Focus-Umfrage
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5,1
-0,3
7,5
2,7
0,9
2,31,6 1,8
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
Long term
growth potential
www.gtai.com
� Sequence of auctions
� Less power for public authorities
� More private responsibility
� Airports (Flughafen München in BH)
� More intermodal transport
� 10.000 km new tracks
� 7.500 km new roads
� New port legislation
More private activity in the infrastructure
Fighting the custo Brasil
03.06.2014 25
www.gtai.com
Regional Structure
Southeast is the industrial core (percentage in %)
03.06.2014 26
28,1
41,914,3
13,1
56,316,6
Value added
Population
www.gtai.com
Regional Structure
Income per year (in bill. R$, 2013, var. 2012)
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60
27
33
140
50
243
Belo Horizonte
(-1,5%, 11%)
Salvador
(-3,7%, 6%)
Recife
(+0,2%, 5%)
Porto Alegre
(+3,5%, 7%) São Paulo
(+7,9%, 44%)
Rio de Janeiro
(+5,5%, 26%)
www.gtai.com
Muitos setores em expansão dinam
Sectors of industry
Complete structure offers opportunities in many sectors
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www.gtai.com
Many achievements but still a lot to tackle
Resuming
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Base
•Stability, comparably solid economic policy
Start
•Internal market activated, social upward mobility
1. success
•Global attention as interesting emerging market
Long term
growth
•Business friendly environment
•Efficient public spending
•Infrastructure/energy costs
•Access to good education
•More efficient legal/tax system/transparency
•Environment issues/violence
www.gtai.com
Publications Info-Events Newsletters GTAI-Data Bank
Further information
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Strong cooperation with
Chamber Network and
other Institutions,
Briefings for delegations
about economy,
infrastructure, sport
events, Chances und
Risks
www.gtai.de
www.gtai.com 03.06.2014 31
Back to the question:
Is Brazil ready to be a global champion?
www.gtai.com
� or not quite yet...?
Thank you for your attention!
03.06.2014 32