industrial policy, competitiveness and innovation - 15/07/10 · 100% state-owned company under...
TRANSCRIPT
July, 2010
Woodrow Wilson International Center for Scholars
Brazil - U.S. Business Council - U.S. Chamber of Commerce
Luciano Coutinho
Challenges for Industrial Policy, Innovation Challenges for Industrial Policy, Innovation and Competitiveness in Braziland Competitiveness in Brazil
OutlineOutline
• Brazilian assets & challenges
• Brazilian growth trends and prospects
• The State: acting for the short and for the long term
• The profile of a strategic agent: BNDES
• Summary and implications
Brazilian assets & challenges
4
Setting the scene: international trendsSetting the scene: international trends
• Growth in check... for some time… New and old poles of growth.
• Negative externalities associated with climate
change.
• Fierce competition in markets.
• Rapid pace of technical progress.
• States actively defending national interests.
Brazil: assets and challengesBrazil: assets and challenges
• Institutional & political stability
• Sound economic policy
– Inflation and public debt
– Reserves
• A complex and diversified economic base
• Infrastructure in need of expansion
• More innovation efforts are needed
• Economic inclusion n the making
• The best performance: job creation
Brazilian growth trends and prospects
Source: Ipeadata
Domestic market explains 2004Domestic market explains 2004--2008 growth 2008 growth cycle and 2010 recoverycycle and 2010 recovery
Contribution to GDP ( in percentage points)
9.17.47.5
5.32.75.0
-0.50.2 -0.3
-2.6-2.2-1.4-1.4
0.5
0.7
1.72.5
0.1
2.7
4.0
6.1
5.1
6.55.7
3.2
1.2
-0.2
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2002 2003 2004 2005 2006 2007 2008 2009 2010*
Domestic Demand Net External Demand GDP
* Forecast
Source: IBGE, BNDES
An average 5% p.a. growth is feasible over An average 5% p.a. growth is feasible over the next 5 years...the next 5 years...
Brazil: GDP Annual Growth Rate
(%)
5.2%
6.5%6.1%
3.1%
5.7%5.2%
5.1%
3.9%
-0.2%
-2%
0%
2%
4%
6%
8%
10%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Estimates
Investment/GDP (%)
21.4%22.2%
20.4%19.7%
19.0%
16.8%
18.7%
17.3%
15.3%14.7%
10%
12%
14%
16%
18%
20%
22%
24%
26%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Forecast
Source: IBGE, BNDES
... with investment leading the way...... with investment leading the way...
... as investment plans are robust and rising... as investment plans are robust and rising... as investment plans are robust and rising
Sectors Growth
2005-8 (observed)
2010-13 (forecast)
Implicit p.a. 2010-13 (%)
Infrastructure 111 172 9.3
Industry 174 305 11.8
Housing 191 258 6.3
Total 476 736 9.1
US$ billionUS$/R$ = 1.80
Source: BNDES Forecast
Based on Corporate Investment Plans from 13 sectors – Last Forecast: April 2010
Sample features:
• 10% of GDP
• 52% of Gross Fixed Capital Investment
• 60% of Manufacturing investments; 90% of Infrastructure investments
Industry
Infra struc ture
Electricity
Oil & Gas
Investments in Energy stand outInvestments in Energy stand out
Energy
50.3%
39.6%
10.7%
25.4%
24.3%
Petrobras’ Annual Investments: US$ 45 billion (2010- 2014)
The State:
acting for the short and for the long term
The short term: managing crisis, but with an The short term: managing crisis, but with an eye on keeping growth momentumeye on keeping growth momentum
• Strong financial regulation in place and liquidity ensured
• Effective counter-crisis policies, at low cost (1.2% of GDP)
– Tax relief on durable goods to maintain household consumption (Incentives have been delivered!!!)
– Credit expansion thanks to State-owned banks
– Strong incentives for investment
The long term: investment related policiesThe long term: investment related policies
Investment policies
Education- PDE
Health Housing
Industrial PolicyPDP
S&T &Innovation
InfrastructurePAC
The challenge: to have them as permanent State poli cies
Growth Acceleration Program Growth Acceleration Program ––PACPAC--
Planned investments - US$ billion
811.6479.6332.0Total
325.3194.5130.8Social & Urban development
384.6232.8151.8Energy
101.752.349.4Logistics
TotalPAC 2
2011-2014
PAC 1
2007-2010
BNDES in PAC 1: 331 projectsFinancing US$ 76 bn for US$ 138 bn of investments (70% � energy)
Effective management by Minister of Coordination and Internal Affairs, close to Presidency
Industrial Policy Industrial Policy –– PDPPDP –– launched May 2008launched May 2008
Highlights
• Political priority : President leadership
• Direct involvement & partnership with relevant acto rs : Ministry of Industry and Trade, Ministry of Finance, Ministry of S&T, BNDES
• Policy focus: Investment, Innovation, Exports, SMEs .
• Systematic interaction with private sector
• Effectiveness : over 95% of proposed measures are operational
Strengthening CompetitivenessAutomotive
ComplexCapital Goods
Textile& Garments
Wood and Furniture
Hygieneand Cosmetics
HousingServices Complex
Bio-dieselNaval & Shipping
Industries
Leather & Footwear
Agribusinesses Plastics
Consolidating and Expanding Leadership
AeronauticsOil, Gas and
Petrochemicals MeatBio-ethanol
Fostering Knowledge
Industrial Health Complex
Nuclear EnergyInformation and Communication
Technologies
Defense Complex
Nanotechnology Biotechnology
Electronics –consumer
Toy Industry
Mining SteelPulp and
Paper
Strategic Issues
Expanding Exports
Productive Integration with
Latin America
Strengthening SMEs
Integration with Africa
Regionalization and production decentralization
Clean Production and Sustainable
Development
Wheat
17
A complex policy framework for a complex A complex policy framework for a complex productive structureproductive structure
General CoordinationIndustry and Trade (MDIC)
Ministerial CouncilChief Cabinet,
Finance, Planning, S&T, Education
Executive SecretariatIndustry and Trade Agency (ABDI), BNDES, Finance Mi nistry (MF), S&T Ministry (MCT)
FosteringKnowledge
Coord.: MCT
6 Executive Committees
StrengtheningCompetitiveness
Coord.: MDIC
15 Executive Committees
Consolidating Leadership
Coord.: BNDES
7 Executive Committees
Strategic Themes
Coord.: ABDI
6 Executive Committees
Systemic Actions
Coord.: MF
1 Executive Committee
Governance: hierarchical structure and well Governance: hierarchical structure and well defined terms for relevant agenciesdefined terms for relevant agencies
The challenge: coordinating 500 civil servants; over 6 0 public agencies
BNDESThe profile of a strategic agent
� Main provider of long-term financing in Brazil
� 100% State-owned company under private law
� Institutional funding
� 2,500 employees
� Instruments
� Direct operations
� Indirect operations
� MSME (financing & guarantee)
� Exim
� Project finance
� Equity investments
� Grants
Scale and scope mattersScale and scope matters
Development Banks
Assets Equity Disbursement
World Bank 275.4 40.0 18.6
BNDES 222.0 15.9 68.8
IADB 84.0 20.7 11.4
Source: BNDES, IADB (Dec./09) and World Bank (June/09).World Bank as of June 30.
US$ billion
Non-performing Loans 2009: 0.20% of total outstanding debt
21
Source: BNDES
The importance of BNDES’ financingThe importance of BNDESThe importance of BNDES’’ financingfinancing
Financing sources for Investment in Manufacturing and Infrastructure (%) (2004-2009)
49.3%57.0% 57.0%
42.0%51.0%
45.3% 43.6%
26.1%19.0% 21.0%
21.0%
26.0%30.0%
39.6%
10.7% 13.0% 10.0%
17.0%
9.0%6.1%
8.9%8.1%
9.0% 10.0%
15.0%7.0%
3.1%
4.2%5.9% 2.0% 2.0% 5.0% 7.0%
15.6%3.7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Average 2004 2005 2006 2007 2008e 2009p
Retained Earnings BNDES External Sources Bonds Stock Market - Brazil
e-estimated p-forecast
Approvals and disbursements
The BNDESThe BNDES’’ performance is associated with performance is associated with BrazilBrazil’’s investments investment--led growth processled growth process
U$ billion
10.913.1 13.6 12.9
19.322.3 23.5
34.1 33.1
50.6 50.5
66.368.8
85.2
71.5
88.2
0
10
20
30
40
50
60
70
80
90
2003 2004 2005 2006 2007 2008 2009 2010*
Disbursements Approvals
* 2010: projected
Source: BNDES. R$/US$: average exchange rate for each year
2009: BNDES financed US$ 46.8 bn for US$ 93 bn in fixed investments. This generated or maintained 4.5 million jobs
(direct/indirect and income effects)
Summary and implications
Accomplishments and trendsAccomplishments and trends
� Success in facing the international financial crisis
� Brazil may grow 5% p.a. over the next few years
� Domestic market will lead growth:
� Consumption: emerging middle class
� Investments: oil & gas, electricity, logistics, large
events (World Cup, Olympic Games), housing
Coming up: Large number of high-return & low-risk projects
Ingredients to ensure sustained developmentIngredients to ensure sustained development
� State: permanent and effective investment policies
� Financing: institutional investors, capital markets, domestic savings, public institutions supporting investment
� Social: more and better jobs; quality education
� Infrastructure: more and better projects; more complex finance/insurance solutions
� Industry: innovation and competitiveness capabilities
Private sector mobilization and foreign investors are essential!
Innovation: the way aheadInnovation: the way ahead
• Priority for investment, innovation & competitivene ss . Challenges: clean production; competent labor force; renewable energies; health; urban infrastructure; e-gov.
• Industrial policy as a permanent State policy . The need to strengthen Intra-State cooperation in Industrial, S&T, Infrastructure and Education policies
• Public-Private interaction: essential for success
Strategic partnership : In a challenging and competitive world, the US & Brazil - private and public domains - should develop project-based cooperation to develop each others’ capacities
July, 2010
Woodrow Wilson International Center for Scholars
Brazil - U.S. Business Council - U.S. Chamber of Commerce
Luciano Coutinho
Challenges for Industrial Policy, Innovation Challenges for Industrial Policy, Innovation and Competitiveness in Braziland Competitiveness in Brazil
July, 2010
Woodrow Wilson International Center for Scholars
Brazil - U.S. Business Council - U.S. Chamber of Commerce
Challenges for Industrial Policy, Innovation Challenges for Industrial Policy, Innovation and Competitiveness in Braziland Competitiveness in Brazil
ANNEX – Tables and Figures
Brazilian assets & challenges
54,1
72.9 France
56,9
76.2 Germany
101,3
117.0 Italy
80,4
115.0 Japan
38,3
75.1 UK
42,3
66.8 US
43,438,8
43,942.0 Brazil
30,0
40,0
50,0
60,0
70,0
80,0
90,0
100,0
110,0
120,0
2003 2004 2005 2006 2007 2008 2009 2010
Forecast
Source: IMF and Brazilian Central Bank.
Interest Rate and Public DebtInterest Rate and Public Debt
Public Sector Net Debt (%) GDP
Net debt is low & under control
0
5
10
15
20
25
30
jan
/00
jun
/00
no
v/0
0a
br/
01
set/
01
fev/
02
jul/
02
de
z/0
2m
ai/
03
ou
t/0
3m
ar/
04
ago
/04
jan
/05
jun
/05
no
v/0
5a
br/
06
set/
06
fev/
07
jul/
07
de
z/0
7m
ai/
08
ou
t/0
8m
ar/
09
ago
/09
jan
/10
jun
/10
Interest Rate (SELIC) % per year
Decreasing interest rate
Strong defenses against external vulnerabilityStrong defenses against external vulnerability
High levels of international reserves…
Reserves/GDP
6.25.1
6.57.5
8.98.0
6.18.0
13.711.9
15.9
0
2
4
6
8
10
12
14
16
18
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
External Debt/Reserves6.2 6.65.8 5.6
4.43.8
3.1
2.01.0 1.0 0.8
0
1
2
3
4
5
6
7
8
19992000200120022003200420052006200720082009
…reduced external debt (vulnerabilities)
Foreign Debt and International ReservesForeign Debt and International Reserves
Source: Brazilian Central Bank
Source: IBGE.
A complex private sectorA complex private sector
Industrial Production, 2009
Labor
Intensive
9.7%
Natural
Resources
intensive
39.8%Scale
intensive
35.1%
Engineering
intensive
15.5%
FDI/GDP2004 2006 2008
Brasil 2.7 1.7 2.7China 2.8 2.9 3.4Índia 0.8 2.2 3.2
Source: IMF
An attractive economy
Underdeveloped infrastructureUnderdeveloped infrastructure
Area
(million km2)
Paved Roads
(1,000 kms)
Railroads
(1,000 kms)Brazil 8.5 212 29
Russia 17.0 755 87India 3.0 1,570 63
China 9.3 1.572 77Source: Institute of Logistics and Supply Chain, COPPEAD, UFRJ
1,500 unpaved
Immediate opportunity: Sâo Paulo – Rio de Janeiro High Speed Train
• Inv: US$ 19 billion - BNDES financing: US$ 10 bn – Exim: US$ 3.5 bn
• Call to bid: from 7/14/2010 to 11/29/2010
• Emphasis: development of local capacity and transfer of technology
Source: Innovation Surveys, various countries
R&D/Sales (most recent available data)
0.09%
0.21%
0.37%
0.42%
0.50%
0.66%
0.87%
0.97%
1.25%
2.20%
2.60%
0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00%
Mexico
Argentina
Portugal
Czech Republic
Hungary
Brazil
Spain
Norway
UK
France
Germany
Innovation capabilities are not strongInnovation capabilities are not strong
Mass markets are being expandedMass markets are being expanded
Social Groups (% of total population)
4744
4238
3632 32
4446
4850
52 53
11 12 12 13 14 15 15
42
2003 2004 2005 2006 2007 2008 2009
Class D/E (up to R$1,115)
Class C (between R$ 1,115 & R$4,807)
Class A/B (as of R$4,807)Data in : % of population
* Values in December 2008
Source : FGV and Finance Ministry
Group C: 26% growth 2003-2009
Social Groups monthly earnings
A&B: US$ 2,700 +
C : US$ 620 –2,700
D&E: up to US$ 620
GDP (2009): US$ 1.6 trillionPer capita: US$ 8,200
Net job creation per year (thousand workers net)
50
2 12
35
96
1 14
94
86
1 18
63
18
31
19
17
24
52
18
34
99
5 20
00
38
7
27
4
88
75
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
(*)
Source: MTE/Caged (*) estimated
An outstanding performance: job creationAn outstanding performance: job creation
Despite 0.2% negative growth in 2009, almost 1 million jobs created
The State:
working for the short and for the long term
The cost of keeping the economy runningThe cost of keeping the economy running
Anti-crisis policy measures R$ billionTotal 312.6
Loan to BNDES 100.0Freeing retained reserves to banks 100.0Tax relief 15.0
Popular Housing Programme 1.6
Loans to States and Cities 2.0
Loan to Caixa Econômica Federal 6.0
Withdrawing Petrobrás from primary surplus target 15.0
Reduction of primary target 24.0
Minimum wage increase 20.0Wage increase for public servants 29.0
Source: Finance Ministry
During crisis, StateDuring crisis, State--owned banks sustained owned banks sustained credit expansioncredit expansion
Source: Bacen.
Contribution to Credit Growth (Sept/08-Jan/10)
Credit Growth(September 2008 = 100)
Private Banks 27%
BNDES37%
Other State-owned Banks 36%
100
109.0113.9
118.3121.2
100
106.9
132.9
150.1
144.6
141.2
138.8
109.5
105.6103.2
103.3
102.4
102.9102.6
90
100
110
120
130
140
150
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-0
9Sep
-09Nov-0
9Ja
n-10
Public BanksPrivate Banks
Source: BNDES
Sept./08
85.0
July/0933.6
150,0
Mar./10122.7
0
50
100
150
200
250
dez
-07
jan
-08
fev-
08
mar
-08
abr-
08
mai
-08
jun
-08
jul-
08
ago
-08
set-
08
ou
t-0
8
no
v-0
8
dez
-08
jan
-09
fev-
09
mar
-09
abr-
09
mai
-09
jun
-09
jul-
09
ago
-09
set-
09
ou
t-0
9
no
v-0
9
dez
-09
jan
-10
fev-
10
mar
-10
PSI launched
BNDES daily disbursement for acquisition of Capital Goods- Direct and 2nd tier operations (US$ million)
Policy action for investment & Private Sector reaction: Policy action for investment & Private Sector reaction: interest rate reduction and growth in demandinterest rate reduction and growth in demand
PSI: Interest rate equalization program
BNDESThe profile of a strategic agent
42Source: BCB/BNDES
67.0
%
11.6
%
8.4
%
3.8
%
2.5
%
1.2
%
1.2
%
0.8
%
0.5
%
0.9
%
0.1
%
2.0
%
0%
10%
20%
30%
40%
50%
60%
70%
80%BN
DES
CEF BB
Bra
des
co
Santa
nder
BN
B
Itau
BRDE
HSB
C
Voto
rantin
BDM
G
Dem
ais
dec-09
Banks’ revenue from loan portfolio with duration of over 5 years (% of total revenue)
LongLong--term credit in Brazil: the BNDES and term credit in Brazil: the BNDES and commercial bankscommercial banks
The BNDES is practically alone in providing (and profiting from)long-term loans
23,2%26,7%
17,8% 17,5%
0%
5%
10%
15%
20%
25%
30%
2006 2007 2008 2009
Basel Index (%)67% 66%
53%40%
8% 6%16% 38%
8% 7% 6%4%
7% 9% 16%12%
10% 12% 9% 6%
0%
20%
40%
60%
80%
100%
2006 2007 2008 2009
Institutional Nacional Treasury Foreign Others Equity
Funding Composition
Prudential behavior is an asset of credibility
Source: BNDES
Institutional fundingInstitutional funding
Recent expand in demand Recent expand in demand required support from the required support from the
National Treasury National Treasury
Institutional Funding (Workers’Assistance Fund)
Institutional Funding (Workers’Assistance Fund)
80% of the BNDES80% of the BNDES’’ loans goes to industry loans goes to industry and infrastructureand infrastructure
Disbursements by business sector (%)
52%
30%
11%
7%
46%
35%
12%
7%
48%
30%
14%
8%
40%
38%
17%
5%
50%
36%
9%
5%
53%
33%
7%
7%
40%
40%
8%
12%
43%
39%
6%
12%
46%
35%
5%
14%
2001 2002 2003 2004 2005 2006 2007 2008 2009
Industry Infrastructure Agriculture Trade and Services
Source: BNDES
Half the disbursements are through Half the disbursements are through commercial bankscommercial banks
Disbursements per type of operation (%)
46
54
46
54
58
42
46
54
45
55
47
53
43
57
41
59
47
53
57
43
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Direct Operation Indirect Operation
Source: BNDES
2009 Number of Operations
Total: 304,843
Disbursements per size (% total)
225,296
58%
28,725
7%
23,711
6%
112,997
29%
micro and small medium-sized
individuals large
Number of operations & disbursement per Number of operations & disbursement per size: a contrastsize: a contrast
Source: BNDES
Export finance is increasing steadily in the Export finance is increasing steadily in the recent pastrecent past
US$ billion
Converted to US dollar on the disbursement dates
2.100
3.083
2.603
3.948 4.007
3.861
5.8626.376 6.595
8.309
4.190
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: BNDES
Export finance from the BNDES
48
A large and diversified equity portfolioA large and diversified equity portfolio
Total Equity Portfolio:
US$ 47.5 billion (Dec.’09 )
Sectorial distribution of BNDES equity portfolio (%)
July, 2010
Woodrow Wilson International Center for Scholars
Brazil - U.S. Business Council - U.S. Chamber of Commerce
Luciano Coutinho
Challenges for Industrial Policy, Innovation Challenges for Industrial Policy, Innovation and Competitiveness in Braziland Competitiveness in Brazil