tam 6 mb tam 20081110 eng
TRANSCRIPT
MB ASSOCIADOS
1
Brazilian Macroeconomic
Perspectives
“T A M DAY”
November 2008
Financial crisis impact on commodities Financial crisis impact on commodities
prices and on the Brazilian economy
perspectives
2
Financial crisis impact on commodity prices
• Prospects for global
growth have
deteriorated as
financial crisis has 130
140
Oil prices (US$/barrel)
financial crisis has
worsened.
• Weakening global
demand is
depressing
commodity prices.
3
60,8
50
60
70
80
90
100
110
120
06/11/07 06/02/08 06/05/08 06/08/08 06/11/08
Source: Bloomberg. Prepared by: MB Associados.
Oil: Supply and Demand (mb/d)
IEA Forecast: Demand projections have been reduced (mb/d)
mb/d
2008 2009
Demand 86,5 87,2
Supply non Opec 54,4 56,1
Source: Opec.
October
4
Source and forecasts: Opep. Prepared by: MB Associados.
IEA Forecast: Demand projections have been reduced (mb/d)
CRB – Commodities Index
700
900 CRB Total
Food
Metals
100
300
500
set/98 set/00 set/02 set/04 set/06 set/08
Source: CRB. Prepared by: MB Associados.
255,3
194,8
186,9
165,5
114,4
Islândia
EUA
Japão
Reino Unido
China
Brazilian banks have strong fundamentals
Average BIS ratio of the 50 largest banks (%)
Total Private Credit (% of GDP)
114,4
111,4
61,0
34,8
25,7
18,2
11,7
9,0
1,9
China
Alemanha
Emirados Árabes
Brasil
Rússia
México
Argentina
Noruega
Congo
Source: Bacen. Prepared by: Credit Suisse.
Source: Nation Master (2004/2005 data). Prepared by: MB Associados.
Financial crisis impact on the Brazilian economy?
• Strong contraction in
credit availability;
Reduction in
7
• Exchange rate
depreciation
aggravated by
investors
deleveraging;
Reduction in the Brazilian economy growth
2,122,00
2,10
2,20
2,30
2,40
Strong devaluation in domestic exchange rate (R$/US$)
Central bank’ sales of dollars in the spot and future exchange rate markets
(data until November 06, 2008 - US$ bi)
24,5Swap
1,50
1,60
1,70
1,80
1,90
05/11/2006 05/05/2007 05/11/2007 05/05/2008 05/11/2008
Source: Bacen. Prepared by: MB Associados.
3,1
5,8
6,3
Dollars lines for exporters
Swap with repurchase agreement
Spot
Inflation dilema: activity x exchange rate
Optimistic Scenario :
– If the exchange rate
returns to R$/US$ 1,90
combined with a strong
reduction in activity,
Pessimistic Scenario:
– If the exchange rate
remains above
R$/US$ 2,00, then it
will be necessary to reduction in activity,
then the exchange rate
pass-through into
inflation should be low;
will be necessary to
increase interest
rates to curb inflation
surge;
9
6,1
6,5
5,0
5,5
6,0
6,5
7,0
IPCA optimistic
IPCA pessimistic
Inflation (IPCA) in 2008 and 2009 (%)
4,8
4,3
2,5
3,0
3,5
4,0
4,5
5,0
I/07 II/07 III/07 IV/07 I/08 II/08 III/08 IV/08 I/09 II/09 III/09 IV/09
Source: IBGE. Prepared by and Forecast: MB Associados. 10
2008 2009 2008 2009
Exchange rate R$/US$ 1,90 R$/US$ 1,90 Above R$/US$ 2,0 R$/US$ 2,0
Interest rates 13,75 12,75 14,25 16,25%
OPTIMISTIC PESSIMISTIC
• Reduction in dollar
credit lines
(including ACC);
• Uncertainty about
small banks
balance situation;
Reduction in credit availability
Evolution of ACC lines to exports (US$ millions) – daily average
291
393
Lehman Brothers bankruptcy
Central bank first offer of credit
lines in dollars for exporters
(US$ 1,6 billions).Lehman Brothers bankruptcy
balance situation;
• Concerns about
companies
exposure to loans
that combine
exchange rate
derivatives
transactions;
11Source: Banco Central. Prepared by: MB Associados.
186
144
92
133 106
150
229
173
1-5 8-12 15-19 22-26 29-30 1-3 6-10 13-17 20-24 27-31
Sept/08 Oct/08
When will the credit availability normalize?
• The Central Bank measures to address liquidity
problems should help small banks to deal with
their balance sheet, reducing solvency risks. It
also may help to increase interbank credit
availability.availability.
• Despite that, the normalization in the credit
market will take time. For now, companies that
have access to credit are paying much higher
interests (140 to 150% of the CDI interest for
short term credit lines).
12
Demand slowdown in the Demand slowdown in the
4th quarter of 2008
13
Consumer expectation and business confidence indexes
Consumer 4.24.6
7.7
4.35.2
12.1
6.3 5.6
-1.7
-5.8
-1.0
3.4
-5
0
5
10
15Change over the same month last year - %
50.5
53.4
40.0
45.0
50.0
55.0
60.0
65.0
70.0
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08
ICEI Actual Conditions Expectations
Source: Sondagem de Opinião da CNI. Prepared by: MB Associados.
Index
14
Business
-5.8
-10.1
-15
-10
Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08Source: FGV. Prepared by: MB Associados.
Commerce indicators in São Paulo(consults to SCPC)
%
SCPC
Jul/08 - Jul/07 6,5
15
Source: ACSP. Prepared by: MB Associados.
Jul/08 - Jul/07 6,5
Ago/08 - Ago/07 13,5
Sep/08 - Sep/07 0,2
Oct/08 - Oct/07 0,0
New vehicle sales
Units
Oct/08 Sept/08
Auto + light trucks 224.744 254.182 -11,6 �
Change
Oct/08 -
Sept/08 (%)
16
Auto + light trucks 224.744 254.182 -11,6 �
Trucks 12.100 12.040 0,5 �
Bus 2.485 2.512 -1,1 �
Motorcycle 150.110 184.368 -18,6 �
Others 9.068 9.254 -2,0 �
TOTAL 398.507 462.356 -13,8 �
Source: Fenabrave. Prepared by: MB Associados.
Vehicle inventories are increasing, as sales fall production will have to adjust
Vehicles: Production and sales(yoy montly change - %)
Vehicles: Inventories(in days of supply)
Sales
Production
17
Production
Industrial Electrical Energy consumption
5,25,3
5,2
5,6
5,2
4,8 4,8 4,8
5,1
5,6
12 - month accumulated growth - %
Previous forecast
4,84,7
4,8
4,6
3,8
4,8
3,6
4,1
4,6
jan/08 fev/08 mar/08 abr/08 mai/08 jun/08 jul/08 ago/08 set/08 dez/08
Source: EPE. Prepared by: MB Associados.
Current forecast
GDP Growth in 2009 (%)?
Optimistic Scenario:
– Even if the credit
availability starts to
recuperate, the
economy is expected to
Pessimistic Scenario:
– If the international
crisis don’t show
signs of
improvement then economy is expected to
expand slower in 2009,
with GDP growth of
3,5%;
improvement then
GDP growth rate
should be significant
smaller, around 2,3%.
19
2009 Most Probable GDP Growth Scenario
• GDP growth is expected to slow from 5,4% to 5,1%,
due to signs that 4th quarter growth will be lower
than previously forecasted.than previously forecasted.
• Activity is now expected to grow 2,8%, down 0,7
percentage point from our previous estimative. A
recovery is expected to begin late in 2009.
20
2009 GDP slowdown will be led by a decline in investment growth
• Most companies have decided to delay further
investments as the international financial crisis
deteriorated. This decision was intensified by thedeteriorated. This decision was intensified by the
fact that most companies deadline for fiscal
budged review occurs in September and October,
exactly when the credit crunch worsened.
21
Companies that already announced investments postponement
Sectors Companies
Oil and Gas Petrobrás
AgribusinessMinerva, VCP, Suzano Papel e Celulose, Cosan e Crystalsev (Uniduto), Klabin, Aracruz, Grupo Orsa, Stora Enso, Duratex, CoopercentralAurora, John Deere, Grupo Equipav, Nova America
Automotive Hyundai, Volkswagen, GM, Delphi, Bosch
CR2, Even, Camargo Correa Desenvolvimento Imobiliário, Condomínio Civil Construction
CR2, Even, Camargo Correa Desenvolvimento Imobiliário, Condomínio RN, Inpar, Holcim
Mining and Steelmaker
Gerdau, ArcelorMittal
Chemical and petrochemical
Elekeiroz, Comperj, Reliance
Electrical energy Tractebel Energia
Telecomunications Vivo
Retail Lojas Renner, Magazine Luiza, Ponto Frio, Amis
Information technology
Samsung
Sources: Jornal Valor, Estado de S.Paulo, Gazeta Mercantil , Folha de S. Paulo e Relatório Reservado. Prepared by: MB Associados.
2009 Most Probable Scenario: Breakdown on Brazil's quarterly GDP growth
5,3%
4,6%
5,8%6,1%
5,1%
4,4%
Previous forecast (2008: 5,3% e 2009: 3,5%)
Current forecast (2008: 5,1% e 2009: 2,8%)
Source: IBGE. Prepared by: MB Associados.
4,0%
3,0%2,6%
3,6%
4,6%
3,2%
1,9% 2,1%
2,9%
4,4%
I/08 II/08 III/08 IV/08 I/09 II/09 III/09 IV/09
6,04,4
12,9
2,9
19,3
3,3 4,02,5
5,57,8
2009 Most Probable Scenario: GDP growth by main components
Household consumption
Government consumption
Investment Exports Imports
4,2
5,5
4,55,1
2,02,4
2,9 2,8
Agriculture Industry Services GDP 24Source: IBGE. Prepared by and forecast: MB Associados.
Real income on 2006 and 2007, by minimum wage (variation in R$ billions)
14.1
20.117.3
25.7
16.9
20.3
9.6
15.415.0
20.0
25.0
30.0 2006 2007
On 2006 low income classes got real income growth because of minimum wageand social welfare. By 2007 middle class income has also started to improve.
25
2.8
6.5
0.8
-0.5
2.9
9.6
-6.4-10.0
-5.0
0.0
5.0
10.0
15.0
Up to 1 From 1 to 2 From 2 to 3 From 3 to 5 From 5 to 10 From 10 to 20 More than 20
Source: IBGE. Prepared by MB Associados.
Real income on 2008 and 2009, by minimum wage (variation in R$ billions)
Growth has accelerated income gain of the upper classes. This may diminish by2009 with the economy slowdown.
14.417.0
18.8 19.4
14.6 14.115.0
20.0
25.0
2008
2009
26
2.04.6
7.2
1.74.7
8.8
5.0 5.2
0.0
5.0
10.0
15.0
Up to 1 From 1 to 2 From 2 to 3 From 3 to 5 From 5 to
10
From 10 to
20
More than
20
2009
Source: IBGE, MB Associados. Prepared by MB Associados.
• Gradual recovery in credit availability;
• Exchange rate stabilization around R$/US$ 2,00;
• End of the interest rate hike cycle;
Perspectives for 2009 and 2010
• Inflation should converge towards the Central
Bank’s target;
• In 2008 GDP is expected to grow 5,1%. For 2009,
GDP growth rate will fall to around 3,0%. By 2010,
growth rate is expected to pickup to around 4,0%.27
Strong improvement in Brazil’s Strong improvement in Brazil’s
political, social and macroeconomic
indicators
28
Investment Grade reflects the strong improvement in Brazil’s economy
• Stabilization: domestic and external;
• Strong links with high growth regions;
• Formalization and consolidation in most markets;• Formalization and consolidation in most markets;
• Reduction in poverty, credit expansion and growth
in the domestic market;
• Investment expansion;
29
-4 -1
6
-1 -2
14 14
2
-2
11 1115 13
10
-3 -6 -7
45 46
40
31
-10
0
10
20
30
40
50
60
Current Account Balance
Trade Balance
33 36 3849 53 54
86
180
201
Improvements in the External SectorCurrent Account Evolution (US$ Billion)
International Reserves (US$ Billion)
-18-24
-30-40
-30
-20
1990 1991 1992 1993 1994 1995 1996 1997 2005 2006 2007 2008*
3,9
3,63,5
2,9
2,1
1,41,3 1,2 1,2
2000 2001 2002 2003 2004 2005 2006 2007 2008*
33 36 38
2000 2001 2002 2003 2004 2005 2006 2007 2008*
30
External Debt and Exports Ratio (%)
Source: Central Bank of Brazil. Prepared by: MB Associados(*) 12-month accumulated until June.
12
14
16
18
20
Inflation (CPI)
Inflation Target
Exchange
rate shock
(political
transition)
Domestic Stabilization
Reduction in Net Public Debt
(% of GDP)
Inflation rate
(12 months accumulated growth)
48,7 48,8
52,6
55,557,2
51,7
46,544,7
45
50
55
60
5,84,4
8,5
5,5 5,1
4,5 4,5
0
2
4
6
8
10
12
dez/01 jan/03 jan/04 jan/05 jan/06 jan/07 jan/08Source: Bacen, IBGE. Prepared by: MB Associados.
31
30,0 30,6
33,334,4
41,7
44,742,7
40,4
25
30
35
40
45
1994 1996 1998 2000 2002 2004 2006 2008*Source: Bacen. Prepared by: MB Associados.
(*) Until June-08.
8,5
14,815,8
17,3 17,4 17,718,6
17,7
20,6 20,9 20,6
11
13
15
17
19
21
23
40
60
80
100
120
140
160
180
200Number of companies
Exports
8,0
-0,8-1
2
4
6
8
Formal Informal
Formal markets are expandingFormal and Informal Employment
(12 months accumulated growth - %)
Exports (US$ Billion) and number of exporting
companies (thousands)
8,5
7
9
0
20
40
1990 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*So urce: Secex. Prepared by: MB Associados.
-5
-3
mar/05 set/05 mar/06 set/06 mar/07 set/07 mar/08 set/08
Source: IBGE. Prepared by: MB Associados.
32
IPOs in Bovespa
6,7
55,7
15,45,44,54
64
26
97
20082007200620052004
R$ billions
No. IPOs
Source: Bovespa. Prepared by: MB Associados.
(*) 12-month accumulated until June.
Accumulated Change in Poverty –Brazil (%)
-2,15%
-0,15
-0,10
-0,05
0,00
2005/2003 1995/1993 2003/1995 2005/1993
33
-19,18% -18,47%
-35,53%
-0,40
-0,35
-0,30
-0,25
-0,20
-0,15
Source: Neri, Marcelo (2007). “ Poverty, Inequality and Income Policies”.
7,2
7,1 7,1
7,2
7,1 7,1 7,1 7,1 7,1
7,4
7,3
7,5
7,37 ,2
7 ,4
7 ,6
14,5
15,5
16,5 Duration (in months)
Deliquency rate (%)
Meses %
Credit Expansion, Duration and Delinquency rate
30,7
34,7
36,7
30
32
34
36
38% of GDP
Total Credit - % of GDPPersonal Credit - Duration and
Delinquency rate
7,0
7,1 7,1 7,1
7,0
7,1
7,0
7,1 7,1
6,9
7,1
7,0
6 ,4
6 ,6
6 ,8
7 ,0
10,5
11,5
12,5
13,5
ab
r/0
7
ma
i/0
7
jun
/07
jul/
07
ag
o/0
7
set/
07
ou
t/0
7
no
v/0
7
de
z/0
7
jan
/08
fev
/08
ma
r/0
8
ab
r/0
8
ma
i/0
8
jun
/08
jul/
08
ag
o/0
8
set/
08
Source: Bacen. Prepared by: MB Associados.
34
24,9
26,4
24,7
22,024,0
24,5
28,1
20
22
24
26
28
30
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*
Source: Banco Central. Elaboration: MB Associados.
(*) Until June-08.
5,7
3,8
5,46,0
4,0
5,0
6,0
7,0 GDP Growth%
Gross Domestic Product is Growing Faster
1,3
2,7
1,1
3,23,8
0,0
1,0
2,0
3,0
4,0
2001 2002 2003 2004 2005 2006 2007 2008*Source: IBGE. Prepared by: MB Associados.
35
(*) 4-quarter accumulated growth until the 2nd quarter of 2008.
Increase in Investment in recent periods
8,7 9,110,0
13,4
15,7
10
15
20
Var.%
36
1,5
-0,3
-8,2
5,0
0,4
-5,2 -4,6
3,6
-10
-5
0
5
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*
Fuente: IBGE. Elaboración y proyección: MB Associados. (*) Acumulado 4 trimestres até Junho/08.(*) Acumulado hasta II/08.Source: IBGE. Elaboration and Forecast: MB Associados. (*) 4-quarter accumulated growth until the 2nd quarter of 2008.
Real Overall Income Growth by minimum wage classes — in 2007/06 %
5,5%
3,4%2,9%
4,0%
5,0%
6,0%
37
2,3%
1,6%
2,9%
1,7%1,2%
0,0%
1,0%
2,0%
3,0%
Up to 1 From 1 to 2
From 2 to 3
From 3 to 5
From 5 to 10
From 10 to 20
More than 20
Source: IBGE. Prepared by: MB Associados.
22,9
10
15
20
25Credit to Real State
Real State Sector Expansion
Construction Sector
Percentage growth - %
Credit to Real State
12 months accumulated growth - %
8,5
6,6
4,6 5,0
9,4
6,3
8,3
10,3
-15
-10
-5
0
5
10
set/04 mai/05 jan/06 set/06 mai/07 jan/08 set/08Source: BCB, IBGE e SNIC. Prepared by: MB Associados.
38
3,2
1,1
-2,9
2,0
-2,1 -2,2
-3,3
1,8
4,6 5,0
-3,7
-1,7
0,3
2,3
4,3
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20072008*
Source: IBGE. Elaboration and Forecast: MB Associados
(*) 4-quarter accumulated growth until the 2nd quarter of 2008.
Conclusions: Medium and long term perspectives are very good considering:
• Democracy in better shape compared to important countries
in Latin America;
• Population sees low inflation as an important value;
• Brazil’s importance as a global supplier of food and energy is• Brazil’s importance as a global supplier of food and energy is
increasing;
• Long term links with China;
• Internationalization of some Brazilian companies;
• Brazil is becoming a more open economy;
39
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40
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