Transcript BNDES - Brazilian-American Chamber of Commerce, Inc.

THE ENERGY SECTOR AND INVESTMENT
OPPORTUNITIES IN BRAZIL
Luciano Coutinho
President
Brazilian Development Bank - BNDES
Brazil Energy Summit
New York, June 23rd, 2008
1
Brazil’s Economy Outlook
2
Strong macroeconomic fundamentals
 “Investment grade” status shall reduce the cost of
capital;
Accumulation of foreign reserves prevent vulnerability to
external shocks.
Credit and capital markets are expanding and the private
sector is profitable and robust.
Fiscal and monetary policies will keep inflation under
control.
Investment is expanding vigorously.
3
Since 2004, Brazilian Economy is on a faster and
more stable growth track
 BNDES forecasts 5.0% growth rate for 2008
GDP GROWTH (% YEAR)
5.7
6.0
Average 2004-2007:
4.5
5.0
5.4
5.0
5.0
5.0
2008*
2009*
2010*
3.8
4.0
3.2
3.0
2.8
2.5
2.0
1.0
0.0
Média Média
1984-93 1994-03
Source: Brazilian Central Bank
2004
2005
2006
2007
* BNDES Forecast.
4
From a low base, credit is expanding
 Credit growth rate reached 27% in 12 months up
March 2008
50
45
Total Credit (% of GDP)
Total credit (% of GDP)
*Forecasts
47.0
44.0
39.5
40
34.7
35
30.7
30
25
28.1
24.0
24.5
2003
2004
22.0
20
2002
2005
2006
2007
2008*
2009*
2010*
Source: Brazilian Central Bank and BNDES (forecasts).
5
… and the capital market is booming
80.000
Primary Offerings (US$ Billion)*
70.000
67.361
60.000
50.607
50.000
40.000
Source: CVM.
*Includes equities, debentures and commercial papers.
30.000
25.310
20.000
10.407
9.835
10.000
8.355
7.276
3.397
-
2000
2001
2002
2003
2004
2005
2006
2007
6
Steady and high profits
12.7% is the average 2003-2006 R.O.E.,
the highest level in 25 years
16
Top 500 companies: R.O.E. (%)
14.1
14
12.5
12
Average:12.7
13.0
11.3
10
8
6.3
6
4
4.8
4.4
6.6
4.6
3.4
2.8
1.2
2
-
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: Conjuntura Econômica,aug/2007
7
Debt to net worth has also decreased
 High profits, low debt: leverage for future growth!
% of net worth
100
90
80
70
60
50
40
30
20
10
-
Top 1000 companies: debt with financial institutions
82.1
54.3
2000
60.6
60.6
50.4
2001
2002
2003
2004
41.7
43.7
2005
2006
Source: Valor 1000, aug/2007
8
Foreign debt is not a restriction
any longer...
 Brazil became a net creditor due to accumulation of
foreign reserves
250
200
Net external debt – US$ billion
Foreign reserves:
US$ 198 bi (June 13rd)
190.3
162.7
165.0
151.0
150
135.7
101.1
100
74.8
50
-11.9
0
2000
2001
2002
2003
2004
2005
2006
2007
-15.1
2008*
-50
Source: Brazilian Central Bank.
9
Inflation Rates are within Central Bank
Targets
 Inflation will be kept under control
Brazilian CPI ( IPCA)
% per year
10
9.30
7.60
8
5.80
5.70
6
4.63
4.46
4
3.10
2
0
2003
2004
2005
2006
2007
2008*
2009*
Source: BRAZILIAN Central Bank
*Forecasting Boletim Focus (06/13/08)
10
The Energy Sector and Investment
Opportunities in Brazil
11
Investment is booming
 Investment is growing at 15% a year, 2.6 times faster
than GDP
18
PIB
16
16.0
FBCF
14.6
14.1
13.4
14
15.2
13.9
11.6
12
11.2
9.8
10
8.9
7.8
7.8
8
7.4
6.2
6
5.4
5.3
5.0
4.5
4
2
3.2
1.6
2.5
3.9 3.5
3.1
2.9 3.1
5.4
5.1
4.4
4.0
5.6
5.8
4.4
1.5
0
2004 2004 2004 2004 2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008
T1
T2
T3
T4
T1
T2
T3
T4
T1
T2
T3
T4
T1
T2
T3
T4
T1
Source: IBGE
12
New Industrial Policy forecast:
Investments will accelerate, reaching 21% of GDP in 2010
Investment rate (% of GDP)
22
20.9
21
19.7
20
19
18.6
18.3
18
17.6
17.4
16.8
17
16.5
16.4
16
FORECAST
15.9
15.7
15.3
15
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
14
Source: IBGE & PDP (forecasts).
13
Investment expansion means an expanding
BNDES portfolio
Approvals are US$ 18 billion higher than
disbursements
70
61.6
Disbursements and Approvals (US$ Billion)
60
50.7
50
43.7
40
Disbursements
34.1
Approvals
30
20
22.4 23.6
19.8
17.6
16.6
16.4
9.9
10
33.3
10.8
15.1
12.6
19.3
14.0
13.1 13.6
11.5 12.8
13.0
10.9
10.7
1997
1998
Source: BNDES
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008*
*12 months up to May
14
Gap is due to infrastructure projects
Approvals for infrastructure increased sharply after
2005.
30
26.6
Disbursements and Approvals (US$ Billion)
25
23.4
20
17.9
Disbursements
Approvals
15
10
13.2
10.3
9.7
7.5 7.0
6.8
5
6.5
6.0
3.4 3.6
5.4
4.6
4.3
3.0 2.6
7.2 7.3
4.6 4.9 4.4
3.1
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
*12 months up to May
2008*
15
Investment plans are increasing
Investments may grow at 11.8% per year
(2008-2011/2003-2006)
Sectors
Manufacturing
Infrastructure
Housing
Total
Investments (US$ Billion)
Observed
Forecast
2003-2006
2008-2011
128.0
229.4
64.0
118.9
165.4
274.6
357.4
623.0
Growth
(% p.y.)
12.4
13.2
10.7
11.8
Source: BNDES Investment Forecast
16
Investments in infrastructure and housing
US$ Billion
Sectors
Electricity power
Communication
Railways
Ports
Saneamento
Total Infra
Housing
Observed
2003-2006
21.0
29.9
4.7
1.5
6.9
63.95
170.5
Forecast
2008-2011
51.8
28.7
10.2
3.5
24.6
118.92
274.6
Growth
(p.y.%)
19.8
(0.8)
16.9
18.7
29.0
13.20
10.7
Source: BNDES Investment Forecast.
17
Brazilian Energy Strategy
The Brazilian strategy for the energy sector envisages:
 Efficiency in the production and distribution of energy for a sustainable
development;
 An increase in the share of biofuels in the energy matrix;
 Environmental protection;
 Protection of consumers’ interests; and
 Promotion of social development.
600
Brazil: Energy supply and demand (2005-2030)*
80
557
Brazil: Electricity supply and demand (2005-2030)*
Million Tonnes Oil Equivalent
Millions tonnes oil equivalent
500
60
Supply
Demand
403
398
40
300
219
200
289
206
55
Supply
400
279
75 73
51
Demand
38 39
32 31
20
165
0
100
2005
2010
2020
2030
Source: Ministry of Mines and Energy. *2010, 2020 and 2030: forecasts.
2005
2010
2020
2030
18
Development of bioenergy and the biomass
Long-term prospects:
Consolidate the country’s leadership in ethanol;
Develop cellulosic ethanol;
Develop agrobiotechnology and nanotechnology;
and
Develop correlated industries.
19
Brazilian Energy Matrix (I)
100
Energy Matrix (%)
Brazil & World - 2006
80
Renewable
Non Renewable
86
60
55
40
45
20
14
0
World
Brazil
Sugarcane share in total Brazilian Energy Matrix is 14.6%
Hydroelectricity share in total Brazilian Energy Matrix is 14.8%
Fonte: Ministry of Mines and Energy – National Energy Balance 2007
20
Brazilian Energy Matrix (II)
Brazilian Energy Matrix (%)
2006
Hydroelectricity share in total electricity is 90%
21
Growth Acceleration Program (PAC): 2007-2010
Investments in Infrastructure - US$ Billion (2007/2010)
ENERGY:
 Oil and Natural Gas
 Electric Power Generation
 Renewable Fuels
 Electric Power Transmission
SOCIAL & URBAN:
 Housing
 Sanitation
 Water Resources
“Light for Everyone” Programm
 Subways
LOGISTIC:
Total
Total
141.05
91.87
33.82
8.93
6.42
87.67
54.56
20.53
6.52
4.47
1.59
29.92
% of Share.
54.53
35.52
13.08
3.45
2.48
33.90
21.10
7.94
2.52
1.73
0.62
11.57
258.64
100.00
BNDES in PAC (05/31/08): 195 projects
Potential Financing – US$ 44 bi (70%  energy)
Total Investments - US$ 86 bi
22
PAC Electric Power Generation and
Transmission: prospects 2008
95 new plants will produce 3,120 MW:
 2 Hydro, 13 Thermo e 4 Small Hydro Plants (1,562 MW);
 PROINFA (Alternative Sources) – 76 (1,558 MW).
4 auctions of new energy (mainly hydroelectricity): 7,000 MW
Start of 2,948 km in new Transmission Lines
3 auctions of Transmission Lines (5,691 Km)
23
PAC Oil and Gas: prospects 2008
7 gasoducts under construction (1,557 Km).
Start of construction:
7 gasoducts (1,831 Km);
COMPERJ – refinery of 150 thousands barrels per day
of heavy oil
Suape Petrochemical Complex.
Expansion of oil tankers fleet:
10 ships Suezmax – the first one to be launched in
2010;
4 ships (capacity of 45 thousands tons) – the first one to
be launched in 2009.
24
ETHANOL
Challenges and Opportunities in BRAZIL
Cost of Ethanol Production
(US$/barrel)
180
154
150
120
90
75
51
60
46
32
30
0
EU (Cereal)
USA (Maize)
Australia
(Sugarcane)
Thailand
(Sugarcane)
Brazil
(Sugarcane)
25
ETHANOL
Challenges and Opportunities in BRAZIL
Top 10 sugarcane producers - 2005
Million ton
% total
1 Brazil
422.9
41.8
2 India
232.3
23.0
3 China
87.8
8.7
4 Pakistan
47.2
4.7
5 Mexico
45.2
4.5
6 Thailand
43.7
4.3
7 Colombia
39.9
3.9
8 Australia
37.8
3.7
9 Indonesia
29.5
2.9
10 USA
25.3
2.5
Total
1,011.6
100.0
Source: FAO
Targets for Ethanol
2007 2008-2010 Total
Production(billion liters/year) 19.1
New plants
Investiments (US$ billion)
23.3
42.4
17
60
77
1.37
4.83
6.2
Ethanol surpassed gasoline consumption in Brazil (1.4 billion liters
sold last February).
Ethanol consumption growth of nearly 55% (Q1/08 vs. Q1/07) 
90% of new vehicles in Brazil are flex fuel.
26
ETHANOL
Challenges and Opportunities in BRAZIL
BRAZIL ARABLE LAND - million hectares
Total Brazil
851
Arable land
(45% of total)
383
63
Cropland in use
(7.4 % of total)
91
Available for expansion
Sugarcane today (sugar +
alcohol)
6
Sugarcane growing for
ethanol today
3
0
(11% of the total or 24% of arable land)
(0.7 % of total or 1.6 % of arable land)
(0.35 % of total or 0.8% of arable land)
100
200
300
400
500
600
700
800
900
Source: Ministry of Agriculture
27
ETHANOL
Challenges and Opportunities in BRAZIL
70,000
60,000
Evolution of cropland in use - BRAZIL
tsd hectares
50,000
40,000
30,000
Sugarcane Area
Total Area
20,000
10,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
80,000
Expansion of sugarcane
production results
mainly from
productivity increases
Brazil: sugarcane Average productivity (kg/ha)
76,000
72,000
68,000
64,000
Source: Ministry of Agriculture
06
05
04
03
02
01
00
99
98
97
96
95
94
93
92
91
07
20
20
20
20
20
20
20
20
19
19
19
19
19
19
19
19
19
19
90
60,000
28
Biofuels: investment location
Location of sugar/ethanol mills in Brazil
29
Future prospects are positive
 The Brazilian economy is poised for a sustained
period of growth.
 Of strategic importance: investment expansion
ahead of GDP growth; emphasis on innovation.
 Key drivers:
A robust private sector
An expanding credit & capital markets
Ongoing public initiatives
30
Final Remarks
An efficient and sufficient supply (and distribution) of energy
plays a vital role in economic performance.
Renewable energy sources are a vector of economic and
social sustainable development.
The Brazilian strategy for energy sector contributes to tackling
the socio-environmental challenges facing the planet.
Expansion of ethanol will comply with standards of
preservation and sustainability of Brazilian social and
ecosystems.
31