Transcript Brazil Economic Outlook - DSE

Brazil:
Economic Ooutlook,
Opportunities and Challenges
Andrea Goldstein
1
7.4
Brazil
World
5.8
4.5
4.0
3.7
3.1
3.5
2.0
1966-80
1981-2003
2004-2009
2010-2015 (*)
Brazil has resumed growth after a long hibernation, and is bound to
grow above the global average over the coming years
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
GDP per capita (constant prices 2009)
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
GDP per capita has been increasing since 2004
Source: WDI - World Bank
GDP per capita growth (%)
14
12
10
8
6
4
2
-4
-6
-8
The growth trend is positive since early the 2000s
Source: WDI - World Bank
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
-2
1960
0
y
Schooling 15+ in 2010
Source: Barro and Lee 2011
Ko
an
re
a
ala
ys
ia
ile
Ta
iw
M
Ch
o
Ar
ge
nt
in
a
ex
ic
5,6
6,9
12,6
11,3
13,0
11,2
10,1
11,0
9,8
9,3
9,1
8,4
19,7
18,2
17,2
15,5
14,9
15
M
8,2
10
Av
er
ag
e
in
a
7,5
7,5
6,5
10,7
19,2
23,0
21,4
25
Ch
il
Th
ai
lan
d
Br
az
Tu
rk
e
6,2
6,2
5,1
20
el
a
sia
di
a
do
ne
Ve
ne
zu
In
In
Schooling
5
0
Growth rate 2000-2010
5
Productivity – growth rate 2000-2009
10
9,1
9
8
7
6
5,2
5,2
4,8
5
4,1
4
2,8
3
2
1
0,7
0,4
0
Brazil
China
Labor productivity
Source: Wilson 2011
India
Total factor productivity
Russia
Tr
im
.
Tr 200
im 0
1°
.2
Tr 00
0
i
3° m.2
Tr 00
i
1° m.2 1
Tr 00
i
3° m.2 1
Tr 00
i
1° m.2 2
Tr 00
i
3° m.2 2
Tr 00
i
1° m.2 3
Tr 00
i
3
3° m.2
Tr 00
4
i
1° m.2
Tr 00
i
3° m.2 4
Tr 00
i
1° m.2 5
Tr 00
i
3° m.2 5
Tr 00
i
1° m.2 6
Tr 00
i
3° m.2 6
Tr 00
i
7
1° m.2
Tr 00
7
i
3° m.2
Tr 00
i
1° m.2 8
Tr 00
i
3° m.2 8
Tr 00
i
1° m.2 9
Tr 00
i
3° m.2 9
Tr 01
i
1° m.2 0
Tr 01
i
0
3° m.2
Tr 01
1
i
1° m.2
Tr 01
im 1
.2
01
2
3°
1°
GDP performance by sector – 1995=100
200
180
160
140
120
100
80
60
Agriculture
Extrative
Manufacturing
Source: Central Bank of Brazil
Service
N
or
ud wa
iA y
ra
In bia
do
ne
si
Fr a
an
ce
C
h
C ile
an
ad
a
U
S
H A
ol
la
nd
In
di
a
So Bra
zil
ut
h
Af
Ve ric
a
n
H ezu
ig
el
h
a
i
n
La
c
o
tin
m
Am e
e
Ar rica
ge
nt
in
a
Tu
rk
M
e
id
M y
dl
e
e
xi
co
in
co
m Jap
e
co an
un
Si trie
ng
s
ap
G ore
er
m
an
M
al y
ay
sia
Ko
re
a
C
hi
T h na
ai
la
nd
Sa
15
10
20
Source: World Bank
25
20,9
20,9
19,5
19,5
18,2
18,0
17,8
16,2
16,0
14,7
14,7
14,6
13,9
13,3
13,2
12,0
11,9
10,7
10,5
9,7
9,2
30
35
30,6
30,6
26,1
40
35,6
Manufacturing value added 2011 (% GDP)
5
0
La
tin
Source: World Bank
n
In
di
a
at
io
te
d
Ki
ex
ic
o
na
e
le
an
y
ni
on
G
er
m
U
Ch
i
ng
do
m
M
Ch
i
in
co
m
Fr
an
ce
In
do
ne
sia
Fe
de
r
Eu
ro
pe
an
Un
i
l
be
an
Br
az
i
Ca
rib
id
dl
e
an
&
M
Ru
ss
i
Am
er
ica
Trade openness - % GDP
120
100
80
60
2000
2011
40
20
0
Primary
Source: MDIC
Semi-manufactured
Manufactured
Others
jan/12
jan/11
jan/10
jan/09
jan/08
jan/07
jan/06
jan/05
jan/04
jan/03
jan/02
jan/01
jan/00
jan/99
jan/98
jan/97
jan/96
jan/95
jan/94
jan/93
jan/92
jan/91
jan/90
Exports – share (%)
70
60
50
40
30
20
10
0
Export coefficient and import penetration manufacturing
20,7
15,0
19,1
15,4
15,0
17,3
16,8
15,3
18,0
18,5
13,5
14,6
2003
11,9
10,3
2002
11,1
10,5
13,4
12,3
11,6
11,4
15
11,8
15,7
17,3
20
18,7
25
2010
2011
10
5
0
2000
2001
2004
2005
Export coefficient
Source: CNI
2006
2007
Import penetration
2008
2009
Export and import – main partners, % total
35
35
31
30
30
30
25
25
22,4
20,7
20,5
20
20
15
15
10,9
16,7
10,1
10
10
5
5
0
15,1
8,6
0
Asia
LAC
Mercosur
EU
Export destination
USA
Asia
EU
Import origin
Source: MDIC
LAC
Mercosur
USA
Brazil-China trade
Brazil-China -- Bilateral trade - share in Brazil's trade
Source: MDIC
16
14
12
10
8
6
4
2
0
60
50
40
30
20
10
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Bilateral trade (US$ bi) (left axis)
Trade flow (%)
Recent growth performance
International
Crisis
PAC 1
International
Crisis
PAC 2
International
Crisis
7,5
6,1
5,7
5,2
4,3
1,3
3,2
2,7
1,1
0,3
-0,3
Average 1.7%
1998
4,7
4,0
2,7
0,0
International
Crisis
2000
2002
Average 3.5%
2004
2006
Average 4.6%
2008
2010
Average 4.7%
20122014*
After the currency crisis of 1998, a macro policy tripod was introduced:
fiscal responsibility law, inflation targeting and floating exchange rate
Source: IBGE and Ministry of Finance
*forecast
Recent growth performance
Decomposition of GDP growth
Source: IBGE
Falling income inequality is
boosting consumption
Growth rate of per capita income (%) – 2001-09 average
Source: IBGE
Job creation is on the rise
Net, private sector jobs, thousands
Source: Ministry of Labor
Falling unemployment
Unemployment rate – record lows
August, 2003
July, 2012
18
Source: IBGE
An increasing middle class is
feeding the domestic market
Brazilian population (millions)
* Based on PNAD (IBGE) data
Brazil: world’s seventh-largest domestic market
Source: FGV
de
z/
96
ju
n/
97
de
z/
97
ju
n/
98
de
z/
98
ju
n/
99
de
z/
99
ju
n/
00
de
z/
00
ju
n/
01
de
z/
01
ju
n/
02
de
z/
02
ju
n/
03
de
z/
03
ju
n/
0
de 4
z/
04
ju
n/
05
de
z/
05
ju
n/
06
de
z/
06
ju
n/
0
de 7
z/
07
ju
n/
08
Fast credit expansion
Credit to private sector - % GDP
60
50
40
30
20
10
0
Source: Central Bank of Brazil
Navigating an increasingly
complex world
 Slow recovery in the US
 Crisis in the Euro zone
 Slowdown in China and other emerging
economies
 Rising geopolitical risks (protectionism, Northeast
Asia, in oil countries)
 Capital market distortions and uncertainties
associated to highly heterodox policies, e.g. Qes
and Abenomics
 Risk aversion on the rise
 Slowdown in trade, capital flows and FDI
Output growth forecast – 2013
Output growth 2013 - WEO IMF (Oct 2012)
9
8
7
6
5
4
3
2
1
0
8,2
6,0
Ar
ea
0,2
Eu
ro
ce
y
0,4
Fr
an
Ki
n
d
ni
te
m
an
gd
pa
Ja
0,9
G
er
om
1,1
n
s
1,2
U
va
nc
Ad
Source: WEO Oct 2012, IMF
1,5
m
ie
da
ed
ec
o
St
a
ni
te
d
ou
2,0
an
a
te
s
t
tp
u
a
W
or
ld
ut
h
Af
ric
ic
o
So
2,1
no
2,8
C
3,0
U
3,5
M
ex
us
si
a
3,8
R
Br
az
il
ia
In
d
C
hi
n
a
4,0
Brazil: Economic indicators 2013
25
21.5
20.9
Exports
Imports
20
15
10
5
8.5
3.9
4.7
4.6
Final
domestic
demand
Private
consumption
0
Output growth
Source: Citi Research (August 2012)
Fixed
investment
Sources of future growth
Domestic demand, but also …
– Increasing competitiveness
– Investments
– Well regulated financial sector -- banking
system not exposed to toxic assets
24
Competitiveness is on the move
•
•
•
•
•
23 new Innovation Institutes
43 new Technological Centers
Sectorial Innovation Funds
4 million people in vocational training per year
Science without Borders – 100,000+ scholarships
abroad in engineering and other tech. areas
• MNCs state-of-the-art innovation labs
• PISA-OECD – “Brazil, a successful reformer”
–
“The federal government has launched a major effort to improve education, increasing
spending in classrooms and on teacher salaries and providing extra help for poorer families in
order to get children into classrooms. By setting quality targets and leaving schools free to
choose how best to achieve them, its National Education Plan has transformed the country
into a laboratory of best education practices.” OECD
Other policies that will enhance
competitiveness
•
•
•
•
•
Electricity tax cut and new regulatory framework
Payroll tax cuts
Temporary and targeted business tax cuts
Huge investments in public services
Concessions and PPPs – ports, railways, roads,
airports
• Active exchange rate policy
• SELIC down by 500 b.p.
26
New sources of savings and
long-term funding
• New long-term funding instruments,
secondary market, buy out markets
• New public pension fund (FUNPRESP)
and rapid expansion of private pension
funds
• FDI has been picking up
– US$ 66 billion in 2011
– 10% of total going to developing countries
27
00
20 S 1
00
20 S 2
01
20 S 1
01
20 S 2
02
20 S 1
02
20 S 2
03
20 S 1
03
20 S 2
04
20 S 1
04
20 S 2
05
20 S 1
05
20 S 2
06
20 S 1
06
20 S 2
07
20 S 1
07
20 S 2
08
20 S 1
08
20 S 2
09
20 S 1
09
20 S 2
10
20 S 1
10
20 S 2
11
20 S 1
11
20 S 2
12
20 S 1
12
S2
20
The interest rate is declining
SELIC interest rate (%)
30
25
20
15
10
5
0
Source: Central Bank of Brazil
Growth Acceleration Program 2 - PAC 2
 Electric Energy
 Ports
 Airports
 Highways/Railways
 Urban Mobility
 2014 World Cup
 2016 Olympic Games
PAC 2 Projects
(US$ bn)
PAC Better City
PAC Citizens' Community
PAC Minha Casa Minha
Vida
PAC Water & Electricity
for All
PAC Transport
PAC Energy
Total
2011 - 2014 After 2014
32.6
-
Total
32.6
13.1
-
13.1
159.0
-
159.0
17.5
-
17.5
59.7
263.8
2.6
358.2
62.3
622.0
545.7
360.8
906.5
29
Investment perspectives are firm
Investment outlook 2012-2015
Sectors
Industry
Oil & Gas
Mining
Steel
Chemical
Vehicles
Electronics
Pulp & Paper
Textile and Apparel
Ind. Health Care Complex
Aviation
US$ billion
2007-2010 2012-2015
263
341
136
202
39
33
18
12
14
14
20
32
12
14
11
15
6
8
6
6
2
4
Growth
%
% year
29.5
5.3
48.5
8.2
(13.9)
(2.9)
(33.6)
(7.9)
4.9
1.0
58.8
9.7
17.5
3.3
30.9
5.5
33.3
5.9
9.1
1.8
158.5
20.9
Infrastructure
187
229
22.2
4.3
Housing
341
491
44.2
7.6
TOTAL
791
1062
34.1
6.0
Source: BNDES
Thew role of BNDES
Disbursements
100,5
97,2
Approvals
78,5
82,1
94,0
86,4
79,8
69,4
56,4
42,5
29,9
2006
Forecast
52,7
37,1
2007
2008
2009
2010*
2011
2012**
BNDES disbursements and approvals (US$ billion)
Source : BNDES. *not including Petrobrás disbursements. **projection
•
•
•
•
•
•
•
•
•
Counter-cyclical role, e.g. 2008/09
Strong support to SMEs
Infrastructure – about 1.5% of GDP
Equity financing
Innovation
Environment
Start-ups, especially in tech. areas
Venture capital
Export finance
32
Is future growth sustainable?
Sound fiscal conditions and room to maneuver
65%
62.7%
60.9%
60%
54.3%
55%
60.4%
50%
45%
36.5%
40%
35%
30%
Net public debt
38.5%
Gross public debt
25%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Net public debt excludes assets and
liabilities of Petrobras and Eletrobras
Source: National Treasury
Sound external vulnerability
indicators (% GDP)
Source: Central Bank of Brazil
Rising investment rate (%)
Investment will keep growing at a stronger pace than GDP
24.0
22.0
20.4
19.5 19.3
19.1
18.1
17.4
16.4
16.1
16
16.4
15.3
Source: IBGE. *Projections - Finance Ministry
Social inclusion will sustain the
domestic market
Poverty rate – (%) share of population
Source: FGV
Risks
• China/Asia slowdown
• Stagnation in the US and Europe
• Protectionism, uncertainties and market
distortions created by unconventional
policies
• Tightening of international credit
37
The way forward – challenges
and reform agenda
• Accelerate labor productivity
• Increase savings and investments
• Improve competitiveness in manufacturing
• Tackle infrastructure bottlenecks
• Accelerate the transition towards a
knowledge-based economy
38
Structural reforms
• Diversify sources of long-term funding
• Foster innovation
• Fiscal reform – ICMS (VAT)
• Pension reform
• Labor legislation reform
• Diversify exports and reduce dependency
on commodities
39
Conclusions
• Domestic market will enlarge further
• Investments and increasing
competitiveness will also drive growth
• Expanding investment opportunities in
several areas
40
• A bumpy road ahead: poor international
environment and uncertainties
• But plenty of room for policy activism at
the Government disposal
• Government is aware of the need to
address a reform agenda to foster
competitiveness and to foment sustained
growth
41
Obrigado!!
42