Transcript Slide 1

27.09.11
Paulo Safady Simão
CBIC President
City of Cape Town - South Africa
NATIONAL AND INTERNATIONAL REPRESENTATIVE
FOR BUSINESS ENTITIES IN THE CONSTRUCTION
INDUSTRY AND REAL ESTATE MARKET
TRADE UNIONS,
BUSINESS
ASSOCIATIONS,
AND CHAMBERS
62
26
entities
states and FD
GENERAL INFORMATION
BRAZIL
COMPOSITION OF GDP GROWTH
In 2010, the Brazilian economy grew 7.5%, with a significant
contribution from Civil Construction, elevating, further, the
expansion of fixed investments in relation to GDP.
Source: Brazilian Institute for Geography and Statistics (IBGE.) Prepared by the Ministry of Finance.
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GDP GROWTH RATES
In the period 2011-2014, the consolidation of investments
(driven by construction) and increased domestic demand is
expected to spur average annual economic growth of 5.1%.
Source: Brazilian Institute of Geography and Statistics (IBGE). Preparation and estimates by the Ministry of Finance.
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GDP GROWTH – DEMAND
Domestic demand will continue to be the principal driver of
inclusive and sustainable economic expansion.
Source: Brazilian Institute of Geography and Statistics (IBGE). Prepared and estimated by the Ministry of Finance.
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GROWTH WITH POVERTY REDUCTION
POPULATION IN POVERTY (%)
Sustainable growth associated to inclusive policies produced a
52% reduction in poverty in the period 2003-2010.
Source: Getúlio Vargas Foundation (FGV). Preparation and estimates by the Ministry of Finance.
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MIDDLE CLASS ACCOUNTS FOR MORE THAN
HALF OF BRAZILIAN POPULATION
DISTRIBUTION OF ECONOMIC CLASSES IN BRAZIL (% POPULATION)
Enhanced income distribution has added 29 million to middle class
(Class C).
Note: Monthly household per capita income by class at 2009 prices: Class A/B: more than R$ 4,800.00; Class C:
R$ 1,115.00 – R$ 4,800.00; Class D: R$ 804.00 – R$ 1,115.00; Class E: up to R$ 804.00.
Source: Getúlio Vargas Foundation/National Household Sample Survey (FGV/PNAD). Prepared and estimated by
the Ministry of Finance
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RECENT GLOBAL FINANCIAL CRISIS
BRAZIL
“The stability of the economy and of
the country’s democratic institutions as
well as frank dialogue between
government and civil society were
decisive in successfully confronting
the crisis”
A development strategy based on investment
and mass consumption (domestic market) was
adopted; and ...
Monetary policy
Reserve requirement
Reduced interest rates
Foreign trade (reserves)
Fiscal policy
Reduced taxes on production
Investments in construction
CREDIT TRANSACTIONS BY FINANCIAL
SYSTEM IN 2009
(AT THE HEIGHT OF THE CRISIS)
Steering of funds at low cost was
decisive for maintaining credit
levels at the height of the global
crisis.
Source: Brazilian Central Bank (BACEN). CBIC Database.
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ECONOMIC OUTLOOK
 Economic stability;
 Average growth of approximately 4.0% per year;
 Growth driven by internal demand and by investments in infrastructure
and housing;
 Investments projected to grow by at least twice the rate of GDP in the
coming 4 years;
 Notwithstanding forecasts pointing to a renewed global downturn,
domestic demand remains robust, international reserves and reserve
requirements are higher than in 2008, and the fiscal situation is
stronger.
Fontes.: Ministério da Fazendfa, CBIC
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GENERAL INFORMATION
CONSTRUCTION
THE CONSTRUCTION INDUSTRY IN CONTEXT
 Represents approximately 19% of national industrial output;
 More than 2.5 million formal workers;
 More than 100,000 licensed companies;
 Accounts for nearly 38% of fixed investments in Brazil.
CHARACTERISTICS
 Product with an extended maturity time;
 Requires long-term financing;
 Principal current funding sources: FGTS (Government Severance
Fund) and Savings Accounts;
 Funding not contingent on market interest rates;
 Still marked by a high degree of informality.
VARIATION IN GDP OF BRAZIL AND THE
CONSTRUCTION INDUSTRY
Source: Brazilian Institute for Geography and Statistics (IBGE) and Brazilian Central Bank (BACEN).
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REAL ESTATE MARKET
PROVISIONS OF LAW NO. 10931/2004
Law No. 10931 represented a milepost for the real estate segment
by establishing a new regulatory framework for real estate brokers
and agents, namely:
 A special tax regime aimed at promoting the adoption of detached assets
system;
 Regulation of the payment of undisputed amounts;
 Consolidation of statutory liens in real estate financing agreements.
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LAW NO. 10931/2004
Increased
funding
for real estate
Reduced
market
interest
rates
Increased
demand for
real estate
VIRTUOUS CYCLE FOR
REAL ESTATE MARKET
Lower
Increased
costs
Employment
levels
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GROWTH IN REAL ESTATE CREDIT
2002 – 2010 (financing volume)8
Source: Brazilian Central Bank (BACEN), Brazilian Association of Real Estate Credit and Savings (ABECIP), and
Federal Savings Bank (CEF) – FGTS Channel. CBIC Database.
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HIGH QUALITY REAL ESTATE CREDIT
Brazilian Savings and Loan System (SBPE) – Agreements with more than 3 outstanding
installments signed after 1998
Mortgage Guaranty + Fiduciary Lien
Fiduciary Lien
Source: Brazilian Central Bank and Brazilian Association of Real Estate Credit and Savings (ABECIP)
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EXPANSIOM OF CREDIT BY SEGMENT
Low participation of real estate credit
Source: Brazilian Central Bank (BACEN).
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REAL ESTATE FINANCING AS A
PERCENTAGE OF GDP
Source: Brazilian Central Bank (BACEN) and Brazilian Association of Real Estate Credit and Savings (ABECIP).
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REAL ESTATE FINANCING AS A
PERCENTAGE OF GDP
Weight of housing credit in Brazilian GDP (%)
ABECIP projections indicate that real estate
credit could reach 11% by 2014.
Source: Brazilian Central Bank (BACEN) and Brazilian Association of Real Estate Credit and Savings (ABECIP)
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RECENT MEASURES
Finance Bill:
 Establishment of Finance Bill (Law No. 12249 of 2010);
 Elimination of tax on required reserve (BCB Circular No. 3513 of
2010).
Rules on Resource Steering for Savings (CMN Resolution No. 3932 of
2010):
 Permission for temporary and partial entry of portfolios assigned
for securitization – deduction of 1/36 in value of assigned portfolios;
 Prohibition as of March 2010 on accounting entries of Real Estate
Receivable Certificates (CRIs) not backed by real estate in financing
agreements executed for the purpose of resource steering.
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RECENT MEASURES
 Implementation of Positive Registry (Law No. 12414 of 2011):
 Enabled constitution of credit histories for individuals and legal
entities, reducing asymmetries in information between creditors and
debtors.
 Financial Transaction Tax (IOF) on private security transactions
conducted in periods of less than 30 days:
 Reduced to zero IOF on private security transactions (Decree No.
7412 of 2010);
 Restricted zero IOF rate to transactions involving debentures,
finance bills, and CRIs ( Decree No. 7487 of 2011).
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RECENT MEASURES
 “Incentives for Long-Term Financing” (Law No. 12431 of 2011)
 Reduce to zero IT on non-resident investments in long-term
private bonds.
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COMPOSITION OF REAL ESTATE CREDIT
MARKET – FINANCIAL AGENTS
Other FIs
3.14%
1.95%
1.64%
6.79%
8.35%
8.74%
69.40%
Source: Bank of Brazil.
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ADDITIONAL GROWTH INDICATORS ...
HOUSING NEEDS
(millions of units)
5.81
Cumulative shortage - 2009
23.49
2010 - 2022
Source: Civil Construction Industry Trade Union of São Paulo (SINDUSCON-SP),
São Paulo State Federation of Industry (FIESP), Getúlio Vargas Foundation (FGV).
CBIC Database.
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ADDITIONAL GROWTH INDICATORS ...
DEMOGRAPHIC BONUS (increase in economically active population).
Absolute Age Pyramid
MEN
WOMEN
Source: Brazilian Institute of Geography and Statistics (IBGE).
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MY HOME, MY LIFE
PROGRAM
LOW-INCOME HOUSING –
RECENT HISTORY
SOCIAL INTEREST HOUSING
Governments and society do not always attach due importance
to the lack of housing, as a result of which a number of countries
(developing nations) have yet to adequately addressed the issue.
In Brazil, civil society, lawmakers, and government have
approached the issue from the standpoint of modern
construction concepts;
In a short time, the housing question was
introduced on organized civil society’s agenda.
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SOCIAL INTEREST HOUSING
Dignified Housing Project (CBIC);
My Home, My Life Program (organized civil society and
governments).
IT IS ESSENTIAL TO UNDERSCORE THE IMPORTANCE
OF CIVIL SOCIETY PRESSURE IN PRIORITIZING
GOVERNMENT ACTION
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THE PROJECT
PMCMV – STAGE 1
HOUSING PACKAGE
GOAL: To implement the National Housing Plan by building 1 million
homes for families with a monthly income of up to 10
minimum salaries
 Increase home ownership for low-income families
 Families with monthly incomes of up to 3 minimum salaries – full
subsidy with insurance waiver
 Families with monthly incomes of 3 to 6 minimum salaries –
increase of partial subsidy for financing through reduced
insurance costs and access to Credit Guarantee Fund (Fundo
Garantidor)
 Families with monthly incomes of 6 to 10 minimum salaries–
incentives to buy through reduced insurance costs and access to
Credit Guarantee Fund (Fundo Garantidor)
Source: My Home, My Life Program
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OTHER FINANCING ARRANGEMENTS
ASSOCIATED TO THE PROGRAM

Urban infrastructure;

Technological development of
companies.
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CHARACTERISITCS AND DISTINGUISHING
FEATURES
PMCMV – CHARACTERISTICS
Attuned to housing shortfall;
Substantial funding for subsidies;
Production by private sector;
Tax deductions on final product;
Direct subsidies for families;
Financing for technological development of companies;
Source: My Home, My Life Program
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PMCMV – CHARACTERISTICS
For households with an income of up to 3 minimum salaries,
construction companies serve as developers (not responsible for
sales).
In some localities, the maximum values established at the federal
level have proved insufficient, with local governments stepping in to
provide necessary resources.
The Program has prioritized full formality of the entire process
properly registered properties,
licensed construction companies, and
registered workers with employment cards.
Source: My Home, My Life Program
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CONSEQUENCES AND OUTCOMES
CONTRACTS UNDER PMCMV 1
ALIGNMENT OF PROGRAM WITH GUIDELINES
The first stage
was completed
on 12/31/2010
and 1,005,028
housing units
were contracted
Source: Federal Savings Bank. Database.
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CONTRACTS UNDER PMCMV 1
ALIGNMENT OF PROGRAM WITH REGIONAL DEFICIT
Source: Federal Savings Bank. Database.
ECONOMIC ASPECTS – PMCMV
GROWTH IN CONSTRUCTION WORKFORCE
Source: Annual Registry of Social Information/General Registry of Employed and Unemployed Persons
(RAIS/CAGED), Ministry of Labor and Employment. Database.
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POLITICAL AND SOCIAL ASPECTS –
PMCMV

Citizenship (option for “excluded”)
More effective occupation of urban land (orderly settlement of urban
areas);

Healthy living through enhanced hygiene and safety/security (reduced
public expenditures on health, security, and education);

Compliance with legal and constitutional commitments in meeting the
basic needs of the population.

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FUTURE OF PROGRAM
GROWTH ACCELERATION PROGRAM 2 –
PAC2
BETTER CITY
CITIZEN
COMMUNITY
ENERGY
Incorporated
in PAC
MY HOME,
MY LIFE
TRANSPORTATION
WATER AND POWER
FOR EVERYONE
Source: PAC 2 Report
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PMCMV – STAGE 2
Incorporated in National Housing Plan (Plano Nacional de Habitação –
PLANHAB) and PAC;

Transition of Urban Development Department (GIDUR/CAIXA) processes
through adoption of improved finishing specifications (over 140,000 units
encompassed);


Greater protection to women head of households;
 Increased focus on sustainability
(solar energy)
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PAC
PROJECTED INVESTMENTS
Based on PAC 2 Report of March 2010
R$ Millions
PAC Projects
PAC Better City
PAC Citizen Community
PAC My Home. My Life
PAC Water and Electricity for All
PAC Transportation
PAC Energy
TOTAL
2011-2014
57.1
23.0
278.2
30.6
104.5
461.6
955.0
Pos 2014
4.5
626.9
631.4
Total
57.1
23.0
278.2
30.6
109.0
1.088.5
1,586.4
Source: Civil House of the Office of the President
Source: PAC 2 Report
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PMCMV – STAGE 2
Increase in number of housing units:
One million to
two million units
contracted
through 2014.
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PMCMV – STAGE 2
Expanding volume of investments:
TOTAL – R$ 125.7 billion
Subsidy – R$ 72.6 billion
Financing – R$ 53.1 billion
Entry of an additional financial
agent (Bank of Brazil) for first
income bracket served by the
PMCMV 2
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PMCMV – STAGE 2
Expansion of Income Brackets:
URBAN – MONTHLY INCOME
INCOME BRACKETS
1
2
3
PMCMV 1
Up to R$ 1,395.00
R$ 1,395.00 – R$ 2,790.00
R$ 2,790.00 – R$ 4,650.00
PMCMV 2
Up to R$ 1,600.00
R$ 1,600.00 – R$ 3,100.00
R$ 3,100.00 – R$ 5,000.00
RURAL – MONTHLY INCOME
INCOME BRACKETS
1
2
3
Fonte: Anúncio do PMVMV 2
PMCMV 1
Up to R$ 10,000.00
R$ 10,000.00 – R$ 22,000.00
R$ 22,000.00 – R$ 55,800.00
PMCMV 2
Up to R$ 15,000.00
R$ 15,000.00 – R$ 30,000.00
R$ 30,000.00 – R$ 60,000.00
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PMCMV – STAGE 2
Priority for lower income families:
40% for households with a monthly income of up to R$ 1,395.00 in Stage 1, to
60% for households with a monthly income of up to R$ 1,600.00 in Stage 2
Household Monthly Income
Up to R$ 1,600.00
R$ 1,600.00 – R$ 3,100.00
R$ 3,100.00 – R$ 5,000.00
Number of Households
1.2 million
600
200
%
60
30
10
Source: PMVMV 2
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PMCMV – STAGE 2
Improved unit specifications:
ITEMS
MCMV 1
2
Minimum Size
Average price of housing units
Specifications
Source: PMVMV 2
Home: 35 m
Apartment: 42 m2
R$ 42,000.00
Ceramic floors in
bathroom, kitchen, and
pantry areas
Tile on walls around water
points
Solar heating in 40,000
units
Minimum limit for exterior
doors (0.8 m)
MCMV 2
2
Home: 39.6 m
Apartment: 45.5 m2
Increased area for
improved access
R$ 55,188.00
Ceramic floors
throughout unit
Tile on all kitchen and
bathroom walls
Solar heating in all
homes
All doors 0.8 m and
larger windows for
improved lighting and
ventilation
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PMCMV – STAGE 2
Strengthening rules:
 New rules on property transfers;
 One-time subsidy to real estate property;
 Inclusion of renovation modality for low-income rural housing;
 Expanded partnership with local governments in social initiatives.
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PMCMV – STAGE 2
Increase in maximum value of real estate properties for incomes above
R$ 1,600.00 was adjusted:
 In the metropolitan areas of São Paulo, Rio de Janeiro, and the Federal
District, value raised from R$ 130,000.00 to R$ 170,000.00.
 For all other state capitals and municipalities with a population of more
than 1 million inhabitants, value boosted from R$ 130,000.00 to R$
150,000.00.
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PMCMV – STAGE 2
 For municipalities with more than 250,000 inhabitants or residents of
metropolitan areas, maximum amount to rise from R$ 100,000.00 to R$
130,000.00.
 For municipalities with populations equal to or more than 50,000 and less
than 250,000 inhabitants, from R$ 80,000.00 to R$ 100,000.00.
 For all other municipalities, amount to remain R$ 80,000.00.
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MOST RECENT PROJECTION ON
RESOURCES FOR THE HOUSING SEGMENT
R$ Billions
SOURCES
2011-2014
FGTS
92.0
Brazilian Savings and Loan
System - SBPE
Federal Budget - OGU / Social
Development Fund - FDS
TOTAL
240.0
78.0
410.0
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CBIC PROPOSALS

Opening of cost plans underlying government studies;

Expansion of unit value for application of the Special Tax Regime (RET); and
Priority review of the National System of Civil Construction Prices and
Indices (SINAPI) and approval of new technologies.

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NEXT STEPS
PEC 285 – allocation of 2% of federal revenues to investments in Social
Interest Housing (long-term maintenance of resources and programs);


Qualified workforce;

Need for new sources of funding;

Urban properties;

Innovation;

Sustainable construction;

Sanitation.
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www.cbic.org.br
Phone: +55(61) 3327-1013
Fax: +55(61) 3327-1393