Transcript Slide 1
Brazil: Recent Economic Developments Henrique de Campos Meirelles Febraban – Lima, March 2004 1 I. The 2002 Confidence Crisis II. Economic Policy in 2003/2004: a. Fiscal Responsibility b. The External Adjustment b. Disinflation d. Improving Public Debt Profile III. Current Outlook of the Brazilian Economy IV. Towards Sustained Economic Growth 2 I. The 2002 Confidence Crisis 3 Sudden Stop Capital Inflows(*) (US$ billion) 70 60 52.8 50 40 36.9 30 25.5 23.2 20 10 0 2001 2002 2003 2004 BCB forecast (*) FDI , medium and long term loans (excluding loans to the Central Bank) 4 The Inflation Risk: 2002 Monthly IPCA Annualized 42.9% p.a. 45 40 35 % p.a. 30 25 20 15 10 5 0 Jan 02 Mar 02 May 02 Jul 02 Sep 02 Nov 02 5 II. The Economic Policy in 2003/2004: a. Fiscal Responsibility 6 Fiscal Responsibility • New Government committed to long-term fiscal sustainability: - Increase in the consolidated public sector primary surplus to 4.25% of GDP. - Approval of the social security reform. - Approval of the tax reform. - Extension to 2007 of tax on financial transactions and of delinking of central government revenues. - Fiscal surplus is no more dependent on extraordinary revenues. 7 4 3 Jan 04 Jul 03 Jan 03 Jul 02 Jan 02 Jul 01 Jan 01 Jul 00 Jan 00 Jul 99 Jan 99 Jul 98 Jan 98 Jul 97 Jan 97 Jul 96 Jan 96 Jul 95 Jan 95 Jul 94 % of GDP Primary Surplus 12-Month, Accumulated 7 6 5 4.19 2 1 0 -1 -2 8 Net Public Sector Debt 1995-2010 60 55 50 % GDP 45 40 43.7% 35 30 Banco Central Estimative 25 20 1995 1997 1999 2001 2003 2005 2007 2009 2010 9 II. The Economic Policy in 2003/2004: b. The External Adjustment 10 Nominal Exchange Rate: 2002/04 4.0 3.7 Basis Points 3.4 Mar 24 2.93 3.1 2.8 2,. 2.2 Mar 02 Jun 02 Source: Bacen Set 02 Dez 02 Mar 03 Jun 03 Set 03 Dez 03 Mar 04 11 Exchange Rate Volatility Moving Average of 21 days 25 % p.a. 20 15 10 5 0 Mar 03 May 03 Fonte: Bacen Jul 03 Sep 03 Nov 03 Jan 04 Mar 04 12 Current Account 10 4.1 5 0.2 US$ billion 0 -5 -10 -7.7 -15 -20 -18.4 -25 -23.5 -25.3 -30 -24.2 -23.2 2000 2001 -30.5 -35 -33.4 -40 1995 * BCB forecast 1996 1997 1998 1999 2002 2003 2004* 13 Trade Balance 24 25 20 US$ billion 15 10 5 0 -5 -10 1995 * BCB forecast 1996 1997 1998 1999 2000 2001 2002 2003 2004* 14 Trade Balance 25 20 12-Month, Accumulated Feb 04 26.1 US$ billion 15 10 Highest trade balance surplus ever recorded 5 0 -5 -10 Jan 99 Jul 99 Jan 00 Jul 00 Jan 01 Jul 01 Jan 02 Jul 02 Jan 03 Jul 03 Jan 04 15 Export Growth Diversification Growth by Market and by Product: 2000/2003 Market Absolute change USD million % change Part 3,511.9 3,447.3 1,449.5 1,077.2 1,030.0 642.3 634.1 610.0 576.3 543.2 431.0 411.9 19.5% 19.2% 8.1% 6.0% 5.7% 3.6% 3.5% 3.4% 3.2% 3.0% 2.4% 2.3% 26.6% 317.7% 51.8% 254.7% 60.2% 110.6% 50.9% 24.2% 196.8% 53.9% 142.7% 72.8% Others 3,633.8 20.2% 17,998.6 100.0% Absolute change USD million United States China Netherlands Russia Mexico South Corea Chile Germany Iran Spain South África Canada Total Market % change Part Soybean Petroleum Oil Soy products Chicken Autovehicles Fuel Oils Raw Soy Oil Cow meat Engines Raw Sugar Iron/steel products Iron ore 2,102.6 1,963.3 951.9 904.0 887.5 744.9 742.3 651.2 610.3 588.5 550.8 407.7 11.7% 96.1% 10.9% 1,238.0% 5.,3% 57.7% 5.0% 112.2% 4.9% 50.2% 4.1% 285.0% 4.1% 247.8% 3.6% 129.4% 3.4% 57.4% 3.3% 77.3% 3.1% 64.1% 2.3% 13.4% 55.9% Others 6,893.6 38.3% 16.5% 32.7% Total 17,998.6 100,0% 32.7% 16 Trade Balance 12-Month, Accumulated 75 74.8 US$ billion 70 65 Imports 60 55 50 Exports 48.7 45 Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 17 Net Foreign Direct Investment 32.8 35 28.9 28.6 US$ billion 30 22.5 25 16.6 20 13.0 15 10.1 10 5 0 1998 * BC forecast 1999 2000 2001 2002 2003 2004* 18 External Debt (Excluding IMF) 260 US$ billion 240 220 200 180 US$192.3 bi 160 140 120 1991 * BC forecast 1993 1995 1997 1999 2001 2003 19 Net International Reserves (IMF criteria) 29 27 US$ billion 25 Central Bank announces policy of accumulation of reserves 23 21.2 21 19 17 15 13 Jan 02 Apr 02 Jul 02 Oct 02 Jan 03 Apr 03 Jul 03 Oct 03 Feb 04 20 II. The Economic Policy in 2003/2004: c. Disinflation 21 Inflation Rate: IPCA 2002/04 Monthly Rate Annualized 45 40 35 % p.a. 30 25 20 15 10 5 0 Jan 02 Apr 02 Jul 02 Oct 02 Jan 03 Apr 03 Jul 03 Oct 03 Feb 04 22 Market Inflation Expectations for 2004 IPCA (median) 8.5 8.0 % 7.5 7.0 6.5 6.0 6.0 5.5 Jan 03 Mar 03 May 03 Jul 03 Sep 03 Nov 03 Jan 04 Mar 04 23 Inflation expectations IPCA in the next 12 months 13 12 11 % 10 9 8 7 6 5.5% 5 4Jan 02 Apr 02 Jul 02 Oct 02 Jan 03 Apr 03 Jul 03 Oct 03 Mar 04 24 II. The Economic Policy in 2003/2004: d. Improving Public Debt Profile 25 FX Debt Rollover Rate 100 % of FX Debt Rollover Rate (including swap) Principal + final coupon 90 80 70 % 60 50 40 30 20 10 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 03 03 03 03 03 03 03 03 03 03 03 03 04 04 04 26 Average Tenure Domestic Public Debt Average Tenure of Securities Issued LFT LTN (Fixed Rate Securities) 13 60 12 Months 50 11 40 10 30 9 20 8 10 7 0 6 Feb 03 Apr 03 Jun 03 Fonte: Bacen Aug 03 Oct 03 Dec 03 Feb 04 Feb 03 Apr 03 Jun 03 Aug 03 Oct 03 Dec 03 Feb 04 27 Public Debt Debt Indexed to the Exchange Rate / Total Debt % 13 42 12 40 38 11 36 34 9 32 30 7 Prefixed Debt / Total Debt 13.6 10 8 6 28 26 5 4 24 22 19.0 3 2 20 18 1 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Feb 02 02 02 02 02 02 03 03 03 03 03 03 04 Fonte: Bacen Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Feb 02 02 02 02 02 02 03 03 03 03 03 03 04 28 III. Current Outlook of the Brazilian Economy 29 Brazil Risk: 2003/2004 1,450 1,350 1,250 Basis Point 1,150 1,050 950 850 Mar 25 577 750 650 550 450 350 Jan 03 Mar 03 May 03 Jul 03 Sep 03 Nov 03 Jan 04 Mar 04 30 Swap 360-day Rate 33 31 29 % 27 25 23 21 19 17 15 Jan 02 May 02 Sep 02 Jan 03 May 03 Sep 03 Mar 04 31 Real Interest Rate: 1997/2004 38 33 Average 2004 = 9.3% The smaller rate of pós-PlanoReal period Average 97/99 21.4% 23 Average 00/02 15.8% 18 Average 03 13.2% Fonte: Bacen Feb 04 Sep 03 Apr 03 Nov 02 Jun 02 Jan 02 Aug 01 Mar 01 Oct 00 May 00 Dec 99 Jul 99 Fev 99 Sep 98 Apr 98 Nov 97 8 Jun 97 13 Jan 97 % p.a. 28 32 Real Interest Rate – 2003/2004 17 16 15 % p.a. 14 13 12 11 10 9.4% 9 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Mar 03 03 03 03 03 03 03 03 03 03 03 03 04 04 33 Sao Paulo Stock Exchange Index Mar 25 21,721 24,000 Basis point 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 Feb 02 Jun 02 Oct 02 Feb 03 Jun 03 Oct 03 Feb 04 34 Private External Debt: Rollover Rate 6-Month Moving Average 160 140 120 % 100 80 60 40 20 Jul 01 Jan 02 Jul 02 Jan 03 Jul 03 Feb 04 35 Resilience to Shocks Brazil is currently in much better shape to deal with adverse external shocks, compared to mid-90s and early00s: External adjustment Fiscal adjustment and structural reforms 36 Interest Payments/Exports 40 36.4 36 % 32 28 26.7 24 19.9 20 1996 1997 1998 * 2004 - BCB forecast 1999 2000 2001 2002 2003 2004* 37 Net External Debt/Exports 4.0 3.6 3.5 3.0 2.5 2.0 2.1 2.0 1.5 1.0 1996 1997 1998 * 2004 - BCB forecast 1999 2000 2001 2002 2003 2004* 38 IV. Towards Sustained Economic Growth 39 Industrial Output: 1996/2003 Quarterly Seasonally Adjusted Industrial Output 135 1991 = 100 130 125 4Q03 Vs 2Q03: +5.1% 120 2H03 Vs 1H03: + 2.2% 115 110 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 Source: IBGE Q4 03 40 Retail Sales: 2000-2003 Quarterly Seasonally Adjusted Sales 101 100 2000 = 100 99 98 4Q03 Vs 2Q03: +3.4% 97 2H03 Vs 1H03: + 2.1% 96 95 94 93 92 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 00 00 00 00 01 01 01 01 02 02 02 02 03 03 03 03 Source: IBGE 41 Wages in Industry Seasonally Adjusted Real Wage May 2003 = 100 108 107 106 105 104 103 102 101 100 99 98 May 03 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 42 GDP Growth Seasonally Adjusted 1.50 (%) 0.11 1Q03 2Q03 3Q03 -0.81 Source: IBGE 4Q03 -0.93 43 GDP x Confidence Shocks GDP in the Aftermath of very Large FX Shocks (%) Indonesia Argentina Uruguay Thailand Malaysia S. Korea Ecuador Mexico (2002) (2002) (1998) (1998) (1998) (1999) (1995) (1998) +3.5 Russia Brazil (1998) (2003) 0 -0.2 Brazil (2004) -2 -4 -4.9 -6 -6.7 -6.3 -6.2 -7.4 -8 -10 -11.0 -10.8 -10.5 -12 -13.3 * For 2004, BCB estimate. 44 Brazil: Recent Economic Developments Henrique de Campos Meirelles Febraban – Lima, March 2004 45