BANCO BNP PARIBAS BRASIL Louis Bazire 3 November 2015 Brazil: Stable and Foreseeable Marcelo Carvalho Head of Latam Economic Research [email protected] 55-11-3841-3418 3 November 2015
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Slide 1
BANCO BNP PARIBAS BRASIL
Louis Bazire
3 November 2015
Slide 2
Brazil: Stable and Foreseeable
Marcelo Carvalho
Head of Latam Economic Research
[email protected]
55-11-3841-3418
3 November 2015
Slide 3
Agenda
Brazil – A comparison with other BRIC economies
Brazil – Stable and Foreseeable
Investors want to finance the next expansion cycle in Brazil
Medium and long term scenario – a positive growth outlook
Short term scenario – “Brazilian Quarterly Outlook: Reaping Rewards”
Inflation – convergence toward targets
Fiscal and monetary policy outlook – Tug of war
Political landscape – elections in October 2010.
Forecasts
3
Slide 4
Brazil: A comparison with other BRIC economies
4
Slide 5
BRIC economies: General characteristics
2009
Land area
(thousands sq km)
GDP (USD Bn)
GDP per Capita (USD)
Population (Mn)
Agriculture
GDP
breakdown Industry
by sector
Services
(%)
External openness (%)
(I + X) / (Pib x2)
Brazil
Russia
India
China
8514
17075
3287
9561
1574
8121
194
7
1229
8662
141
5
1313
1122
1170
17
4908
3678
1334
11
28
37
26
49
65
58
56
40
12.0
23.0
19.0
29.0
5
Slide 6
BRIC economies: real GDP growth varies
A n n u a l a ve ra g e
Av e ra g e re a l G D P g ro w th ra te s
14%
14%
1991-1999
12%
12%
10%
10%
1991-1999
2000-2009
2000-2008
2004-2007
2004-2007
8%8%
6%6%
4%4%
2%2%
0%0%
-2%
-2%
Brazil
B ra z il
Russia
R u s s ia
India
In d ia
China
C h in a
-4%
-4%
-6%
-6%
S ourc es : B N P P , national s tatis tic s
6
Slide 7
BRICs: Investment and Saving rates are still relatively low in
Brazil
•
Differences in investment rates, also in saving rates
In ve s tm e n t ra te s
60
50
S o u rce s: N a tio n a l S ta tistics, B N P P ca lcu la tio n s
* In d ia - fisca l ye a rs
B ra zil
R u ssia
In d ia *
C h in a
S o u rce s: N a tio n a l S ta tistics, B N P P ca lcu la tio n s
* In d ia : fisca l ye a rs
B razil
R ussia
India*
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1990
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
0
1993
0
1992
10
1991
10
1995
20
1994
20
30
1993
30
40
1992
40
1991
p e rc e n t o f G D P
50
1990
p e rc e n t o f G D P
S a vin g ra te s
60
C hina
7
Slide 8
What has changed within BRICs since 2003?
• All BRICs have become global players on both economic and geopolitical fronts
–
With similarities and differences in the globalisation process
• Similarities in the process, even if differences in the magnitude
– Increase in potential growth: increase in saving and investment to GDP ratios, but to a
lesser extent for Brazil
– Increase in globalisation: trade and financial integration and Foreign Direct Investment
– Decrease in country risk(1) : increase in foreign exchange reserves, decrease in external
public debt
(1) In the narrow sense: sovereign risk and transfer risk
8
Slide 9
What has changed within BRICs since 2003?
Differences in terms of growth sustainability
•
•
•
•
Brazil: Higher potential growth, probably sustainable
India: New model of growth (more linked to manufactured goods), sustainable under
certain key conditions
China: Current growth model not sustainable in the medium term
Russia: Growth still highly dependent on oil price
Differences in terms of external financial vulnerability
•
•
•
China: Very low external financial vulnerability
Brazil: Strong decrease in external financial vulnerability
India: Moderate decrease in external financial vulnerability
–
•
Large companies still depend on the financing in foreign currency
Russia: No decrease in external financial vulnerability
–
Even if the problem of external public debt has been solved, large private companies have
become overindebted, mainly in foreign currency. Dollarization of the economy is still high.
9
Slide 10
What has changed within BRICs since 2003?
•
Similarities and differences: quantitative illustration
Brazil
Russia
India
China
2003
2008
2003
2008
2003/04
2008/09
2003
2008
External public
debt/GDP (%)
21.7
4.2
25
2
8.6
4.8
3.2
0.8
External private sector
debt/GDP (%)
21.3
15.5
18
27
13
14
8.5
9.0
Foreign exchange
reserves (USD billion)
49
193
73
413
108.8
242.6
408
1 946
Inflation rate
(average) (%)
9.3
5.9
12
12.5
5.5
8.4
1.2
5.9
Public debt/GDP
(gross) (%)
70.4
64.3
30
5
86
76.8
28.8
21.9
Domestic credit
total/GDP (%)
23
38
28
45
63.9
81.0
147.9
122.5
Saving/GDP (%)
16.5
17.1
29
31
29.8
37.3
43.4
51.3
Invest./GDP (%)
15.8
18.9
20.5
25
27.6
39.0
41.2
43.2
Sources: IIF, National statistiques, BNP Paribas calculations
10
Slide 11
BRICs: Summary
• Brazil: from moderate GDP growth (2.5%-3% per year) with high
vulnerabilities to slightly higher growth (4%), more sustainable
and less vulnerable
• Russia: no significant changes during the decade: fairly high growth
(3%-6%) but still very vulnerable to commodity prices and financial
shocks
• India: from fairly high growth (5%-6%) with vulnerabilities to high
and more sustainable growth (7%-8%)
• China: very high growth relatively stable (roughly 10%) and not too
much vulnerable(1). But the growth model relying on exports and
investment may not be sustainable in the medium-long term
(1) Low vulnerability to external financial shocks, high vulnerability to downturn in the global business cycle
11
Slide 12
Conclusion: What next in the medium term? (3)
Brazil: Probably the best “mix” within BRICs in terms of growth potential and risks
•
GDP growth potential is accelerating progressively to 4-5% per year but probably not to 7-9%
as India or China
–
•
Nevertheless, Brazil’s growth has become more sustainable and less vulnerable to external
shocks than that of China and, to a lesser extent, that of India
–
•
The process of acceleration has started recently (saving, public and private investment, financial
intermediation, decrease in real interest rate …). The pursuing of this movement, notably for
infrastructure investment, is key to consolidate this evolution
From 1994-2007(1), Brazil has solved huge problems of macro economic imbalances, established
credible economic policies, strongly increased its State and corporate governance, diversified its
export base (both on a geographical and sector point of view) and reduced its external financial
vulnerability
Even if is GDP growth potential considered closer to that of Russia, its sustainability is
higher and its vulnerability is much lower
–
Notably in terms of export diversification, State and corporate governance, monetary policy capability,
financial sector robustness and external financial vulnerability
(1) Particularly since 2003-04
12
Slide 13
BNP PARIBAS GROUP IN BRAZIL
13
Slide 14
BNP Paribas in Brazil: A group of 2.328 employees
Asset Management
–
–
–
Corporate & Investment
Banking
Since 1998
Employees:
35
Intern: 7
Since 1950
Employees:
254
Intern: 36
Personal Finance
Wealth Management
Brasilia
Belo
Horizonte
Since 1998
Employees: 1619
Rio de Janeiro
Since 1998
Employees: 38
Intern: 1
São Paulo
Insurance
Since 1999
Employees:
341
Equipment Solutions
Curitiba
Since 2006
Employees:
50
14
Slide 15
BNP Paribas Brazil: 4th Largest Foreign Bank by Total Assets
Evolution of Group BNP Paribas Presence in Brazil
Establishment of a
wholly owned
subsidiary
Representative
Office in Brazil
1950
1996
1981-95
1999
1998
Minority stake in
Banco Cidade
Implementation of a
reinforced organic
growth strategy
Launching of Cardif
activities
2001
2000
Launching of Asset
Management and
Cetelem Activities
Launching of Arval
activities
Merger of BNP and
Paribas in Brazil
Launching of
Cetelem and
MasterCard Securities Services
Activities
parternership
2006
2008
2007
Acquisition of local
asset management Cetelem acquired
activities of UBS,
Banco BGN,
ABC and IAMEX
specialized in
consumer credit
(Total Assets BRL 2
Billion)
2010
2009
BNPP Acquired
Fortis
Financial Highlights of Banco BNP Paribas Brasil SA (R$ million)
2006
2007
2008
2009
7,500
15,400
26,391
14,245
Net Worth
626
792
983
993
Net Income
77
176
266
250
12.2%
22.2%
27.1%
25.2%
Total Assets
AAA
Brazil-National Scale
(since 28 Oct 2008)
ROE
15
BANCO BNP PARIBAS BRASIL
Louis Bazire
3 November 2015
Slide 2
Brazil: Stable and Foreseeable
Marcelo Carvalho
Head of Latam Economic Research
[email protected]
55-11-3841-3418
3 November 2015
Slide 3
Agenda
Brazil – A comparison with other BRIC economies
Brazil – Stable and Foreseeable
Investors want to finance the next expansion cycle in Brazil
Medium and long term scenario – a positive growth outlook
Short term scenario – “Brazilian Quarterly Outlook: Reaping Rewards”
Inflation – convergence toward targets
Fiscal and monetary policy outlook – Tug of war
Political landscape – elections in October 2010.
Forecasts
3
Slide 4
Brazil: A comparison with other BRIC economies
4
Slide 5
BRIC economies: General characteristics
2009
Land area
(thousands sq km)
GDP (USD Bn)
GDP per Capita (USD)
Population (Mn)
Agriculture
GDP
breakdown Industry
by sector
Services
(%)
External openness (%)
(I + X) / (Pib x2)
Brazil
Russia
India
China
8514
17075
3287
9561
1574
8121
194
7
1229
8662
141
5
1313
1122
1170
17
4908
3678
1334
11
28
37
26
49
65
58
56
40
12.0
23.0
19.0
29.0
5
Slide 6
BRIC economies: real GDP growth varies
A n n u a l a ve ra g e
Av e ra g e re a l G D P g ro w th ra te s
14%
14%
1991-1999
12%
12%
10%
10%
1991-1999
2000-2009
2000-2008
2004-2007
2004-2007
8%8%
6%6%
4%4%
2%2%
0%0%
-2%
-2%
Brazil
B ra z il
Russia
R u s s ia
India
In d ia
China
C h in a
-4%
-4%
-6%
-6%
S ourc es : B N P P , national s tatis tic s
6
Slide 7
BRICs: Investment and Saving rates are still relatively low in
Brazil
•
Differences in investment rates, also in saving rates
In ve s tm e n t ra te s
60
50
S o u rce s: N a tio n a l S ta tistics, B N P P ca lcu la tio n s
* In d ia - fisca l ye a rs
B ra zil
R u ssia
In d ia *
C h in a
S o u rce s: N a tio n a l S ta tistics, B N P P ca lcu la tio n s
* In d ia : fisca l ye a rs
B razil
R ussia
India*
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1990
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
0
1993
0
1992
10
1991
10
1995
20
1994
20
30
1993
30
40
1992
40
1991
p e rc e n t o f G D P
50
1990
p e rc e n t o f G D P
S a vin g ra te s
60
C hina
7
Slide 8
What has changed within BRICs since 2003?
• All BRICs have become global players on both economic and geopolitical fronts
–
With similarities and differences in the globalisation process
• Similarities in the process, even if differences in the magnitude
– Increase in potential growth: increase in saving and investment to GDP ratios, but to a
lesser extent for Brazil
– Increase in globalisation: trade and financial integration and Foreign Direct Investment
– Decrease in country risk(1) : increase in foreign exchange reserves, decrease in external
public debt
(1) In the narrow sense: sovereign risk and transfer risk
8
Slide 9
What has changed within BRICs since 2003?
Differences in terms of growth sustainability
•
•
•
•
Brazil: Higher potential growth, probably sustainable
India: New model of growth (more linked to manufactured goods), sustainable under
certain key conditions
China: Current growth model not sustainable in the medium term
Russia: Growth still highly dependent on oil price
Differences in terms of external financial vulnerability
•
•
•
China: Very low external financial vulnerability
Brazil: Strong decrease in external financial vulnerability
India: Moderate decrease in external financial vulnerability
–
•
Large companies still depend on the financing in foreign currency
Russia: No decrease in external financial vulnerability
–
Even if the problem of external public debt has been solved, large private companies have
become overindebted, mainly in foreign currency. Dollarization of the economy is still high.
9
Slide 10
What has changed within BRICs since 2003?
•
Similarities and differences: quantitative illustration
Brazil
Russia
India
China
2003
2008
2003
2008
2003/04
2008/09
2003
2008
External public
debt/GDP (%)
21.7
4.2
25
2
8.6
4.8
3.2
0.8
External private sector
debt/GDP (%)
21.3
15.5
18
27
13
14
8.5
9.0
Foreign exchange
reserves (USD billion)
49
193
73
413
108.8
242.6
408
1 946
Inflation rate
(average) (%)
9.3
5.9
12
12.5
5.5
8.4
1.2
5.9
Public debt/GDP
(gross) (%)
70.4
64.3
30
5
86
76.8
28.8
21.9
Domestic credit
total/GDP (%)
23
38
28
45
63.9
81.0
147.9
122.5
Saving/GDP (%)
16.5
17.1
29
31
29.8
37.3
43.4
51.3
Invest./GDP (%)
15.8
18.9
20.5
25
27.6
39.0
41.2
43.2
Sources: IIF, National statistiques, BNP Paribas calculations
10
Slide 11
BRICs: Summary
• Brazil: from moderate GDP growth (2.5%-3% per year) with high
vulnerabilities to slightly higher growth (4%), more sustainable
and less vulnerable
• Russia: no significant changes during the decade: fairly high growth
(3%-6%) but still very vulnerable to commodity prices and financial
shocks
• India: from fairly high growth (5%-6%) with vulnerabilities to high
and more sustainable growth (7%-8%)
• China: very high growth relatively stable (roughly 10%) and not too
much vulnerable(1). But the growth model relying on exports and
investment may not be sustainable in the medium-long term
(1) Low vulnerability to external financial shocks, high vulnerability to downturn in the global business cycle
11
Slide 12
Conclusion: What next in the medium term? (3)
Brazil: Probably the best “mix” within BRICs in terms of growth potential and risks
•
GDP growth potential is accelerating progressively to 4-5% per year but probably not to 7-9%
as India or China
–
•
Nevertheless, Brazil’s growth has become more sustainable and less vulnerable to external
shocks than that of China and, to a lesser extent, that of India
–
•
The process of acceleration has started recently (saving, public and private investment, financial
intermediation, decrease in real interest rate …). The pursuing of this movement, notably for
infrastructure investment, is key to consolidate this evolution
From 1994-2007(1), Brazil has solved huge problems of macro economic imbalances, established
credible economic policies, strongly increased its State and corporate governance, diversified its
export base (both on a geographical and sector point of view) and reduced its external financial
vulnerability
Even if is GDP growth potential considered closer to that of Russia, its sustainability is
higher and its vulnerability is much lower
–
Notably in terms of export diversification, State and corporate governance, monetary policy capability,
financial sector robustness and external financial vulnerability
(1) Particularly since 2003-04
12
Slide 13
BNP PARIBAS GROUP IN BRAZIL
13
Slide 14
BNP Paribas in Brazil: A group of 2.328 employees
Asset Management
–
–
–
Corporate & Investment
Banking
Since 1998
Employees:
35
Intern: 7
Since 1950
Employees:
254
Intern: 36
Personal Finance
Wealth Management
Brasilia
Belo
Horizonte
Since 1998
Employees: 1619
Rio de Janeiro
Since 1998
Employees: 38
Intern: 1
São Paulo
Insurance
Since 1999
Employees:
341
Equipment Solutions
Curitiba
Since 2006
Employees:
50
14
Slide 15
BNP Paribas Brazil: 4th Largest Foreign Bank by Total Assets
Evolution of Group BNP Paribas Presence in Brazil
Establishment of a
wholly owned
subsidiary
Representative
Office in Brazil
1950
1996
1981-95
1999
1998
Minority stake in
Banco Cidade
Implementation of a
reinforced organic
growth strategy
Launching of Cardif
activities
2001
2000
Launching of Asset
Management and
Cetelem Activities
Launching of Arval
activities
Merger of BNP and
Paribas in Brazil
Launching of
Cetelem and
MasterCard Securities Services
Activities
parternership
2006
2008
2007
Acquisition of local
asset management Cetelem acquired
activities of UBS,
Banco BGN,
ABC and IAMEX
specialized in
consumer credit
(Total Assets BRL 2
Billion)
2010
2009
BNPP Acquired
Fortis
Financial Highlights of Banco BNP Paribas Brasil SA (R$ million)
2006
2007
2008
2009
7,500
15,400
26,391
14,245
Net Worth
626
792
983
993
Net Income
77
176
266
250
12.2%
22.2%
27.1%
25.2%
Total Assets
AAA
Brazil-National Scale
(since 28 Oct 2008)
ROE
15