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Brazil: Sustainable Growth Min. Guido Mantega April 2010 2 Brazil: one of the fastest growing economies in 2010 GDP growth forecast – selected countries – in % of GDP * The Economist forecast ** Government forecast Source: The Economist Produced by: Ministry of Finance 3 New social and economic paradigms • • • • • Emphasis on a more robust growth Employment generation Social inclusion and income distribution Investment enhancement Government encourages and promotes growth • Efficient stimulus programs 4 Robust employment generation and more formal jobs Net employment generation – in thousands of workers * Government forecast of 1.8 million for 2010, of which 657,259 comprised within the accumulated year period up to Mar-2010 Source: CAGED /MTE Produced by: Ministry of Finance 2010: the smallest unemployment rate in a time series Unemployment rate – in % of economically active population Source: PME/IBGE Produced by: Ministry of Finance New middle class and Brazilian unification Social class distribution - in % of population Source: MDS, MTE and CPS/FGV Produced by: Ministry of Finance Social classes diversify consumption % change in the purchased value (food, beverages, hygiene and cleaning) * Average monthly household income is specified below * Class D/E: from R$ 0 to R$ 1,115 Class C: from R$ 1,115 to R$ 4,807 Class A/B: from R$ 4,807 and on Source: Kantar World Panel Produced by: Ministry of Finance 8 Highest employment rate in the world Net employment generation forecast for Q2 2010* Gap within companies that expect job raising (43%) as opposed to the ones which expect a reduction (5%) in Q2 2010 (% between Q1:2010 and Q4:2009) * Expected employment generation from Manpower Consulting research 8for the Q2 2010 based on interviews with 850 companies in Brazil Source: Manpower Consulting Produced by: Ministry of Finance 9 Purchasing power of minimum wage Today’s minimum wage buys more products – in numbers of staple food baskets Source: DIEESE Produced by: Ministry of Finance 10 Dinamycs of Brazilian domestic demand Retail sales – selected countries - % change from 2008 to 2009 Fontes: IDV Produced by: Ministry of Finance 11 Retail Sales - PMC % change from preceding every 12-month period * Including automobiles, motorcycles, parts and pieces, and construction materials Source: IBGE Produced by: Ministry of Finance 12 Government action is essential • Infrastructure stimulus: PAC • PAC is a strategic investment program with management and infrastructure planned actions • Industrial sector policy • Income distribution • Acting and efficient State-owned companies (BNDES, BB, CAIXA, BNB, Petrobras) 13 Investment enhancement % change from preceding year 13 * Ministry of Finance Forecasts Source: IBGE Produced by: Ministry of Finance 14 Federal Government and State-Owned Companies Investment Cash basis - % of GDP 14 * Ministry of Finance Forecasts Source: Ministry of Finance Produced by: Ministry of Finance 15 Industry investment volume Industry resource distribution - realized and planned by sector of activity 15 Source: BNDES Produced by: Ministry of Finance Decade of infrastructure to come Investments in R$ billions 16 Source: Exame Infrastructure Yearbook 2009-2010 Produced by: Ministry of Finance 17 Construction growth in Brazil Average number of contracts by presidential terms Source: Abecip and CAIXA Produced by: Ministry of Finance 18 2010: Sustainable and quality growth • Growth is sustainable because it doesn’t create macroeconomic imbalances • Inflation under control – efficient inflation targeting regime • Robust fiscal rules – primary surplus target of 3.3 % of GDP in 2010 and continuous reduction in net public debt • Low external vulnerability 19 Evolution of inflation index, target and expectations% % change from every 12-month period * Market Forecasts FOCUS Report from April 9th, 2010 Fontes: IBGE and Brazilian Central Bank Produced by: Ministry of Finance Decomposition of Monthly Inflation (% change) 0.9 0.8 0.7 Remaining itens Fuel (ethanol and gasolines) Tranport (tickets and fares) Food (in house) 0.6 0.5 0.4 0.3 0.2 0.1 0.0 -0.1 -0.2 Source: IBGE. 20 Elaborated by: MF/SPE 20 21 Sustainable PAC: reduction of public debt Fiscal results – primary surplus and nominal deficit/surplus - in % of GDP ** * Ministry of Finance Forecasts Source: Brazilian Central Bank and The Economist Produced by: Ministry of Finance 5.0 Jan/03 Apr/03 Jul/03 Oct/03 Jan/04 Apr/04 Jul/04 Oct/04 Jan/05 Apr/05 Jul/05 Oct/05 Jan/06 Apr/06 Jul/06 Oct/06 Jan/07 Apr/07 Jul/07 Oct/07 Jan/08 Apr/08 Jul/08 Oct/08 Jan/09 Apr/09 Jul/09 Oct/09 Jan/10 Apr/10 25.0 Nominal Growth rate (% YOY) 20.0 15.0 10.0 Net primary revenue Primary expenditure GDP - (5.0) 23 Sustainable nominal deficit: reduction of public debt Nominal deficit - in % of GDP * Ministry of Finance Forecasts in February, 2010 ** G-20 nominal deficit average refers to Apr 15th, 2010 ed. Source: The Economist Produced by: Ministry of Finance 24 Sustainable PAC: reduction in public debt Public Sector Net Public Debt - in % of GDP * Ministry of Finance Forecasts in February, 2010 Source: Brazilian Central Bank Produced by: Ministry of Finance 40 35 30 25 20 15 10 5 0 Brazil South Korea Philippines Indonesia Mexico Turkey Peru South Africa Chile Hungary Poland Paquistan Thailand Lebanon Bulgaria Colombia Romania Malaysia Costa Rica Croatia Egypt Ukraine Uruguay Venezuela Vietnam Belize Tunisia Ecuador Russia China Morocco Dominican… 25 IIF Ranking on Investors Relation and Data Transparency 38 37 35 34 34 33 32 31 30 29 24 21 21 20 18 16 16 12 11 11 11 11 10 10 9 6 6 4 4 3 3 2 26 Deficit in Current Account does not bind growth, nor increase external vulnerability Current Account – in US$ billions and % do PIB * Government Forecasts 26 Source: Brazilian Central Bank Produced by: Ministry of Finance 27 Lower external vulnerability International reserves and external debt - in % of GDP and index Source: Brazilian Central Bank Produced by: Ministry of Finance 28 From supporting to leading country • Brazil is respected and highly regarded. • Change: from debtor to creditor and new protagonist position. • The myth that “Brazil is a second-class country” has fallen apart. • Brazil could became one of the most dynamic countries in this decade.