Brasil: Cenário Macroeconômico · Cenário Macroeconômico 3 Macroeconomic Overview Brazil 1. Fraco desempenho do crescimento em meio a um aumento dos desequilíbrios macro econômicos

Gilson Carvalho

Brasil: Cenário Macroeconômico Maio 2015

Fiat Chrysler Finanças

Indicadores Macroeconômicos

2 Macroeconomic Overview Brazil

Source: Market Consensus, FCF

May, 2015

As série de contas externas não consideram a metodologia adotada pelo Bacen a partir de abril 2015.

Atividade 2010 2011 2012 2013 2014 2015P 2016P

PIB (USD bilhões) 2.206 2.614 2.414 2.388 2.345 2.013 1.928

PIB (BRL bilhões) 3.887 4.375 4.713 5.158 5.521 5.897 6.281

PIB (%) 7,6 3,9 1,8 2,7 0,1 (1,4) 0,9

Credito (BRL bilhões) 1.663 2.034 2.369 2.713 3.022 3.347 3.646

Credito (% PIB) 44,1 46,5 50,3 52,6 54,7 56,8 58,1

População (milhões) 196 197 199 201 203 204,2 205,7

PIB per capta (USD) 11.284 13.242 12.118 11.881 11.563 9.858 9.372

Taxa de Desemprego (%) 6,7 6,0 5,5 5,4 4,8 6,4 7,4

Contas Externas 2010 2011 2012 2013 2014 2015P 2016P

Balança Comercial (USD bilhões) 20,1 29,8 19,4 2,6 (3,9) 0,7 9,6

Balança em Conta Corrente (USD bilhões) (47,4) (52,5) (54,2) (81,1) (90,9) (82,5) (75,6)

Balança em Conta Corrente (% PIB) (2,1) (2,0) (2,2) (3,4) (3,9) (4,1) (3,9)

Investimento Estrangeiro Direto (USD bilhões) 48,4 66,7 65,3 64,0 62,5 45,0 50,0

Reservas Internacionais (USD bilhões) 287,9 352,0 378,6 375,8 374,1 365,6 361,5

Dívida Externa Total (USD bilhões) 255,7 298,2 316,8 312,0 347,6 378,2 409,2

Contas Públicas 2010 2011 2012 2013 2014 2015P 2016P

Superávit Primário (% PIB) 2,6 2,9 2,2 1,8 (0,6) 0,9 1,8

Meta Superávit Primário (% PIB) 2,2 2,3 2,2 1,9 1,8 1,2 2,0

Câmbio, Juros e Inflação 2010 2011 2012 2013 2014 2015P 2016P

Taxa de Juros (Selic - final de período) 10,75 11,00 7,25 10,00 11,75 13,75 12,00

Inflação (IPCA, %) 5,9 6,5 5,8 5,9 6,4 8,4 5,5

BRL/USD (final de período) 1,67 1,88 2,04 2,34 2,66 3,2 3,3

Cenário Macroeconômico


1. Fraco desempenho do crescimento em

meio a um aumento dos desequilíbrios

macro econômicos

• Recessão em 2015

• Crescimento abaixo de 1% em 2016

• Demanda doméstica fraca

• Investigação de corrupção da Petrobras

• Deterioração do mercado de trabalho

• Diminuição do crescimento de crédito

• Inflação elevada

2. Desafios fiscais

• Déficit fiscal elevado

• Aumento do gasto do governo

• Riscos para consolidação fiscal (contração

econômica; atraso na implementação das medidas

fiscais)

3. Cenário político complicado

• Perda de popularidade da presidente

• Congresso fragmentado

• Investigação de corrupção da Petrobras

May, 2015

Fatores de risco para rebaixamento do grau de

investimento

• Continuação do fraco desempenho de crescimento

• Dificuldade na consolidação fiscal

• Baixa confiança no processo de implementação das

medidas de ajuste fiscal

• Perda de reservas internacionais

Pontos a serem monitorados

• Contas fiscais

• indicadores de confiança

• Eficácia congelamento dos gastos do governo

• Êxito das de medidas fiscais no Legislativo

Fatores fundamentais para melhorar o cenário

macro

• Melhoria da credibilidade política

• Redução dos desequilíbrios macro econômicos

• Consolidação fiscal

• Melhor ambiente de investimento

Cenário Macroecônomico


Nível de Atividade: Brasil apresenta fraco desempenho do crescimento em meio aos

desequilíbrios macroeconômicos, com previsão de crescimento abaixo de 1% em 2016,

dificuldade de acesso ao crédito, fraca demanda doméstica e deterioração do mercado de

trabalho

Inflação: Pressão sobre os preços administrados, desvalorização do real e aumento dos

impostos apontam para elevada inflação em 2015, acima do teto da meta de 6,5%

Juros: Na última reunião o COPOM aumentou a Selic em 0,5% pp e sinalizou que apesar de

próximo o fim do ciclo de aperto monetário não será na próxima reunião

Câmbio: O real já depreciou em mais de 15% nesse ano com forte volatilidade e bastante

sensível às incertezas políticas, apesar disso o BC não prorrogou o programa de swaps.

Balança Comercial: A balança comercial permanece fraca e já acumula um déficit de USD 5 bi

até abril.

IED: A grande diferença das taxas de juros locais e internacionais contribuem para o influxo de

capital estrangeiro no país, apesar da instabilidade política e recessão econômica pela qual o

país está passando

May, 2015


Crédito: a pífia performance econômica, a deterioração do mercado de trabalho e os baixos índices de

confiança do consumidor e empresário contribuem para a redução do crédito tanto para as empresas

quanto para pessoa física

Contas Publicas: apesar do comprometimento do governos com a meta fiscal, o país tem desafios

adiante, pois precisa superar a contração econômica, a dificuldade em cortas os gastos e a perda das

reservas internacionais além da incerteza na aprovação das medidas de ajuste fiscal

Politica: o cenário político está ainda mais instável devido a perda de popularidade da presidente, a

fragmentação do congresso e a investigação de corrupção da Petrobrás

Risco Soberano: o risco de um rebaixamento do grau de investimento é real. As agências de rating

estão monitorando a consolidação fiscal, a deterioração dos índices de confiança e o êxito das medidas

fiscais no Legislativo

A retomada do crescimento em 2016 (e manutenção da classificação de grau de investimento)

depende da extensão dos ajustes implementados em 2015.

Cenário Macroeconomico

May, 2015

Backup

GDP


May, 2015

Activity Level


2014 GDP growth was 0.1% better than forecasted, but already incorporated in the new

methodology... The perspective for 2015 is one of the worst regarding GDP. The market already

expects -1.4%.

The last GDP data was released in March by IBGE according to the new methodology for National

Accounts. IBGE also revised the historical series using the new methodology. The most relevant

changes occurred between 2011 and 2013, with an upward revision in the growth rates.

GDP 2014 (bn): BRL 5,521

1/9 Source: IBGE, FCF

May, 2015

7,6%

3,9%

1,8%

2,7%

0,1%

-1,4%

0,9%

2010 2011 2012 2013 2014 2015F 2016F

GDP

Activity Level

9 Macroeconomic Overview Brazil 2/9

Source: Credit Suisse, BofA, FCF

A bunch of reasons explain Brazilian’s low growth…

Domestic Issues Global Issues Infrastructure

Investments

Reduced Cross

Border Trade

Demography Fragility of

Institutions

Potential growth lower than 3,0% Negative GDP Growth

Low business and consumer confidence

High inflation

Low credibility on

fiscal policy

Reduced

predictability

Risk of electricity and

water rationing

Downgrade rating

Petrobras

Low growth on

important markets

(Euro Area)

China’s growth

slowdown

Risk of Greece

leaving Euro Area

Punctual Issues Structural Issues

Poor infrastructure

conditions impact

productivity

High raw material import

taxes and few

commercial agreements

with non prime

counterparties

Lost of momentum of

labor force

Low productivity

Poor perception over

quality of institutions

May, 2015

Purchasing Managers’ Index (PMI)


Source: Latin Focus

The Markit manufacturing Purchasing Managers’ Index (PMI) fell from March’s 46.2 to 46.0

in April, thus dropping to the lowest level in over four years. As a result, the PMI index is now

further below the 50-threshold that separates contraction from expansion in business

conditions in the manufacturing sector. According to Markit, April’s figure came on the back

of a steeper decrease in output, new business and buying levels.

May, 2015

PMI

Note: A reading above 50 indicates an expansion in business activity while a

value below 50 points to a contraction.

Labor Market


Deterioration in labor market conditions in 2015 is expected. The growth of occupied population will be compatible with the slight increase in the unemployment rate in next years.

4/9

Source: BCB, FCF

May, 2015

Unemployment


May, 2015

FEAR OF UNEMPLOYMENT INDEX

UNEMPLOYMENT INDEX

74,7 7573,8

72,274,4 74,6

71,6

76,5

73,574,7 75,3 74,5

6971,3

72,5 73 73,676,1 77

75

98,8

Mar

-10

May

-10

Jul-1

0

Sep-

10

Nov

-10

Jan-

11

Mar

-11

May

-11

Jul-1

1

Sep-

11

Nov

-11

Jan-

12

Mar

-12

May

-12

Jul-1

2

Sep-

12

Nov

-12

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

Source: IBGE & CNI

GDP Breakdown


Increase of Brazilian GDP’s growth depends on a substantial hike in investments rate and

on some internal measures (labor reform, tax reform, enhancements on infrastructure) and

a better global outlook...

...The low level of confidence indexes (business and consumers) led to a investments

deceleration in 2014.

Source: IBGE, Tendências, FCF

May, 2015

Breakdown of GDP value added in 2014 (%)

5,6

23,4

71,0

Agriculture Industry Services

62,7%

20,3%

19,8%

11,6%

-14,3%

Household Consumption Government Consumption Investments Exports Imports

GDP Breakdown


On the demand side, the decrease in the investments and the fall in imports explained the

lower GDP growth during 2014...

...On the supply side, industry and agriculture reverted the strong increase presented in

2013.

Source: IBGE, Tendências, FCF

May, 2015

2008 2009 2010 2011 2012 2013 2014 2015F 2016F

Household Consumption 6,4% 4,2% 6,4% 4,8% 3,9% 2,9% 0,9% 0,2% 0,1%

Government Consumption 2,1% 2,9% 3,9% 2,2% 3,2% 2,2% 1,3% 2,2% 2,0%

Investments 12,7% -1,9% 17,8% 6,6% -0,6% 6,1% -4,4% -4,6% 0,6%

Exports 0,4% -9,2% 11,7% 4,8% 0,5% 2,1% -1,1% -1,4% 5,0%

Imports 17,0% -7,6% 33,6% 9,4% 0,7% 7,5% -1,0% -9,0% -3,7%

Agriculture 5,5% -3,8% 6,8% 5,6% -2,5% 7,9% 0,4% 0,1% 0,9%

Industry 3,9% -4,8% 10,4% 4,1% 0,1% 1,8% -1,2% -4,3% 2,3%

Services 4,8% 1,9% 5,8% 3,4% 2,4% 2,5% 0,7% -0,7% 1,0%

5,0% -0,2% 7,6% 3,9% 1,8% 2,7% 0,1% -1,4% 0,9%GDP (%)

De

ma

nd

Su

pp

ly

GDP growth on supply and demand sides (%)

Investments vs GDP

15 Macroeconomic Overview Brazil Source: IBGE, FCF

May, 2015 8/9

Investments vs GDP


Source: BNDES, Credit Suisse

Lack of suitable infrastructure is a serious

bottleneck to increase growth pace of

Brazil.

Investment rate of Brazil is recurrently

lower than 20%. Infrastructure investments

are far below the level of other developed

countries and from BRICS’.

Infrastructure Investments

(% of GDP, average 1992-2011)

Water

Energy

Airports

Ports

Railroads

Highways

China

Japan

India

Other Developed

Countries

Middle East &

Africa

Eastern Europe

European Union

USA

LatAm

Brazil

Infrastructure Investments in Brazil

(% of GDP)

May, 2015

Inflation


May, 2015

Inflation


CPI began the year upper the limit of 6.5% yoy and should keep pressured along 2015, mainly due to administered prices and food...

… besides the inflation will be above the upper target limit in the current year, the government has been taken the measures to bring the inflation closer to the target in 2016.

1/1

Source: IBGE, FCF

May, 2015

4,3

5,96,5

5,8 5,96,4

8,4

5,5

4,5 4,5 4,5 4,5 4,5 4,5 4,5 4,5

2009 2010 2011 2012 2013 2014 2015F 2016F

CPI Evolution (% p.y)

CPI Target

Interest Rates & FX


May, 2015

Interest Rates


At last Central Bank Monetary Policy Committee (COPOM) meeting, Selic was raised in another 50 bp to 13.25% in May 2015 that until now bring a +600 tightening cycle initiated in April’13. Market expects another hike of 50bp to reach 13.75% in the end of 2015. There are few entities in the market that are forecasting a Selic at 14% in the end of this year.

1/1

Source: BCB, FCF

Besides the pressured inflation, it should remain high along the year since the focus of the monetary authority moves to 2016, the monetary policy strategy tends to put less weight on current inflation and more attention on economic growth and fiscal adjustment.

May, 2015

8,75

12,50

7,25

10,00

11,00

12,25

13,75

12,00

7

9

11

13

Interest Rate - Selic (% p.y.)

FX


1/2

Since the middle of 2011, BRL entered in a downward trend. From September 2014 until

now the deterioration of fiscal accounts, the uncertainty about economic policy to be adopted,

the turbulences around political environment and the difficulty on the fiscal adjustment

approval led to a sharp deterioration in the flow to Brazil and the exchange rate had

depreciated faster. The market expects BRL 3.20 / USD for the end of 2015.

Source: BCB, FFB

May, 2015

FX


2/2

BRL x USD : Currency behavior in the last years

PSDB x PT 54,28 x 27,04

PSDB x PT 53,06 x 31,01

PT x PSDB 46,44 x 23,19

PT x PSDB 48,61 x 41,64

PT x PSDB 46,91 x 32,61

PT x PSDB 51,6 x 48,4

FHC FHC Lula Lula

Source: BCB, TSE, FFB

Dilma

May, 2015

External Accounts


May, 2015

Trade Balance

24 Macroeconomic Overview Brazil 1/

3 Source: Market Consensus/BCB, MDIC, FCF

The first annual deficit since 2000, 2014 posted a trade balance deficit of USD 3.9 bn…

May, 2015

...Mainly explained by the contraction of exports, that negatively affected commodity prices

and the slowdown in demand of major trading partners.

32%

23%

16% 17%

23%

-23%

32%

27%

-5%

0%

-7%

-16%

3%

30%

17%

24%

32% 44%

-26%

42%

25%

-1%

7%

-4%

-18%

-2%

33,7

44,7 46,1

40,0

24,7 25,3

20,3

29,8

19,4

2,6

(3,9)

0,7

9,6

(10,0)

-

10,0

20,0

30,0

40,0

50,0

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F

Exports (%) Imports (%) Trade Balance (USD bi)

As séries de contas externas não consideram a metodologia adotada pelo Bacen a partir de abril 2015.

Trade Balance 2014 – Main Products


2/3

Source: Secex, Mdic

Main Exported Products 2014 Main Imported Products 2014

May, 2015

Main Exported Products Value % Share

1 - Soybeans & products 31.408 14

2 - Ores 28.402 12,6

3 - Oil and fuel 25.175 11,2

4 - Transport material 20.374 9,1

5 - Meats 16.891 7,5

6 - Chemicals 15.051 6,7

7 - Metallurgic products 14.423 6,4

8 - Sugar & ethanol 10.357 4,6

9 - Machines & equipaments 8.671 3,9

10 - Paper & pulp 7.218 3,2

11 - Coffee 6.616 2,9

12 - Footwear & leather 4.287 1,9

13 - Eletric equipament 3.965 1,8

14 - Precious metals and stones 2.817 1,3

15 - Textiles 2.536 1,1

Main Imported Products Value % Share

1 - Fuel and Oil 45.040 19,7

2 - Mechanical Equipment 31.874 13,9

3 - Electrical and Electronical Equipment 27.013 11,8

4 - Motor Vehicles and parts 19.470 8,5

5 - Organic and Inorganic Chemicals 12.834 5,6

6 - Plastics and its Products 8.849 3,9

7 - Fertilizers 8.443 3,7

8 - Iron, Steel and its Products 7.468 3,3

9 - Pharmaceutica 7.427 3,2

10 - Optical and Precision Equipment 6.761 3

11 - Rubber and its products 4.091 1,8

12 - Cereals and milling products 3.183 1,4

13 - Airplanes and its parts 2.571 1,1

14 - Synthetic and Arificial Filaments and Fibers 2.503 1,1

15 - Cooper and its products 1.986 0,9

This deficit was funded mostly by a higher volume of external loans, which drove the external debt up.

Current Account


The current-account deficit was the widest in 13 years. The deficit is boosted by the trade balance deficit.

3/3

Source: BCB, Credit Suisse, FCF

May, 2015

-24

-31-33

-25 -25 -23

-8

4

12 14 14

2

-28-24

-48 -53-54

-81

-83-76

-2,8

-3,5

-4-4,3

-3,8

-4,2

-1,5

0,8

1,81,6

1,3

0,1

-1,7-1,5

-2,1 -2-2,2

-3,4

-3,9 -4,0 -3,9

-4,5

-2,5

-0,5

1,5

-90

-70

-50

-30

-10

10

Current- Account Balance

USD billion % of GDP


Foreign Direct Investments (FDI)


1

Foreign direct investments (FDI) are expected to decline in the upcoming years as a result of lower growth perspectives for the local economy

Source: BCB, FCF

May, 2015

Intercompany Loans Capital market share


Credit Operations


May, 2015

Credit x Income Commitment x Delinquency


6

Source: BCB, FCF

May, 2015

The population leverage has become much bigger in recent years, with no room for new financial loans. According to the current scenario, interest rates have gone up and credit costs are higher nowadays.

31,3 30,2

35,5

40,7

43,9 44,1 46,5

50,3 52,6

54,7 56,8

58,1

17,4 18,2 18,2 18,9 19,6 19,7

23,3 22,9 21,9 22,0 22,0 21,8

6,2 6,9 6,4 7,2 7,0 5,3

6,7 6,9 5,7

6,8 5,4 5,6

-

10,0

20,0

30,0

40,0

50,0

60,0

70,0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F

Credit Operations (%GDP)

Income Commitment (%)

Delinquency Rate for Individuals (%)

Delinquency


6

Delinquency remained relatively stable in 2014 following the reduction in credit concessions to

auto financing. Total loans to this segment decreased 4.5% in 2014, leading delinquencies to

decline from 5.2% to 3.9%.

Source: BCB, Credit Suisse

Delinquency Rate (%)

May, 2015

The rising unemployment, low confidence, and tightened monetary and fiscal policies, creates an

expectation that credit growth continue its gradual deceleration and delinquency tends to

increase, as it adjusts to a challenging economic scenario for companies and consumers.

Credit Operations


6

As a result of the current monetary tightening cycle, spreads and interest rates also

increased in the period for both earmarked and non-earmarked operations.

Source: Market Consensus/BCB, FCF

May, 2015

Based on the scenario for economic activity in the current year, the continuity of monetary

politic and the ongoing fiscal adjustment, the deceleration in credit operations is expected.

43,9 44,1 46,5

50,3 52,6

54,7 56,8 58,1

2009 2010 2011 2012 2013 2014 2015F 2016F

Total Credit Operations (% GDP)

BNDES participation


6

Source: BNDES, Credit Suisse, FCF

Since 2008, National Treasury injected more than BRL 400 bln in the Public Banks to

support credit originations and offset the effects of financial crisis

No further contribution from National Treasury to public banks in the next 3 years, due

to the high impact on public accounts, with reflects over sovereign credit ratings

May, 2015

Track Record of Money Injection on Public Banks

(BRL bln)

TJLP x Selic


6

Source: BNDES, FCF

Current tightening cycle (initiated on October 2014) widened the gap between Selic and

TJLP (“Long Term Interest Rates”) to 625 bps (biggest gap since 2008).

In the last week of December, CMN announced an increase of TJLP to 5,50%py. Market

currently predicts further increases on TJLP along 2015, so that it will surpass 6,00%py

level at year end.

May, 2015

Bank loans


6

Participation of public on total credit portfolio increased from 34% in 2007 to 59% on

December 2014.

Origination pace of credit operations at public banks decreased from 11.2% yoy to 10.5%

yoy in April, totaling BRL 3.061 trillion, which represents 54.5% of GDP.

May, 2015

Source: Credit Suisse, FCF

Public Accounts


May, 2015

Public Accounts


Fiscal account has deteriorated very sharply since 2011 at both the flow (fiscal deficit) and

stock (gross public debt) levels. The consolidated public sector recorded a primary deficit of

0.6% of GDP in 2014 as a direct result of lower tax revenues for the central government

due to less contributions related to a smaller economic growth and an increased in the

government expenditure.

Source: Market Consensus /BCB, FCF 1/

5

Net debt is gross debt minus financial assets corresponding to debt instruments. These financial assets are: monetary gold and SDRs,

currency and deposits, debt securities, loans, insurance, pension, and standardize guarantee schemes and other accounts receivable.

May, 2015

Gross debt has increased owing to the continued direct issuance of BRL 60.0 billion to the

BNDES and a fiscal deficit (primary surplus minus interest payment) of 6.7% of GDP. The

steady erosion of the fiscal stance pushed net and gross public debt up.

42,1

39,2

36,4 35,2

33,8 34,1 35,0

41,0

60,9

53,4 54,2

58,7 57,2

58,9

61,7 61,9

2009 2010 2011 2012 2013 2014 2015F 2016F

Brazilian Debt (% GDP)

Net Debt Gross Debt

Primary & Nominal Results


Source: Credit Suisse, FCF

2/5

The primary result posted a deficit of 0.6% of GDP in 2014. The cumulative primary surplus

in 2015 has reached 28% of the objective set for the year (1.2% of GDP). Recession will

make it an even more challenging goal for the year, and Central Bank already admits it. The

market expects a primary surplus of 0.9% of GDP in 2015. For 2016, the forecasted target is

2.0% of GDP.

May, 2015

Public Sector Primary Result

-0.6

0.9

Fiscal Measures


May, 2015

In January the Government has reinforced its commitment to fiscal adjustment (on spending and revenue) and

freeing up the tariffs. However some measures to effect must be approved by the Senate by the end of May,

once they expire on July 1. 3/5

Source: Santander, FCF

Before Now

Wage bonus Needs 1 month of work Needs 6 months working

Unemployment insurance Needs 1 month of work Needs 18 months working for 1st request ( 12 months for the 2nd request

and 6 months for the 3rd)

Death pension Pay the total amount (w/o limits)

Needs 2yrs married and 2yrs of contribution to the pension system.

Payment depend on the age expectancy: 50% of the total amount is paid.

Young widow(er) will not receive

Unemployment insurance to fishermen When it is not fishing season3yrs as fisherman needed and cannot receive this benefit if receives

another (as illness assistance)

Sick leave as of 15 days out of work due to illnessAs of 30 days out of work due to illness ( 12 months for the 2nd request and 6

months for the 3rd)

CIDE and PIS/Cofins (tax on gasoline and

diesel)

None CIDE at gasoline and diesel prices/

PIS/Cofins at BRL0.266 cents in gasoline price

and at BRL0.148 cents in diesel price

CIDE at 10 cents in gasoline price and 5 cents in diesel price/ PIS/Cofins at

12 cents in gasoline and at 10 cents in diesel prices

IPI (tax on cars production) 3% - 9% 7% - 13%

IPI (tax on cosmetics) Wholesale prices equalized to retail prices

IOF (tax on finacial operations) on consumer

loans1.50% 3%

PIS/Cofins on imports 9.25% 11.75%

PIS/Cofins on financial revenues 0% 4.65%

FIES (government funded scholarship

program)

Extended the period to fulfill its obligations with the private schools on the

program, reducing its short term monthly

Financial institution's Social Contribution on

Net Income (CSLL)15% 20%

2015 BudgetGovernment will freeze BRL 69.9 billion reais (USD22.5 billion) of spending

from 2015 budget.


Source: Rating Agencies, FCF 4/

5

Sovereign Ratings

S&P downgraded, on March 2014,

Brazil's long-term foreign currency

sovereign rating one notch to

BBB-, adopting a stable outlook.

Moody’s and Fitch agencies have

indicated a likely downgrade in

case of no improvements on fiscal

accounts and inflation/growth

performances.

On March 2015, S&P maintained

Brazil’s long term sovereign rating

in BBB-, keeping a stable outlook

due to the economic policy

changes proposed by the

government.

Brazilian Sovereign Credit Ratings

Positive Negative Stable Outlook

May, 2015

Focus on Economic Team Monetary tightening

Fiscal adjustment

Fx adjustment (End of BCB swap program)

Brazil economic challenges have increased Economic recession

High inflation

Fiscal deterioration and growing debt

Downside risks Low confidence indexes and low growth

Challenging external conditions

Corruption scandals and complex political system

Sustainability of the adjustment process

Lack of microeconomic reform agenda


Source: Rating Agencies, Fitch 5/

5

Sovereign Ratings

May, 2015

Inflation Growth Market expectation *

* Based on Focus research, April 10th, 2015

Fiscal deterioration and Growing Debt

Low growth and High Inflation

% yoy

(% GDP)

Politic


May, 2015

Dilma’s Approval

May, 2015 42

Macroeconomic Overview Brazil

After Dilma Rousseff’s reelection, the disclosure of several corruption scandals, depreciation of the local currency, the upward trend of inflation and the labor market deterioration, Datafolha reported strong decline in government approval, reaching now 62% of disapproval.

In addition, the fiscal adjustments in place and cuts in social benefit entitlements are likely bring about a decline in political support from unions and social movements, which are among the most traditional supporters of the ruling PT.

Source: TSE, FCF 1/2

Confidence Index


The sharp fall presented since the beginning of the 2014 is still “downhill”. In 2015 the confidence index already reached the worst level since 2005. This result was motivated by the worsening of domestic scenario, the expectations and the worries about labor market, inflation and the risk of water and electricity shortage.

Social Movements

World Cup

Source: FGV, CNI, FCF

May, 2015

2/2

83,3

76,175

80

85

90

95

100

105

110

115

120

125

Confidence Index

Consumer Confidence Index Industry Confidence Index

Documents

Brasil: Cenário Macroeconômico · Cenário Macroeconômico 3 Macroeconomic Overview Brazil 1. Fraco desempenho do crescimento em meio a um aumento dos desequilíbrios macro econômicos