Sao Paulo | Rio de Janeiro | Braslia | Curitiba | Porto Alegre | Recife | Belo Horizonte
London | Lisbon | Shanghai | Miami | Buenos AiresBrazil, the Emerging Giant: Notes on the Economy, Foreign Trade and Investment FlowsDurval de Noronha Goyos Jr.Senior Partner - Noronha AdvogadosHartford, Connecticut/USA March 04th, 2009.
1. Geopolitical fundamentals3. Foreign Trade1.1 Strategic Advantages 3.1 Overview of Brazils foreign trade1.2 Energy 3.2 Foreign Trade with Selected Partners1.3 Water 3. 3 Trade in Agricultural products1.4 Population / Social Classes2. The Economy4. Investment Flows2.1 GDP 4. 1 Inbound2.2 External Debt 4. 2 Outbound2.3 International Reserves2.4 Inflation5. Foreign Policy General Aspects2.5 Exchange rates2.6 Interest rates2.7 Problems2.8 Current Account2.9 Some industrial aspects2.10 Unemployment
POINTS OF PRESENTATION
Map of Brazil
1.1 Strategic AdvantagesPop over 100 MillioninhabitantsGDP overUS$ 1 TrillionGDP,Population,AgricultureArable land over20 millionshectarsARGKZTTURUKRAUSIDNPKTNIGBRAUSAINDRUSCHIBGLMEXJPNCANGERUKNLDKORSPNITAFRASource:Fiesp
Fundamentals of Brazil's EconomySource: Brazilian Ministry of Mines and Energy1.2 Sources of Energy86%14%55%45%
Grf1
1486
4555
Renewable
Non-Renewable
Sheet1
WorldBrazil
Renewable1445
Non-Renewable8655
Fundamentals of Brazil's EconomySource: MME/BEN (2008) and PNE 20301.2 Evolution of the Brazilian Energetic Matrix (%)
1.2 World's Oil ReservesSource: Oil & Gas Journal January, 2008Fundamentals of Brazil's Economy In Billion of Barrels
1Saudi Arabia2662Iran1383Iraq1154Kuwait1045UAE976Brazil947Venezuela878Russia799Libya4110Kazakhstan3911Nigeria3612USA29
2005 1.85 million barrels a day2006 Brazil achieves self sufficiency in oil2007 Discovery of Tupi oilfield with estimated 10 billion of barrels of oil. The discovery could double the Brazilian reserves.2008 Discovery of Carioca oilfield with estimated 70 billion barrels of oil. Discovery puts Brazil's oil reserves among the world's largest 1 2010 3.4 million barrels a day 2
Fundamentals of Brazil's EconomySource: 1- Financial Times, July 8 20082- Petrobras estimate1.2 Oil Production
Fundamentals of Brazil's Economy22 billion liters/year (2008)70 billion liters/year (2020)* EstimateIncrease in cultivated area by 67,000 hectaresCreation of 20,000 direct jobs and 60,000 indirect jobsInvestments in production chain estimated at around USD 1,5 billion for the next yearsCO2 emission reduction by 3.5 million tons/year1.2 Ethanol ProductionSource: Sugar Cane Industry Union - UNICA
Fundamentals of Brazil's Economy1.3 Worlds Availability of Fresh WaterSource: Brazilian National Agency of Water and Embassy of the Popular Republic of China
25%52%14%1.4 Brazil's Social Development: Division by Classes in 2008
Source: Brazilian Institute of Geography and Statistics - IBGE Fundamentals of Brazil's Economy
Grf1
14
52
25
100
Sheet1
Classes A/BClass CClasses D/E
10014.0052.0025.00
Fundamentals of Brazil's EconomySource: Brazilian Institute of Geography and Statistics - IBGE 1.4 Brazil's Social Development: Growth of Class C
% of Population
34%36%48%52%
Grf1
34
36
48
52
Total
Sheet1
2005200620072008
Total34.0036.0048.0052.00
2.1 Economic Growth % (GDP)
Source: Brazilian Institute of Geography and Statistics IBGE/IEDI
Fundamentals of Brazil's Economy
Grf1
1.1
5.7
2.9
3.7
5.3
6
GDP
Sheet1
20032004200520062007* 2008
GDP1.15.72.93.75.36
2.1 Brazil's GDP (incorporating purchase power parity rating)Total GDP US$ 2 trillion
GDP per capita US$ 10,300 (2008)
GDP per capita US$ 9.700 (2007)
Source: CIA World Book
Fundamentals of Brazil's Economy
2.1 Brazils GDP in US$
Source: Brazilian Institute of Geography and Statistics - IBGE Fundamentals of Brazil's Economy
200320042005200620072008GDP(Billion)552663.48821,0061,3001,378Population(Million)178.9181.5185.5186.7188.9196.0GDP per capita (Thousand)3,103,664,775,41 6,917,030
2.2 Development of External DebtFundamentals of Brazil's EconomySource: Central Bank* JAN/2009
YearGross Amount (US$ Billion)Net Amount (US$ Billion)1998235,11999223,92000216,92001209,92002210,72003214,9165,62004201,4148,42005169,4115,62006172,686,762007 193,2 12,86* 2008200,2(-6,6)
Fundamentals of Brazil's Economy 2.3 Brazilian International Reserves
Source: Central Bank*December/2008
YearUS$ Billion200349,296200452,935200553,799200685,8392007180,334*2008206,800
Fundamentals of Brazil's Economy 2.3 Brazilian International Reserves
Source: Central Bank*December/2008
US$ Billion
Grf1
49.29
52.9
53.799
85.839
180.3
206.8
US$ billion
Sheet1
20032004200520062007*2008
US$ billion49.2952.9053.8085.84180.30206.8
2.4 Brazil: Inflation rate %Source: Central Bank Fundamentals of Brazil's Economy
Grf1
12.5
7.8
6.8
3.5
3.15
5.9
US$ billion
Sheet1
200320042005200620072008
US$ billion12.57.806.803.503.155.9
Fundamentals of Brazil's Economy2.4 Brazils Inflation Rate Targeting
Source: Central Bank / IBGE
US$ Billion
Fundamentals of Brazil's Economy2.5 Exchange RatesSource: Central Bank
Development R$ x US$
Grf1
2.19
2.13
2.04
1.77
1.78
1.7451
1.7062
1.6816
1.7424
1.6822
1.6547
1.5919
1.5938
1.63
2.11
2.33
2.31
1,57
Plan1
31-Dec-040.3213
31-Mar-050.3227
30-Dec-050.2900
31-Mar-060.2709
29-Dec-060.2739
30-Mar-070.2653
28-Sep-070.2454
31-Dec-070.2425
29-Jan-080.2468
25-Feb-080.2385
5-Mar-080.2406
25-Mar-080.2461
10-Apr-080.2406
25-May-080.2383
30-Jun-080.2322
20-Jul-080.2338
3/31/062.19
2.13
3/30/072.04
12/31/071.77
1/29/081.78
2/1/081.75
2/25/081.71
3/3/081.68
1.74
10-Apr-081.68
25-May-081.65
30-Jun-081.59
29-Jul-081.59
8/30/081.63
10/31/082.11
12/31/082.33
1/30/092.31
Plan1
Plan2
Plan3
2.6 World's Interest Rates
Source: Economist January 2009
Fundamentals of Brazil's Economy
2.7 Main problems yet to be solvedtaxes are not competitive;
interest rates are very high;
Brazilian currency overvalued.Fundamentals of Brazil's Economy
Source: Central Bank
US$ Billion2.8 Brazil's Current AccountFundamentals of Brazil's Economy
2.9 Some Industrial Aspects: Automotive Production
Source: National Automotive Industry Association ANFAVEA Fundamentals of Brazil's Economy
YearCars and light commercial vehiclesTrucksBusesTotal20031,721.11078,93826,9901,827.03820042,181.131107,33828,7582,317.22720052,375.142117,89235,2662,528.30020062,471.224106,00133,8092,611.03420072,653.275133,90435,0842,822.26320082,848.706163,68138,2233,050.610
2.9 Some Industrial Aspects: Aeroplane TradeSource: Development, Industry and Trade Ministry - MDICFundamentals of Brazil's Economy
US$ million200320042005200620072008Exports2,0503,3713,3023,4424,3676,064Imports5918889671,2341,5934,950Balance1,4582,4822,3352,2082,7741,114Flow of Commerce2,6414,2604,2704,6765,96011,014
The Brazilian ship program is under expansion and it includes new yards and investments at the order of US$ 4 billion/year. Nowadays, Brazil has 82 ships under construction and new other 154 constructions under approval.
The 26 Brazilian main yards have a capacity of processing of 600 thousand tons of steel/year.
In 2008 the Brazilian ship industry kept the direct jobs of 40,000 people.
By October 2007, the total of the loans from BNDES* was in the amount of R$ 3,6 billion in relation to the ship industry.
This positive scenario is part of an even most promising market with the new oil reserves in the called Pre-Salt coat.
Source: National Trade Union of the Marine Reparation and Offshore IndustryFundamentals of Brazil's Economy2.9 Some Industrial Aspects: Ship Industry
Fundamentals of Brazil's Economy Steel :In 2008, Brazilian production reached record levels, closing at 33,7 million tons.
The estimate for 2009 is a decrease of 3%
Cement :In 2009, according estimates Brazil will maintain the production of 2008, which had an increase of 15% over 2007. Source: Brazilian Cement Association and Brazilian Iron Institute2.9 Some Industrial Aspects: Base Industries
Fundamentals of Brazil's Economy2.10 Unemployment rate in Brazil
Months of April, May, June, September and December 2002 to 2008Source: Brazilian Institute of Geography and Statistics - IBGE
Grf1
1312111110
1213131210
131211109
1110998
101010108
1010998.2
98777.6
April
May
June
September
November
Sheet1
2002200320042005200620072008
April1312131110109
May1213121010108
June11131191097
September11121091097
November10109888.27.6
Source: Development, Industry and Trade Ministry - MDIC * Up to December 31 2008
US$ Billion
Brazilian Trade OverallForeign Trade3.1 Overview of Brazilian Foreign Trade
YearExportsUS$ FOBImports US$ FOBBalanceUS$ FOBFlow of TradeUS$ FOB
200496,6762,8333,84159,512005118,5273,6044,93192,122006137,8091,3546,45229,152007160,64120,6240,03281,27* 2008197,94173,1924,74371,13
US$ Billion
Source: Development, Industry and Trade Ministry - MDIC * estimate
Foreign Trade3.2 Brazils Balance of Trade
Grf1
96.6762.8333.84159
118.573.644.92192
137.891.3546.45229
160.64120.640.03281
197.42173.1924.74371.13
Exports
Imports
Balance
Flow of Trade
Sheet1
2004200520062007* 2008
Exports96.67118.5137.8160.64197.42
Imports62.8373.691.35120.6173.19
Balance33.8444.9246.4540.0324.74
Flow of Trade159192229281371.13
Brazilian Flow of Trade
Source: Development, Industry and Trade Ministry MDIC December/2008
Foreign Trade3.2 Brazilian Trade with Selected Partners
Grf1
14.29USA
8.32Argentina
9.82China
3.22Netherlands
5.62Germany
1.53Venezuela
0.68South Africa
2.53Italy
3.48Japan
2Mexico
2.41Chile
46Others
371
Sheet1
USAArgentinaChinaNetherlandsGermanyVenezuelaSouth AfricaItalyJapanMexicoChileOthers
371148103621332246
Source: Development, Industry and Trade Ministry MDIC December/2008
Foreign Trade3.2 Brazilian Trade with Selected Partners
Grf1
22EUROPEAN UNIONEUROPEAN UNION
18NAFTANAFTA
10MERCOSURMERCOSUR
7AFRICAAFRICA
23ASIAASIA
20OTHERSOTHERS
371
Sheet1
EUROPEAN UNIONNAFTAMERCOSURAFRICAASIAOTHERS
37122181072320
US$ Billion
Source: Development, Industry and Trade Ministry - MDIC * December 2008
Foreign Trade3.2 Brazilian Trade with Selected Partners: European Union
YearExportsUS$ FOBImports US$ FOBBalanceUS$ FOBFlow of TradeUS$ FOB
200424,6715,998,6840,66200527,0318,238,8045,26200631,0420,2010,8451,24200740,4226,7313,6967,15* 200846,3936,1910,2082,58
US$ Billion
Source: Development, Industry and Trade Ministry - MDIC * estimate
Foreign Trade3.2 Brazilian Trade with Selected Partners: European Union
Grf1
24.6715.998.6840.66
27.0318.238.845.26
31.0420.210.8451.24
40.4226.7313.6967.15
46.3936.1910.282.21
Exports
Imports
Balance
Flow of Trade
Sheet1
2004200520062007* 2008
Exports24.6727.0331.0440.4246.39
Imports15.9918.2320.226.7336.19
Balance8.688.810.8413.6910.2
Flow of Trade40.6645.2651.2467.1582.21
US$ Billion
Source: Development, Industry and Trade Ministry - MDIC * January 2009
Foreign Trade3.2 Brazilian Trade with Selected Partners: China
YearExports FOBImports FOBBalance FOBFlow of TradeFOB
20045,443,711,739,1520056,835,351,4812,1820068,407,990,4116,39200710,7412,61-1,8623,36* 200816,4020,04- 3,6336,44
US$ Billion
Source: Development, Industry and Trade Ministry - MDIC * estimate
Foreign Trade3.2 Brazilian Trade with Selected Partners: China
Grf1
5.43.711.739.15
6.835.351.4812.18
8.47.990.4116.39
10.7412.61-1.8623.36
16.420.04-3.6336.44
Exports
Imports
Balance
Flow of Trade
Sheet1
2004200520062007* 2008
Exports5.46.838.410.7416.4
Imports3.715.357.9912.6120.04
Balance1.731.480.41-1.86-3.63
Flow of Trade9.1512.1816.3923.3636.44
US$ Billion
Source: Development, Industry and Trade Ministry - MDIC * December 31 2008
Foreign Trade3.2 Brazilian Trade with Selected Partners: USA
YearExports FOBImports FOBBalance FOBFlow of TradeFOB
200420,0911,358,7431,45200522,5312,669,8735,20200624,5214,659,8639,18200725,0618,726,3443,78* 200827,4225,621,7953,04
US$ Billion
Source: Development, Industry and Trade Ministry - MDIC *estimate December 31, 2008Foreign Trade3.2 Brazilian Trade with Selected Partners: USA
Grf1
2012932
23131036
24141039
2619744
2725254
Exports
Imports
Balance
Flow of Trade
Sheet1
2004200520062007* 2008
Exports2023242627
Imports1213141925
Balance9101072
Flow of Trade3236394454
Source: US Trade*estimate December 2008Foreign Trade3.2 Brazilian Trade with State of Connecticut: % Increase 2005-2008Increase of 151.46%
Source: Development, Industry and Trade Ministry MDIC - December/2008
Foreign Trade3.2 Brazilian Trade with Selected Partners: Sources of Imports
Grf1
Sheet1
Grf1
15USAUSA
12ChinaChina
8ArgentinaArgentina
7GermanyGermany
4NigeriaNigeria
4JapanJapan
2ChileChile
3FranceFrance
3South KoreaSouth Korea
3ItalyItaly
40OthersOthers
173
Sheet1
USAChinaArgentinaGermanyNigeriaJapanChileFranceSouth KoreaItalyOthers
17315128744233340
Source: International Relations and Trade Institute - Icone Brasil
Foreign Trade3.3 Brazilian Trade in Agricultural products
ProductsPosition between main exporters% of Total Global ExportsOrange juice181%Poultry135%Sugar133%Coffee130%Tobacco127%Bovine Meat124%Ethanol113%Soy232%Soy Oil228%Pork 311%Cotton35%
Source: Brazilian Confederation of Agriculture and Livestock CAN *Estimate
US$ Billion
Foreign Trade3.3 Brazilian Trade in Agricultural products
Grf1
39434
43538
49642
58850
70960
Exports
Imports
Balance
Sheet1
2004200520062007*2008
Exports3943495870
Imports45689
Balance3438425060
Source: Brazilian Confederation of Agriculture and Livestock CAN *Estimate
Foreign Trade3.3 Brazilian Trade in Agricultural products
DestinationsAgribusiness Exports(US$ million)Var. % 07/06(b/a)TotalExp.(c)Increased Value%2006 (a)2007 (b)BasicSemiManufactured 1.EU16.15321.23231,4440.35757,4314,5328,042. USA7.3706.840-7,1925.06519,5519,7060,753. China3.8024.69123,3810.74967,6929,233,094. Russia3.1563.4027,803.74164,3730,724,925. Argentina1.5711.91721,9714.41711,196,3182,506. Japan1.4911.76818,574.32158,4214,6526,93
Source: Brazilian Confederation of Agriculture and Livestock CAN *Estimate
Foreign Trade3.3 Brazilian Trade in Agricultural products: Main Destinations
Grf1
21EU
7USA
4China
3Russia
2Argentina
1.7Japan
11.778
Sheet1
EUUSAChinaRussiaArgentinaJapan
11,7782174321.7
Source: FAO/IBGE
Foreign Trade3.3 Brazilian Trade in Agricultural products
Grf1
32866
81188
88132
60116
India169
4296
3145
4427
Area available for expansion
Area already utilized
Sheet1
BrazilUSARussia FederationEurope UnionIndiaChinaCanadaArgentina
Area available for expansion328818860423144
Area already utilized66188132116169964527
US$ Billion
Source: Unctad, World Investment Report 2008
Brazil
Investment Flows4.1 Foreign Direct Investments: Inflows by Country
Grf1
-36.483
21
22
24
24
40
40
40
45
51
52
53
60
108
158
223
232
Total
Sheet1
LuxemburgSwedenHong KongSingaporeMexicoItalySwitzerlandBelgiumGermanyRussiaSpainChinaCanadaFranceUnited KingdomUSA
Total-36.483212224244040404551525360108158.00223.00232.00
Source: The Economist - January 31, 2009Investment Flows4.1 Foreign Direct Investments: Inflows, 2008 estimate, $bn
US$ Billion
Source: Central Bank * December/2008
Investment Flows4.1 Foreign Direct Investment: Inflows
Grf1
212001
18.72002
12.92003
20.22004
21.52005
22.72006
362007
45.1*2008
Total
Sheet1
2001200220032004200520062007*2008
Total21.0018.7012.9020.221.522.73645.1
US$ BillionSource: Central Bank
Investment Flows4.2 Foreign Direct Investment: Outbound
Grf1
4.7342002
0.462003
14.32004
10.062005
34.912006
12.132007
20.52008
Total
20,5
Sheet1
2002200320042005200620072008
Total4.7340.4614.310.0634.9112.1320.5
Source: Unctad, World Investment Report 2008
US$ BillionBrazil
Investment Flows4.2 Foreign Direct Investment: Outflows by Country
Grf1
1.6
16.9
20.5
31.16
37.7
45.65
50.96
51.3
53.19
73.54
90.78
120
167.43
224
265
313.7
Total
Sheet1
ChinaCanadaHolandSwedenRussiaSwitzerlandBelgiumHong KongJapanItalySpainGermanyFranceUnited KingdomUSA
Total1.61720.531.1637.745.6550.9651.353.1973.5490.78120.00167.43224.00265313.70
Brazils prevailing foreign policy doctrine recognizesthe vulnerability of the country in a number of areas:
Economic;Technological;Political;Commercial; andMilitary.Source: Brazilian Ministry of Foreign Affairs General Aspects of Brazil Foreign Policy5. Foreign Policy General Aspects
Brazils present foreign policy doctrine recommends alliances with other major developing countries such as:
China;India;Russia; andSouth Africa
In order to minimize such vulnerabilities.Source: Brazilian Ministry of Foreign AffairsGeneral Aspects of Brazil Foreign Policy5. Foreign Policy General Aspects
Address:Alexandre Dumas, 1630 CEP: 04717-004 So Paulo SP Brazil
Phone: (55-11) 5188-8090 Fax: (55-11) 5184-0097 (55 11) 5184-2471 NORONHA ADVOGADOSLocated in one of the main financial centers of the city, the So Paulo office is the head office of Noronha Advogados and the oldest, having been opened in June 1978.
It concentrates the highest number of professionals and is the centre for the firms administrative and financial departments. The So Paulo office houses an efficient and up-to-date library and computer network, fully connected to the other offices, in Brazil and abroad. Contact: Durval de Noronha Goyos JniorBento Delgado Kardos
NORONHA ADVOGADOS
Durval de Noronha Goyos Jr.