BRAZIL- EMERGING

MARKET

PRESENTED TO

MAM PROF DR. MUQADDAS REHMAN

PRESENTED BY

• Sadia Arshad MC15-502• Umm-e-Aimen MC15-512• Mariam Ramay MC15-523• Kiran Saeed MC15-525• Salman Haidery MC15-529• Sehrish Iftikhar MC15-531• Shakaib Khalil MC15-532• Adeena Safdar MC15-533• Muhammad Imran MC15-548• Sayyed Khawar Abbas MC15-605

EMERGING MARKETS

"Emerging Markets are countries that are restructuring their economies along market-oriented lines and offer a wealth of opportunities in trade, technology transfers, and foreign direct investment.”(Chuan Li of University of Iowa's Center for International Finance and Development)

•The term "emerging markets" was coined by Antoine van Agtmael and dates back to 1981.

BRIC

• BRIC is a grouping acronym was coined in 2001 by Jim O'Neill from investment bank Goldman Sachs in a paper entitled "Building Better Global Economic BRICs”

• They might overtake the G7 economies by 2027 (SOME SOURCES)Goldman Sachs has argued IN 2050 could eclipse TO G7

BRIC

• B – Brazil

• R – Russia

• I – India

• C - China

BRIC

These countries encompass over 25% of the world's land coverage, 40% of the world's population and hold a combined GDP (PPP) of 33,690 billion dollars.

GDP (PPP) • Total : $33,690 billion (2015)• China $18,976 billion• India $7,997 billion• Russia $3,458 billion• Brazil $3,259 billion

BRIC to BRICS

• August 2010 Jim O'Neill of Goldman Sachs argued that Africa could be considered the next BRIC•South Africa was officially admitted as a BRIC nation on December 24, 2010,•President Jacob Zuma attend the BRICS summit in Sanya in April 2011 as a full member

BRAZIL

•Largest and most populous country in South America.

•5th largest country by geographical area.

•5th most populous country in the world.

•4th most populous democracy in the world.

BRAZIL-FDI

•FDI 5455 USD Million in January of 2016

•FDI averaged 3375.62 USD Million from 1995 until 2016

•All time high of 20427 USD Million in December of 2010

•2007 List by the UNCTAD 11TH, 2013 List by the CIA World Factbook 13TH

BRAZIL

Source: McKinsey Global Institute (2014). Connecting Brazil to the world: A path to inclusive growth.

The Opening Phase (1964 - 1974)

Brazilian military coup occurred in 1964

Priority was to reverse the high inflation rate to reduce the public deficit

Imports allowed, because not yet developed

"Economic Miracle”. 1969 and 1973, the National Development Program

The Closure Phase (1974 -1979)

Due to the first oil crisis in 1973, Brazil’s government launched the second PND in 1974

New foreign loans, search for new export markets and the attempt to substitute imports

The national alcohol program also known as “Pró Alcool” was launched in 1975

The Petrobrás discovery of new oil fields in Rio de Janeiro

In 1976 the import of automobiles to Brazil was prohibited by the government

The Lost Decade

second oil crisis, in 1979, increase the import prices

João Figueiredo's government (1979 to 1985) introduced import restrictions and price controls

The End of Dictatorship

In 1985, Figueiredo's government was deposed

1988, import tax rate of 85% was unfavorable for cheaper models

Accumulated inflation remained in 1782.90% in 1989

in 1990 that car imports were finally allowed, opening market

The End of Dictatorship

Plan launched in 1994 in order to stabilize the national currency, From 1995 to 2000, the imports resulted on a

deficit of USD 24.1 billion

Against a surplus of USD 60.4 billion, from 1990 to 1994. In 2000, according to the World Trade Organization,

Brazil participated in world trade, with 0.9% of imports

Government of Brazil

•Federal Government of Brazil– Democratic Republic

• Executive – Legislative –and Judicial

•Executives:

Dilma RousseffHead of State and Head of Government of Brazil(Since 1 January 2011)

Michel TemerVice President of Brazil

Global Market Share

• Rank in the world trade 2014:

Merchandise 25Commercial services 32

Merchandise Trade

• Its share in the world total export is 1.8• Breakdown in economy's total export:Agricultural product 39.0Fuels And Mining 24.4Manufacturers 33.3• By main destination:European Union 18.7China 18.1United States 12.1Argentina 6.3Japan 3.0

Commercial Services Trade

• Its share in world total exports 0.79• Breakdown in economy's total export:Goods related services 1.0Transportation 14.9Travel 17.5Other commercial services 66.7

Sectorial Break-up

World bank report 2014

Top Ten Exports

1. Oil seed: US$21.2 billion (11.1% of total exports)2. Ores, slag, ash: $16.7 billion (8.7%)3. Oil: $13.7 billion (7.2%)4. Meat: $13.1 billion (6.8%)5. Machines, engines, pumps: $11.4 billion (5.9%)6. Vehicles: $9.6 billion (5%)7. Iron and steel: $8.9 billion (4.7%)8. Sugar: $7.8 billion (4.1%)9. Food waste, animal fodder: $6.2 billion (3.2%)10. Coffee, tea and spices: $6 billion (3.2%)

Industry: Agriculture & Commodities

Agriculture & Commodities

• In the foreign markets, it answers for 25% of global exports of raw cane and 50% of refined sugar;

• Reasons: Rapid expansion of sugar cane production at globally competitive prices. Decline in exports by previously large suppliers, particularly the EU and

Cuba. Highly competitive costs of production . Brazil, especially in the Center/South region, retains cost advantages from

large average mill size and long crushing season.

Brazil maintains dominant share of world sugar exports

Industry: Agriculture & Commodities

It is the world leader in soybean exports and is responsible for 80% of the planet’s orange juice.

• A pioneer and leader in the manufacture of short- fibre timber cellulose, Brazil has also achieved positive results within the packaging sector, in which it is the fifth largest world producer.

Diversified Industry

•Brazil accounts for three fifths of the South American economy’s industrial production. •Accounting for one-third of GDP, Brazil's diverse industries range from •Automobiles, Steel• Petrochemicals, Computers• Aircraft, Consumer durables.

Top companies among these diversified industries are:•Embraer•Aracruz Celulose

Brazil Crude oil exports by Region and Country

Industry: Service Sector

• Brazil has a diverse and sophisticated services industry as well.

• During the early 1990s, the banking sector accounted for as much as 16% of the GDP.

Top performers in this sectors are:

• Banco Bradesco

• Banco do Brasil

Brazil, One of the Biggest E-Sales Opportunity in the World

• Brazil is the 4th largest Internet market globally with 120 million Internet users out of a total population of more than 200 million.

• According to AméricaEconomía Intelligence, Brazil represents about 60% of all B2C e-commerce in Latin America. 

Top Ten Exports

Larger International Trade Players from Brazil

• Petrobras (oil, petrochemicals)• Vale S.A. (diversified metals, mining)• JBS S.A. (food, beverages)• Grupo Pão de Açúcar (retail including online)• BRF S.A. (food)• Oi (telecommunications)

International Trade Players from Brazil

• According to global trade intelligence firm Zepol, the following smaller companies are also examples of Brazilian exporters:

• American Safety Razor Brazil (razor blades, adipic acid)• Hapag Lloyd Brazil (containers, siliceous earths, white cement)• Vanguard Logistics Services Do Brazil (transmission belts, rubber/plastic

molds, malt beer)• Inergy Automotive Systems Do Brazil (combustion engine internal pumps,

gas station external pumps)• Afil Import Export E Comercio (garlic, flaxseed, corn)

Leading Brazilian Firms

Embraer ( NYSE: ERJ)• Headquartered in São Paulo, Brazil.• Embraer is a Brazilian aerospace conglomerate. The company produces

commercial, military, and corporate aircraft, as well as providing related aerospace services. It also has maintenance and commercial sites in the USA and commercial offices in France, Singapore and China.

• It recently replaced Canada based Bombardier Inc. to become the 3rd largest producer of aircrafts.

• Brazil only comprises about one-fifth of Embraer's revenue.• At the end of 2014, Embraer had a order backlog totalling US$20.9 billion.

Manufacturer: Embraer

• It has delivered more than 1000 of these aircrafts.

• In 2003, Embraer entered a partnership with the Harbin Aircraft Manufacturing Corporation of Harbin, Chinato produce ERJ 145 for the Chinese market.

Revenue Per Region

Commodities: Petro Bras

Petrobras (NYSE: PBR)• Is a semi-public Brazilian energy company headquartered in Rio de Janeiro

founded in 1953.•  in 2008, Petrobras was the world’s fifth-largest company worth $310 billion.

Since then it has lost more than 90 percent of its value.• The market cap of Brazil’s oil giant stands at just $19 billion with its shares

trading near $1--and some analysts say the actual equity value is zero.• It’s shares trade at just 0.21 times the company’s book value, the least among

its oil industry peers, according to Bloomberg data.• It operated the world's largest oil platform - the Petrobras 36 Oil Platform -

until an explosion on 15 March 2001 led to its sinking on 20 March 2001.• Petrobras is a world leader in development of advanced technology from

deep-water and ultra-deep water oil production.

Petrobas Assets Seen as less and less valuable

Core Competencies

• Petrobras works extensively with foreign acquisitions too, buying and controlling the most important energy companies in South America and exploring huge deep-water fields of West Africa and the Gulf of Mexico.

Materials: Aracruz Celulose

• Founded in 1972.•  In 2009 the company merged with VCP and renamed Fibria.• Is a major Brazilian manufacturer of pulp. It is headquartered in Sao Paulo.• The company is the world's leading supplier of bleached eucalyptus pulp.• The company has an annual production capacity of 2.4 million tons, through

two mill sites.• Aracruz Celulose (Fibria) posted net income of R$ 614 million in the second

quarter of the year.• Principal Competitors:Companhia Suzano de Papel e Celulose; Industrias

Klabin de Papel e Celulose S.A.; Votorantim Celulose e Papel S.A.; Bahia Sul Celulose S.A.

Mining: Vale

• It is one of the largest logistics operators in Brazil.• In addition to being the second-largest mining company in the world, it is also the

largest producer of iron ore, pellets, and second largest of nickel.• Total iron ore reserves of about 14 billion metric tons.• A $150 billion diversified mining company, it has the capacity to produce about 400

million tons of iron ore a year and accounts for more than 80% of Brazil’s total iron ore exports

• In the electric energy sector, the company participates in consortia and currently operates nine hydroelectric plants.

• Vale has managed to establish itself as a global mining company through joint ventures and acquisitions abroad.

• Vale has participation on mining operations in Finland, Canada, Australia, Mongolia, China, India, Angola, South Africa, Chile, Peru and other countries.

• .Vale’s chief rivals are the Australian diversified mining groups BHP Billiton and Rio Tinto

Global Iron ore Market Share

Oi (Telecmunication)

• Oi  formerly known as Telemar, is the largest telecommunications company in Brazil and South America, both in terms of subscribers and revenues.

•  It is headquartered in Rio de Janeiro.• OOi'smajor subsidiaries include Telemar and Brasil Telecom.• Brazil’s telecom revenues reach R$234 billion• At the end of 2013 Oi had 74.5 million subscribers, including 16.9 million for

landline, 50.3 million for wireless , 5.3 million for ADSL, and 1 million for other services.

CORE COMPETENCIES

• A Changing Business Climate • World-class Sporting Events• Diversified Economy• Natural Resources• Tourism

A CHANGING BUSINESS CLIMATE

The Brazilian government is trying to simplify its business licensing processes to make it easier for companies to become legitimate. If it succeeds, strong small companies will grow, which will help the Brazilian economy overall.

 The World Bank ranks Brazil 124 out of 183 economies for ease of doing business in 2014

World-class Sporting Events

Hosting mega events have traditionally been a privilege of developed nations.2007: Brazil was the sole bidder and won the right to host

• 2014: 2nd time brazil hosted FIFA event

• October 2, 2009: International Olympics Committee (IOC) announced Brazil as the host country of the 2016 Summer Olympics

• This marks the first time that South America has ever hosted the Olympics.

World-class Sporting Events Contd.

Hosting the games will “inject $51.1 billion into Latin America’s largest economy through 2027.”

Additionally, the Olympics and Paralympics will create nearly 121,000 jobs a year in the seven-year period.

With just two deals, the organizers have already secured an estimated $700 million in local sponsorships, which was a new record for the Olympics.

DIVERSIFIED ECONOMY

• Brazil’s diverse economy is characterized by well developed agricultural, mining, manufacturing and service sectors.

• There is increased globalization where the Brazilian government policies favor exports.

• A diverse economy offers many investment opportunities in several segments in manufacturing and services industries

• More business friendly environment than other emerging countries.• Established transportation networks and distribution channels in most

industrialized areas.

NATURAL RESOURCES

• Vast amount of natural resources Bauxite, gold, iron ore, manganese, nickel, phosphates, platinum, tin, rare earth elements, uranium, petroleum, hydropower and timber.

• No need to import large quantities , good local availability of key resources.• With its ideal agricultural climate, Brazil boasts a healthy export trade in

coffee, sugar, soya beans, textiles and electrical equipment.

TOURISM

• Brazil is a land filled with joyous people, beautiful landscapes, the Amazon Rain forest, untouched tropical beaches – some of the most beautiful in the world – historical cities with incredible night life and some of the world’s most breathtaking waterfalls.

• The growing tourist and eco-tourism industries cater to all tastes. • In more recent years it has begun to attract foreigners from around the world.

In 2012, 5.7 million international tourists visited Brazil. • Tourism is expected to soar further as the country will host the 2016

Olympics.

Future Challenges

1.Productivity growth2.Tax burden ("Brazil Cost”)3.Integration into global markets4.Focus on key commodities5.Expand infrastructure