2011 - Delta - Brazil and Latin America

1

Brazil and Latin America

Luiz Nelson Porto Araujo

São Paulo, April 7th 2011

Recent Development and Perspectives

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2

Fundamentals

Global Scenario

Latin America

Brazil

3

Fundamentals

Global Scenario

Latin America

Brazil

4 Source: Dani Rodrik e Arvind Subramanian (2003): The Primacy of Institutions; Delta analysis

Economic development

Integration

Institutions

Geography

Income

capacity to trade

natural

resources and

institutions

distance from

markets

Health of

population and

agricultural

productivity

demand

for good

institutions

efficiency and

dissemination of

technology demand

for foreign

goods and

services

openness and transparency

property rights and

rule of law

5

Growth and competitiveness

TFP (innovation)

• Acquiring global knowledge

• Creating knowledge through own

efforts

• Disseminating and using existing in-

country knowledge

Growth

Physical capital

Adjusted for

• capacity utilization

• vintage of capital

Human capital

Labor adjusted for

• education

• skills

• training

Capital

market

Labor

market

• Three areas are usually

considered for enhancing

competitiveness and

accelerating growth, and

which are also relevant for

the analysis of Latin America

• First – macroeconomic

environment to extend

reforms that will improve the

investment climate

• Second – higher productivity

will require a focused effort

to expand TFP through

innovation-based growth

• Third – "micro" reforms to

foster growth

Analysis

Source: OECD: Delta analysis

• Investment climate

• Macroeconomic conditions

• Rule of law

• Competition policy

• Governance

• Security

6

Slow development and underdevelopment

• Growth of per capita

income income be

low or even negative,

even if GDP increase

significantly

• Development trap

• In some countries

there are no

institutions that

ensure long-term

concerns

• Populism and

poverty

• In some contries

corruption takes the

place of markets or

rule based decisions

• Interest groups and

inefficiency

• Some countries are

involved in internal

civil wars, tribal

conflicts and

religious clashes

• Uncertainty and

inefficiency

Population Internal conflicts Corruption Institutions

• Low savings result in

small capital stock;

production remais

low

• Low technology

innovation

• Lack

entrepreneurship

• Poor education

system

• Low innovation and

risk taking

• Some countries have

accumulated a high

foreign and domestic

debt

• High cost of capital

and negative

balance of services

• Countries are

characterized by

different

endowments

• Technology and

commercial

advantages

Capital formation Endowments Debt Entrepreneurship

Source: Delta analysis

7

Underdeveloped markets

• size

• income

• price

• access

• regulation

Developed markets

• size

• income

• price

• access

• regulation

Markets – main drivers


8

• Criation of jobs and opportunites for

local residents

• Atraction and retention of

investments and capitalization of

competitive advantages

• Efficient environmental management

and optimization of growth

opportunities

• Sustainable fiscal management to

attract and retain talents (quality of

life and business)


Creative cities and regions

9

Cities – from Europe to Asia

10 Largest cities in 1900 (in Millions)

City, country Population

London, UK 56.5

New York, USA 4.2

Paris, France 3.3

Berlin, Germany 2.7

Chicago, USA 1.7

Vienna, Austria 1.7

Tokyo, Japan 1.5

St. Petersburg, Russia 1.4

Manchester, UK 1.4

Philadelphia, USA 1.4

10 Largest cities in 2015 (in Millions)

City, country Population

Tokyo, Japan 26.4

Mumbai, India 26.1

Lagos, Nigeria 23.2

Dhaka, Bangladesh 21.1

São Paulo, Brazil 20.4

Karachi, Pakistan 19.2

Mexico City, Mexico 19.2

New York, USA 17.4

Jakarta, Indonesia 17.3

Calcutta, India 17.3

Source: United Nations; Delta analysis

Americas Europe Asia Africa

10

Income distribution

Source: United Nations, UNCTAD; Delta analysis

5%

26% up

to US$

30.000

53% up to US$

6.000

16% up to US$ 1.000

13%

45% up to

US$ 30.000

36% up to US$ 6.000

6% up to US$ 1.000

2007 2030

Population

6.7 billions

Population

8.5 billions

1.8

6.7

3.6

1.0

3.1

0.6

2.8

1.1

upper class

middle class

low income

class

poverty/extreme

poverty

GDP PPP per capita 2007

75 countries that represent 97% of the world´s GDP and 90% of world population

11

Fundamentals

Global Scenario

Latin America

Brazil

12

World crisis - contagion

Begining

• Higher than

expected default

in the U.S. sub-

prime market

• End of "great

moderation"

Propagation

• From housing

market

• To derivatives

• To balance

sheets of banks

• To inter-bank

loans

• To credit

markets in

general

Impact

• Fall of stock

market

• Portfolio

realocation

• Higher volatility

• Fall in liquidity

• Higher demand

for liquid assets

Implications

• No two crises

are alike

• Flexibility for

specific events

• Guarantee of

sistemic stability


13

World crisis – challenges

Developed economies

• banking crisis

• employment

• confidence

BRICs

• exports

• growth and inflation

• international governance

Latin America

• social inclusion

• infrastructure

• public governance


14

Economic powers – new and emerging

Source: NASA; Delta analysis

The economics of agglomeration and development

15

Economic powers – new and emerging (cont.)

Area Rank Population Rank GDP PPP Rank

thous km2

millions US$ billions

Russian Federation 17.075,2 1 138,8 9 1.477,0 6

Canada 9.984,7 2 34 37 1.335,0 15

United States 9.826,6 3 313,2 3 14.720,0 1

China 9.597,0 4 1.336,7 1 9.872,0 2

Brazil 8.512,0 5 203,4 5 2.194,0 7

Australia 7.686,9 6 21,8 55 889,6 17

India 3.287,6 7 1.189,2 2 4.046,0 4

Argentina 2.766,9 8 41,8 32 596,0 23

Kasakhstan 2.717,3 9 15,5 64 197,7 53

Sudan 2.505,8 10 45,1 29 98,8 70

population estimated for July 2011

PPP – purchasing power parity

Source: United Nations, International Monetary Fund, Economic Commission for Latin America; Delta analysis

16

Dancing with the emerging economies

Source: World Bank, International Monetary Fund, Goldman & Sachs; Delta analysis

• By the year 2050, the E7, the world´s seven emerging

economies – China, India, Russia, Brazil, Indonesia, Mexico and

Turkey – will overtake the economies of the G7 – US, Japan,

Germany, UK, France, Italy and Canada

Size

• This will create exciting business and investment opportunities

across multiple markets, including consumer, agricultural,

industrial, banking and logistics

Opportunities

• In this scenario Latin America still faces significant economic

challenges: i) public governance, ii) social inclusion, iii)

infrastructure and iv) cost of doing business

Challenges

17

Global trends – risks and opportunities

Source: Monitor(2010): A Vision into the Future; Delta analysis

• The BRICs are receiving

significant attention

• Population aging Demographics

Megacities

Societal values

Technology and Knowledge

• Each country will present

a unique set of

opportunities and risks

• Growing domestic

incomes, relative political

stability, and open foreign

investment environments

• Political and regulatory

risks will pose ongoing

challenges to foreign firms

18

Fundamentals

Global Scenario

Latin America

Brazil

19

A land of contrasts


20

Geography

Argentina

Bolivia

Brazil

Chile

Colombia

Mexico

Paraguay

Peru

Uruguay

Venezuela

Area

million km2

2,8

1,1

8,5

0,8

1,1

0,3

2,0

0,4

1,3

0,2

0,9

Argentina

Bolivia

Brazil

Chile

Colombia

Mexico

Paraguay

Peru

Uruguay

Venezuela

Source: World Bank; Delta analysis

Ecuador

Ecuador

21

Institutional environment

Politics Economics Social Competitivity Doing

business

Argentina

Bolivia

Brazil

Chile

Colombia

Ecuador

Mexico

Paraguay

Peru

Uruguay

Venezuela

Source: United Nations, International Monetary Fund, Economic Commission for Latin America, International Finance Corporation; Delta analysis

x

x very good very bad x

x

x

x bad x

x neutral x

x good

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

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x

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x

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x

x

x

22

15

9

24

21

41

50

57

15

22,3

15

31,1

1,0

1,8

1,3

1,0

1,3

1,1

1,1

1,8

1,2

0,3

1,7

42

10

203

17

45

15

114

6

29

3

28

Population

Millions, 2011 (est.)

Average annual growth

%, 2005-2010

Argentina

Bolivia

Brazil

Chile

Colombia

Density

People/km2, 2011

Mexico

Paraguay

Peru

Uruguay

Venezuela

Population

Source: World Bank, United Nations; Delta analysis

• Area, population and density vary significantly. Brazil is the largest and most populated country in LA

Ecuador

23

Population (cont.)

Population (millions) Population in 2050 (millions)

1950 1975 2007 Low Medium High

World 2.535 4.076 6.671 7.792 9.191 10.756

More developed regions 814 1.048 1.223 1.065 1.245 1.451

Less developed regions 1.722 3.028 5.448 6.727 7.946 9.306

Least developed countries 200 358 804 1.496 1.742 2.002

Other less developed countries 1.521 2.670 4.644 5.231 6.204 7.304

Africa 224 416 965 1.718 1.998 2.302

Asia 1.411 2.394 4.030 4.444 5.266 6.189

Europe 548 676 731 566 664 777

Latin America and the Caribbean 168 325 572 641 769 914

Northern America 172 243 339 382 445 517

Oceania 13 21 34 42 49 56

% of Latin America and the

Caribbean 6,8 8,0 8,6 8,2 8,4 8,5

Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat (2007). World Population Prospects: The 2006

Revision; Delta analysis

24

Economics

GDP growth and

income distribution

Low interest rates

and public debt

Increase in public

and private

investment

Low and stable

inflation

Agenda


Economic agenda

• Local governments

have tried to

maintain a

credible economic

agenda, with a few

exceptions. The

challenges are

tremendous and

should not be

underestimated

• Sudden shifts in

the current

agenda are not

expected

25

Economics (cont.)

351

19

2.024

199

283

57

1.004

17

154

41

285

0

500

1.000

1.500

2.000

2.500

Argentin

a

Bolivia

Brazil

Chile

Colo

mbia

Equator

Mexic

o

Paraguay

Peru

Uruguay

Venezuela

GDP (US$ bill) official exchange

rate – 2010

596

48

2.194

260

432

115

1.560

33

277

48

344

0

500

1.000

1.500

2.000

2.500

Argentin

a

Bolivia

Brazil

Chile

Colo

mbia

Equator

Mexic

o

Paraguay

Peru

Uruguay

Venezuela

GDP (US$ bill) PPP – 2010


26

Economics (cont.)

GDP PPP Inflation GDP growth Poverty Reseves

US$ billions % % % of pop US$ billions

Argentina 596,0 22,0 7,5 30,0 53,9

Bolivia 48,0 7,2 3,8 30,3 9,7

Brazil 2.194,0 4,9 7,5 26,0 290,4

Chile 260,0 1,7 5,3 11,5 26,1

Colombia 431,9 3,1 4,4 45,5 28,5

Ecuador 115,3 3,3 3,7 33,1 3,6

Mexico 1.560,0 4,1 5,0 18,2 116,4

Paraguay 33,3 7,2 14,5 18,8 4,1

Peru 276,9 1,5 8,7 34,8 44,1

Uruguay 48,4 6,9 8,5 20,9 7,7

Venezuela 344,2 29,8 -2,8 37,9 29,5

data for 2010

PPP – purchasing power parity

Inflation – consumer price

Population below poverty line


27

Economics (cont.)

• Brazil and Mexico are the largest economies in LA. Growth rates have a strong dispersion. Brazil, for

nearly two decades have grown slowly compared to other countries in the region

7,5

3,8

7,5

5,3

4,4

3,7

5,0

14,5

8,7

8,5

-2,8

8,7

4,6

6,1

4,6

6,3

2,0

3,3

6,8

8,9

7,5

8,2

2,7

3,4

2,6

6,0

2,7

2,3

3,0

1,7

3,8

2,2

1,5

GDP growth rate (real)

%, 1992-2011


%, 2007


%, 2010

Argentina

Bolivia

Brazil

Chile

Colombia

Mexico

Paraguay

Peru

Uruguay

Venezuela

Ecuador

Source: World Bank, International Monetary Fund; Delta analysis

28

Economics (cont.)

• The production structure is similar, with differences for Bolivia and Paraguay (agriculture), Bolivia

and Paraguay (industry), and Brazil and Uruguay (services)

60

43

68

54

53

58

63

60

53

68

61

32

17

26

41

38

36

33

18

33

23

35

9

40

6

6

9

6

4

22

6

9

4

Agriculture

% of GDP, 2010

Industry

% of GDP, 2010

Services

% of GDP, 2010

Argentina

Bolivia

Brazil

Chile

Colombia

Mexico

Paraguay

Peru

Uruguay

Venezuela

Ecuador


29

Economics (cont.)

• There is a strong correlation between population and the labor force. Brazil, as expected, has by far

the largest labor force, but other countries present higher growth rates. Unemployment is generally

high

7,9

6,5

7,0

8,7

11,8

5,0

5,6

5,7

7,9

6,8

12,1

16,6

4,2

103,6

7,6

21,3

4,6

47,0

3,0

15,7

1,6

13,3

Labor force

Millions of inhabitants, 2010

Unemployment

% of labor force, 2010

Argentina

Bolivia

Brazil

Chile

Colombia

Mexico

Paraguay

Peru

Uruguay

Venezuela

Ecuador


30

Economics (cont.)

• Mexico (NAFTA) and Brazil are responsible for most of the international trade in LA


15,4

1,6

12,0

10,1

4,0

-0,3

-3,0

-1,6

8,0

-1,6

33,5

52,6

5,4

187,7

54,2

36,3

17,7

306,0

9,6

25,7

8,3

31,4

68,0

7,0

199,7

64,3

40,2

17,4

303,0

8,0

33,7

6,7

64,9

Exports

US$ billions, 2010

Imports

US$ billions, 2010

Trade balance

US$ billions, 2010

Argentina

Bolivia

Brazil

Chile

Colombia

Mexico

Paraguay

Peru

Uruguay

Venezuela

Ecuador

31

Natural resources and agriculture/livestock

Hydropower Minerals Oil/gas Agriculture/

Livestock Other

Argentina

lead, zinc, tin, copper,

iron ore, manganese,

uranium

oil

sunflower seeds, lemons,

soybeans, grapes, corn,

tobacco, peanuts, tea,

wheat; livestock

fertile plains of the

pampas

Bolivia X

tin, zinc, tungsten,

antimony, silver, iron,

lead, gold

oil/gas

soybeans, coffee, coca,

cotton, corn, sugarcane,

rice, potatoes

timber

Brazil X

bauxite, gold, iron ore,

manganese, nickel,

phosphates, platinum,

tin, rare earth elements,

uranium

oil/gas

coffee, soybeans, wheat,

rice, corn, sugarcane,

cocoa, bananas, apples,

lemons, citrus; beef,

poultry, pork

arable land, timber,

cellulose, fish

Chile X

copper, iron ore, nitrates,

precious metals,

molybdenum

grapes, apples, pears,

onions, wheat, corn,

oats, peaches, garlic,

asparagus, beans; beef,

poultry

timber, fish, wool

Colombia X coal, iron ore, nickel,

gold, copper, emeralds oil/gas

coffee, cut flowers,

bananas, rice, tobacco,

corn, sugarcane, cocoa

beans, oilseed,

vegetables; forest

products; shrimp

Ecuador X oil

bananas, coffee, cocoa,

rice, potatoes, manioc

(tapioca), plantains,

sugarcane; cattle, sheep,

pigs, beef, pork, dairy

products; balsa wood;

fish, shrimp

timber

Source: CIA World Factbook; Delta analysis

32

Natural resources and agriculture/livestock

Hydropower Minerals Oil/gas Agriculture/

Livestock Other

Mexico silver, copper, gold, lead,

zinc oil/gas

corn, wheat, soybeans,

rice, beans, cotton,

coffee, fruit, tomatoes;

beef, poultry, dairy

products

timber

Paraguay X iron ore, manganese,

limestone timber

Peru X

copper, silver, gold, iron

ore, coal, phosphate,

potash

oil/gas

asparagus, coffee, cocoa,

cotton, sugarcane, rice,

potatoes, corn, plantains,

grapes, oranges,

pineapples, guavas,

bananas, apples, lemons,

pears, coca, tomatoes,

mango, barley, medicinal

plants, palm oil, marigold,

onion, wheat, dry beans;

poultry, beef, dairy

products; guinea pigs

timber, fish

Uruguay X minor minerals

beef, soybeans, rice,

wheat, lumber, dairy

products

arable land, fish,

cellulose

Venezuela X iron ore, gold, bauxite,

other minerals, diamonds oil/gas

corn, sorghum,

sugarcane, rice, bananas,

vegetables, coffee; beef,

pork, milk, eggs

fish


33

Industries

Main industries

Argentina food processing, motor vehicles, consumer durables, textiles, chemicals and petrochemicals, printing, metallurgy, steel, tourism

Bolivia mining, smelting, petroleum, food and beverages, tobacco, handicrafts, clothing

Brazil

food processing and beverages, textiles, consumer durables, shoes, chemicals and petrochemicals, cement, lumber, tin, metallurgy,

iron and steel, aircraft, motor vehicles and parts, other machinery and equipment, tobacco, wood and wood products, tourism

Chile

copper, lithium, other minerals, foodstuffs, fish processing, iron and steel, wood and wood products, transport equipment, cement,

textiles, tourism

Colombia textiles, food processing, oil, clothing and footwear, beverages, chemicals, cement; gold, coal, emeralds

Ecuador petroleum, food processing, textiles, wood products, chemicals

Mexico

food and beverages, tobacco, chemicals, iron and steel, petroleum, mining, textiles, clothing, motor vehicles, consumer durables,

tourism

Paraguay sugar, cement, textiles, beverages, wood products, steel, metallurgic, electric power

Peru

mining and refining of minerals, steel, metal fabrication, petroleum extraction and refining, natural gas and natural gas liquefaction,

fishing and fish processing, cement, textiles, clothing, food processing

Uruguay food processing, electrical machinery, transportation equipment, petroleum products, textiles, chemicals, beverages

Venezuela petroleum, construction materials, food processing, textiles; iron ore mining, steel, aluminum; motor vehicle assembly


34

115

149

127

43

39

130

35

106

36

124

172

Rank

2005

Rank

2006

Doing business

• The Doing Business database provides objective measures of business regulations and their

enforcement. They indicate the regulatory costs of business and can be used to analyze specific

regulations that enhance or constrain investment, productivity, and growth

-2

-1

-3

10

-1

-3

6

-1

10

-2

-2

Change in rank

Last two years

113

148

124

53

38

127

41

105

46

122

170

Source: International Finance Corporation; Delta analysis

Argentina

Bolivia

Brazil

Chile

Colombia

Mexico

Paraguay

Peru

Uruguay

Venezuela

Ecuador

35

Doing business (cont.)

Vibrant financial markets with a full array of financial products and

services (Brazil, Chile and Mexico, mostly)

Openness to Foreign Direct Investment (FDI); Brazil is the largest

recipient of FDI in Latin America

Prudent monetary and fiscal policies, solid macroeconomic position

and controlled inflation (most counries)

Domestic consumption-led growth (most counries)

Booming middle class – better educated, more disposable income

and spending (most counries)

Increasing demand for imports – consumption and investment goods

(most counries)


36

Fundamentals

Global Scenario

Latin America

Brazil

37

A land of contrasts


38

Overview

• 8.5 million km2

• More than 5,500 cities

• 7,500 km coastline

• 84% of households in urban areas

Geography

• 190 million inhabitants (census 2010)

• Growth rate: 12.3% over 2000

• Life expectancy: 71 years

• Poverty: 11% of population

Population

• Illiteracy rate: 11%

• More than 80% with water

• More than 90% with electricity

• Ranks 65th in UN’s HDI

Education and

living standards

• Labor force: 100 million

• Urban unemployment: 7,0%

Labor

• Public/private investments

• Main gaps: roads, railways, ports, airports

Infrastructure

Source: IBGE, Bacen; Delta analysis

39

GDP

14,7

5,7

1,4

5,4

3,3

1,5

2,0 2,3

2,6

2,0

0

2

4

6

8

10

12

14

16

United S

tates

Chin

a

India

Japan

Germ

any

Russia

Brazil

United Kin

gdon

France

Italy

GDP (US$ trill) official exchange

rate – 2010

14,7

9,9

4,0 4,3

3,0

2,2 2,2 2,2 2,2 1,8

0

2

4

6

8

10

12

14

16

United S

tates

Chin

a

India

Japan

Germ

any

Russia

Brazil

United Kin

gdon

France

Italy

GDP (US$ trill) PPP – 2010


40

GDP (cont.)

Source: IBGE; Delta analysis

2,7

1,1

5,7

3,2

4,0

6,1

5,1

-0,2

7,5

-1,0

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

2002 2004 2006 2008 2010

GDP growth (%)

16,4

15,3

16,1 15,9

16,4

17,4

19,1

16,9

18,4

10,0

12,0

14,0

16,0

18,0

20,0

2002 2004 2006 2008 2010

Savings and investment (% GDP)

Gross savings

Gross investment

41

GDP (cont.)

Natural resources

• Iron ore, manganese, bauxite, nickel, uranium, gemstones, oil, wood,

and aluminum

• 14% of world´s renewable fresh water

Agriculture

• 6% of GDP

• Coffee, soybeans, sugarcane, cocoa, rice, livestock, corn, oranges,

cotton, wheat, and tobacco

Industry

• 26% of GDP

• Steel, iron ore, coal, commercial aircraft, chemicals, petroleum,

machinery, motors, vehicles, auto parts, consumer durables, cement,

and lumber

Services

• 68% of GDP

• Mail, telecommunications, banking, transportation, commerce and

computing


42

13,1 27,6

5,1 8,1

56,8 42,6

16,3 14,6

8,7 7,1

GDP and population

Inequalities

• South/Southeast account for

73% of GDP and 57% of

populations

• Slow income level

convergence

• South/Southeast

• slower growth of GDP and

population

•North/Northeast/Middle-west

• new frontier

% of GDP

% of population

data for 2010; GDP per capita US$ 10.900

Source: IBGE; Delta analysis

122,6

111,6

133,3

47,5

63,0

Middle-west

South

Southeast

Northeast

North

% of GDP per capita

43

2003 2009

Rise of middle classe

• Since 2002, around 25 million Brazilians have moved to the middle of the social pyramid. In 2010,

the C class accounts for about 103 million Brazilians and will continue to expand in coming years.

For the period between 2008 and 2010, the estimate is that the class C percentage of population

will increase 21.5%

2014

Source: Fundação Getúlio Vargas, IBGE; Delta analysis

8%

37%

27%

28%

13

66

47

49

20

95

44

29

31

113

40

16

% of pop and million individuals % of pop and million individuals % of pop and million individuals

11%

50%

24%

15%

16%

56%

20%

8%

44

Sustainable

development

strategy

Low and

stable

inflation

Social

inclusion

Public

governance

Income,

investment,

employment

growth

Sustainable development


45

Sustainable development (cont.)

Sustainable development

Economic policy

- inflation targeting

- floating exchange rate

- fiscal control

Social policy

- protection

- focalization

- efficiency

Regional policy

- incentives

- scale and scope

- relocation

• GDP growth and low inflation

• Infrastructure expansion and new development vectors

• Expansion of brazilian firms abroad

• Income distribuition and reduction of poverty

• Change in labor force – higher qualification

Expected results

(2011-2015)

• Good fundamentals

• Growth of production, employment and income

• Improvement in regulatory framework and risk mitigation

• Social inclusion and income transfer programs

Virtuous cycle


46

Political environment

Results and inaugural speech

• Dilma Rousseff, from the Labor Party (PT),

was elected president with 56% of valid

votes

• The runoff for several state elections also

took place: in the end, 16 out of 27 elected

state governors are from parties within the

PT's coalition. This adds to an already

favorable picture in Congress, where

support for Dilma is about 70% in both

houses

• Inaugural speech:

• fight inflation

• domestic economy

• social policies to end poverty and

homelessness

Votes in second round

Votes %

Dilma 55.745.867 56,0

Serra 43.707.472 44,0

Dilma Rousseff

José Serra

RR

RO

AM

AC

AP

PA

PI

MA

MT

MS

TO

DF

GO

CE

RN

PB

PE

AL

SE

BA

MG

ES

RJ SP

PR

SC

RS

Total electors

135.804.433

Source: Tribunal Superior Eleitoral; Delta analysis

47

Business climate

Growth and consumption

• Macroeconomic stability

• Growth led by domestic consumption and investiment

• Emerging middle class

Investment

• Gaps in infrastructure

• Higher demand for durable and non-durable goods

• Attraction of foreign investment

Demographics

• Changing structure

• Better educated

• Higher income per capita

Financial markets

• Consolidated

• Social inclusion


48

Business climate (cont.)

Business climate Investor consideration

• Auto Industry: new players entered the

market in the recent past. Capacity

adjustment. Repositioning of major

brands

• Major Manufacturing Industries:

petrochemicals, steel, mining, cement,

pulp and paper, and food processing are

in expansion. Consolidation expected

• Service Industries: now a significant

and growing part of the economy. Apart

from restrictions in the banking, finance

and telecommunications sectors

(gradually being put down), foreign

investors may participate in service

industries. Consolidation expected

• High-Tech Industries: comprised

mainly of the assembly of imported

components and parts. Multinationals

dominate, but there are several large

domestic goups. Consolidation expected

• Political stability has been maintained

for almost three decades

• There is a large domestic market

• Favorable site for South America

expansion – foreign investment is

welcome

• Many state and local governments offer

incentives to attract investment; foreign

investors are elegible for most incentives

available

• Local and foreign investors are treated

equally – joint-ventures with local

partners are favored but not essential

• Exports are being encouraged; trade

barriers are gradually being reduced


49

Growth Acceleration Program 2

city

citizenship

housing

water and

energy

transport

energy

and pre-

sal

Source: federal government; Delta analysis

PAC 2

(2011-2014)

• PAC Cidade Melhor – major cities

challenges

• PAC Comunidade Cidadã – state

presence

• PAC Minha Casa Minha Vida –

housing deficit

• PAC Água e Luz Para Todos –

universalization

• PAC Transportes – expansion and

interconnection

• PAC Energia – renewable energy

and development of pre-sal

Planning

Investment

Development

50

Social agenda

The social agenda is

managed by the

federal government,

with initiatives

throughout the

Executive

Education

Social

inclusion

Technology

Employment

Source: federal government; Delta analysis

Fundamentals

• Announced by former president Lula,

in 2007, the objectives of the social

agenda are:

• consolidate Social Policy as a

guaranty to citizen´s rights

• reduce social inequality

• integrate initiatives to promote

opportunities and emancipation of

poor families

• enhance and improve the

integration of inter governmental

agents, and articulate with States

and Cities

51 Source: federal and local governments, companies; Delta analysis

Multiplier effects

• derived demand

• income and employment

• new frontiers

• new markets

• new clusters

• South/Southeast

• focus – scale and scope

• sectors – oil & gas,

education, agribusiness,

energy (including biomass),

construction

• North/Northeast/Middle-west

• Focus – frontier (new

industries)

• sectors – agribusiness,

retail, construction

pré-sal

energy

steel

sugar cane

ports

cattle

soybean

Regional development

SOUTH

MIDDLE-WEST

NORTH

NORTHEAST

SOUTHEAST

railroads

52

World soccer cup 2014

States Cities

North AM Manaus,

Northeast CE, RN, PE e BA Fortaleza, Natal, Recife and

Salvador

Southeast MG, RJ e SP Belo Horizonte, Rio de Janeiro

and São Paulo

South PR e RS Curitiba and Porto Alegre

Middle-west MT Brasília and Cuiabá

Potential market – main drivers

• North: infrastructure (transport/energy),

housing

• Northeast: infrastructure

(transport/energy/telecom), industrial

location, housing

• Southeast: infrastructure

(transport/telecom), housing

• South: housing

• Middle-west: infrastructure

(transport/energy/telecom), housing

NORTHEASAT

SOUTHEASAT

MIDDLE-WEST

SOUTH

NORTH


53

Risks

Short-term Medium-term Long-term

Population, mortality, fertility, and urbanization

Religion

Social structure

Cultural unity and diversity

Social conflict and participation

Government and politics

Economics

Environment

Regulation


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2011 - Delta - Brazil and Latin America

Business

Transcript of 2011 - Delta - Brazil and Latin America