Brazil Economic Focus | August 2016 (slide pack)
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Transcript of Brazil Economic Focus | August 2016 (slide pack)
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1. Brazil has for a long time been a closed economy
UNCLASSIFIED
It is the ‘most closed’ among G20 countries
Source: International Chamber of Commerce* Grade range: 1 to 6
Argentina
Brazil
China
Germany
Indonesia
Japan
Mexico
Saudi Arabia
Turkey
United States
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
Openess to International Trade - G20 Countries
Has minor participation in global value chains
Brazil
Developing Economies
Developed Economies
0 10 20 30 40 50 60
Global Value Chain Participation Index (grade)*
Source: WTO*2011 data (most updated)
And foreign trade accounts for a small proportion of GDP
Brazil China Russia Mexico UK0
10
20
30
40
50
60
70
80
Exports & Imports (% of GDP)*
Source: World Bank*2015 data
6
2. But recent initiatives indicate a move towards openness
UNCLASSIFIED
2015 saw the beginings of a change in mindset...
• Development of the National Exports Plan
• Relaxation of restrictions to foreign companies in the reinsurance sector
• Liberalization of foreign investments in the health sector
...which accelerated in 2016
• Government is more focused on trade:– Exports promotion Agency transfered to the Foreign Ministry – Foreign Trade Chamber transfered to direct supervision of the Presidency
• Government supports proposal for legislation change relaxing pre-salt oil extraction rules
• National Oil Agency studies relaxating local content rules
• Taskforce within Finance Ministry works on delivering strong agenda on concessions and privatizations
• Government expresses interest in joining TISA negotiations
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3. The UK can seize this opportunity to intensify trade relations
UNCLASSIFIED
We have been working together with Brazilian government
- Information to Trade: CAPTA is the new online platform to facilitate
trade! Businesses now find all trade agreements Brazil signed in a interactive plataform
- Tax Reform: Brazil with a simpler tax system. Proposed changes in
Value Added Tax, Fiscal Rules and Budgetary processes to increase competition being negotiated in Congress and Ministries.
- Time for Change: 4 projects fed in National Confederation of
Industry’s demands for President Candidates in 2014 to improve business environment: trade, tax and finance improvements!
Supported by the Prosperity Fund...
Prosperity Fund – Business Environment Portfolio – FY 15/16 9 Prosperity Fund Projects - £ 1,121,2702 Tactical Fund Projects - £30,000Total value of the portfolio: 11 Projects - £1,151,270 Benefit to the UK: Create opportunities for UK companies to compete in a more efficient, fairer, and stable market with fewer barriers to trade, an internationally comprehensive tax system, a transparent environment, and increased integrated market. This unlocks £1,260 billion worth in opportunities for the UK in Brazil.
...to boost UK exports to Brazil...
China USA Germany Argentina UK0
5
10
15
20
25
30
35
Origin of Brazilian Imports (US$ billion)*
Source: Ministry of Development, Industry, and Foreign Trade*2015 data
and diversify our exports, exploring new opportunities
Pharmace
uticals
Machinery
Vehicles
Chemical p
roducts
Eletrica
l Applia
nces
Leasin
g or Mach
inery rental
Waterw
ay transp
ort of c
argo
Copyright li
censin
g and rights
Reinsurance
and retro
cessi
on
Business
services
0
200
400
600
800
Top UK Exports to Brazil (Goods & Services – US$ million)*
Source: Local data source - SISCOSERV*2015 data
Potentially regaining market share, which decreased from 25% in 1912 to 1.6% today
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20151.25%
1.45%
1.65%
1.85%
2.05%
2.25%
2.45%
2.65%
2.85%
3.05%
UK Market Share on Brazilian Imports
Source: International Trade Centre
And increasing UK’s presence in Brazil
USA Netherlands Spain UK China-
20
40
60
80
100
120
Origin of Foreign Direct Investment in Brazil (US$ bil-lion)*
Source: Central Bank of Brazil* 2014 data
Strengthening the relationship both ways
China USA Argentina Netherlands UK0
5
10
15
20
25
30
35
40Destination of Brazilian Exports (US$ billion)*
Source: Ministry of Development, Industry, and Foreign Trade* 2015 data
Use timing to negotiate new agreements?
• “We will multiply bilateral agreements”.
• “We are going to seek a direct agreement with the UK, that will be easier than via EU-Mercosur”.
Foreign Minister José Serra
Mercosur has been positive for Brazil but insufficient ....
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
50
100
150
200
250
300
-10
0
10
20
30
40
50
Brazil-Mercosur Trade Balance (US$ billion)
Exports Imports Trade Balance
Source: Ministry of Development, Industry, and Foreign Trade
To engage Brazil in the global economy
Key Macroeconomic Indicators
Monthly Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16
Inflation (12 mth. accum.) 10.71 10.36 9.39 9.28 9.32 8.84
Benchmark Interest Rate 14.25 14.25 14.25 14.25 14.25 14.25
Unemployment (%) 9.93 10.00 10.20 10.62 10.91 11. 3
Trade Balance (US$ bn.) 0.9 3.0 4.4 4.8 6.4 3.9
Exports (US$ bn.) 11.2 13.3 16.0 15.4 17.5 16.7
Imports (US$ bn.) 10.3 10.3 11.6 10.5 11.1 12.8
Quarterly 2016 Q1 Q2 Q3 Q4
GDP (% var. QoQ) -0.3
