Sourcing Opportunities in Brazil - Market Survey

Dragon SourcingYour Tailored Approach to Emerging Markets

www.dragonsourcing.com

Study on Sourcing Opportunities in

Brazil

Feb, 2015

Table of Contents

2© 2015 Dragon Sourcing. All rights reserved.

Executive Summary

Brazil – Macro Economics

Ores, Slag and Ash

Oil seed, Oleagic fruits, grain, seed, fruit, etc.

Mineral fuels, Oils, distillation products, etc.

Meat

Vehicles other than railway, tramway

Machinery, nuclear reactors, boilers, etc.

Sugars and sugar confectionery

Iron and Steel

Ships, boats and other floating structures

Residues, wastes of food industry, animal fodder

Cereals

Pulp of wood, fibrous cellulosic material, waste etc.

Coffee, tea, mate and spices

Electrical, electronic equipment

Aircraft, spacecraft, and parts thereof

Executive Summary – Top Export Categories (1/2)


Category HS Code Top ProductsProductions

(2013)

Export

Value

(2013) in

USD

Billion

CAGR of

Exports

Value (5

years)

Brazil’s

Share of

Total

Global

Export

(2013)

Top Export Destinations

Import

Duty into

US

Import

Duty into

EU

Export

Duty

MiningHS 26

seriesIron Ore

398 million

metric tons35.1 25% 14%

China, Japan,

Netherlands, Germany,

Korea

Nil Nil Nil

Oil seedsHS 12

series

Soybean Oilseed 86.7 million

metric tons

(soybean

oilseed)

23 19% 23%

China, Spain,

Netherlands, Thailand,

Taipei

Nil Nil NilCotton Oilseed

Mineral

fuels

HS 27

series

Crude Oil 2.023 million

barrels/day

(crude oil)

22.4 8% 1%China, USA, Netherlands,

India, ChileNil Nil Nil

Natural Gas

MeatHS 02

series

Pork 11.532 million

tons (Chicken)

2012 data

14.8 11% 12%China, Russia, Saudi

Arabia, Venezuela, Japan

0 to 4.4

cents/kg

0% to

12.8%Nil

Chicken

AutomotiveHS 87

series

Cars 2.72 million

units (Cars)14.1 14% 1%

Argentina, Mexico, Chile,

Peru, USANil 16% Nil

Commercial Vehicles

Industrial

Machinery

HS 84

seriesTractors

73,061 units

(Agricultural

machinery)

12.8 12% 1%USA, Argentina, Mexico,

Netherlands, Germany0%-6.7% 0%-5.7% Nil

SugarHS 17

seriesRaw Sugar

37.709 million

metric tons12 9% 23%

China, UAE, Algeria,

Bangladesh, Russia

0 to 35.74

cents/kg

98.00 EUR

/ 1000 kg +

1.372 EUR

/ 10 000

kg/polar

Nil

Iron and

Steel

products

HS 72

seriesCrude Steel

34.2 million

metric tons8.3 6% 2%

USA, Netherlands,

Argentina, China, JapanNil 1.70% Nil

Note:

• Production value is provided for the top product in each category whereas Export value, CAGR of Export values and Percentage of Global exports are provided for

the entire category.

Executive Summary – Top Export Categories (1/2)

4

Category HS Code Top ProductsProductions

(2013)

Export

Value

(2013) in

USD

Billion

CAGR of

Exports

Value (5

years)

Brazil’s

Share of

Total

Global

Export

(2013)

Top Export Destinations

Import

Duty into

US

Import

Duty into

EU

Export

Duty

Ships &

Boats

HS 89

series

Tanker1,417,797

gross tonnage

(Tanker)

7.93 186% 5%Panama, Netherlands,

Switzerland, Mexico, USANil Nil Nil

Floating production

storage and offloading

Drilling Ship

Animal

fodder

HS 23

series

Poultry feed 22.1 million

tons (Chicken

feed)

7.14 10% 9%

Netherlands, France,

Germany, Korea,

Thailand

Nil

0 to 44

EUR/1000

kg

NilSwine feed

CerealsHS 10

series

Corn

80.53 million

tons (Corn)7.07 44% 9%

Korea, Japan, Taipei,

Iran, Egypt

0 to 0.65

cents/kgNil Nil

Rice

Wheat

Oats

Wood pulpHS 47

series

Pulp14.995 million

tons5.19 12% 11%

China, Netherlands, USA,

Italy, BelgiumNil Nil Nil

Paper

Coffee, tea

and spices

HS 09

series

Tea 3.45 billion kgs

(Green Coffee)4.95 6% 11%

USA, Germany, Japan,

Italy, BelgiumNil 0%-8.30% Nil

Coffee

Electrical,

electronic

equipment

HS 85

series

Electric motors and

generators (excluding

generating sets)

72.6 USD

billion (Gross

Sales)

4.75 -3% 0%

Argentina, USA,

Colombia, Germany,

Chile

0%-6.7% 0%-4.7% Nil

AeronauticalHS 88

seriesHelicopters Not Available 4.37 1% 1%

USA, Ireland, Venezuela,

China, KenyaNil Nil Nil

© 2015 Dragon Sourcing. All rights reserved.

Note:

• Production value is provided for the top product in each category whereas Export value, CAGR of Export values and Percentage of Global exports are provided for

the entire category.

Executive Summary – Emerging Export Products

5

Emerging Products

Export Value

(2013) in USD

Billion

% of Total

Export (2013)

Growth rate in

Value (% per

annum)

Top Export DestinationsImport Duty

into US

Import Duty

into EUExport Duty

Turbo-engines 1.22 0.50% 44%USA, Argentina, Mexico, Netherlands,

Germany2.5%-6.7% 2.7%-5.7% Nil

Rice 0.40 0.17% 11% Korea, Japan, Taipei, Iran, Egypt0.1cents/kg-

0.65 cents/kgNil Nil

Saffron 0.012 0.0% 29% USA, Germany, Japan, Italy, Belgium Nil 0%-8.30% Nil

Electric generating sets 0.16 0.07% 23%Argentina, USA, Colombia, Germany,

Chile2%-6.7% 0%-4.7% Nil

Electrical capacitors 0.12 0.05% 18%Argentina, USA, Colombia, Germany,

Chile2%-6.7% 0%-4.7% Nil

Aircraft Parts 0.52 0.21% 13%USA, Ireland, Venezuela, China,

KenyaNil Nil Nil

Note:

• The above products are considered to be emerging products based on the performance and export growth of the products. It is expected that any potential client

could benefit by putting across the sourcing strategy right now and reap the benefits in the forthcoming years.


BRAZIL - MACRO ECONOMICS

Sourcing Opportunities in Brazil


– Brazil is the is the largest country in both South America and the Latin American region.

Population of: 202.65 million (2014 estimate)

Surface area ~8,515,767 km2

Coastline about ~7,491 km

World's 7th largest by nominal GDP and the 7th largest by purchasing power parity (2012)

Population (2010) Area (km2)

São Paulo 11.25 million 1,523

Rio de Janeiro 6.32 million 1,182.3

Salvador 2.67 million 706

Brasília 2.57 million 5,802

Fortaleza 2.45 million 313.8

Growth Growth (2013) Value (2013)

Gross Domestic Product

2014: 1.5%

2015 (E): 2.7%

2016 (E): 3.1%

2.5% USD 2,245 billion

Exports 2011-2012: -5.3% -0.2% USD 0.242 billion

Foreign Direct Investments 2010-2013: 14.86% 6.22% USD 80.842 billion

7

Brazil Overview

Source: worldbank.org, tradingeconomics.org, stat.wto.org


Brazil – GDP

8

The Brazilian economy slowed significantly during 2011 and 2012. The GDP growth of 7.5%, decelerated to 2.7% in 2011 and down to to 1% in 2012 due to the euro

zone debt crisis which increasingly indebted consumers retreated after nearly few years of buoyant spending in Brazil. The country is showing a slow recovery

-0.5

0

0.5

1

1.5

2

2.5

3

0

500

1000

1500

2000

2500

3000

2009 2010 2011 2012 2013

Perc

enta

ge C

hange in G

DP

GD

P in U

SD

billions

Brazil - GDP in USD billions

66%

28%

6%

GDP Breakdown by Sector (2012)

Services Industry Agriculturre

5.20%

-0.33%

7.53%

2.73%

1.03%

2.49%1.80%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

2008 2009 2010 2011 2012 2013 2014

Real GDP Growth in Brazil

Principle Industries

Automotive

Iron & Steel

Aircraft

Petroleum & Petrochemicals

Cement & Construction

Other Industries

Machinery

Electronics

Textiles

Food and beverages

Mining

Source: tradingeconomics.com,

data.worldbank.org, quandl.com, mecometer.com,

statista.com, zanran.com

Services include services in retail trade (including hotels and restaurants),

transport, and government, financial, professional, and personal services such

as education, health care, and real estate services.


Brazil – Labor Wage Rates & Labor Participation

9

Minimum wage rate in Brazil in 2014 was USD 318 (BRL 724) per month. It has been revised in 2015 and the current minimum

wage is USD 297 (i.e. BRL 788) per month in 2015 mainly catering to the increasing cost of living in the country.

Highlights:

Minimum wage rates in Brazil is calculated based on the GDP performance and inflation

Standard working hours: 8 hours per day

Unemployment rate in Brazil have been decreasing in 2013 to 5.1% from 5.6% in 2012

GDP (PPP) in Brazil is USD 11,769 per capita

GNI (PPP) in Brazil is USD 2,955 billion in 2013

GNI per capita, PPP is USD 14,750 in 2013

267

307

293

304

287

318

12%

0.10

0.07

14%

9%

6.78%

0%

4%

8%

12%

16%

240

270

300

330

2009 2010 2011 2012 2013 2014

Perc

enta

ge C

hange in M

inim

um

W

age

Min

imum

Wage R

ate

s/m

onth

in

US

D

Minimum Wage Rates in Brazil in USD per Month

15.70%

13.30%

71%

Labor Participation by Occupation (2011)

Agriculture Industry Services

Source: forbes.com, heritage.org, riotimesonline.com, reuter.com, tradingeconomics.com, ipeadata.gov.br, knoema.com, theodora.com


Although the minimum wage rate was increased in 2015, BRL has also weakened significantly against USD during the period

Brazil – Trading Partners

10

About 51% of the global exports from Brazil in 2013 are with its major trading partners including China, USA, Argentina,

Netherlands, Japan and Germany.

Top countries importing from Brail include: China, USA, Argentina, Netherlands, Japan and Germany

China holds about 19% of total exports from Brazil in 2013, followed by USA at 10.3%, Argentina at 8.1%

Exports to China: Oil seeds and oleaginous fruits (worth USD 17.148 billion) is the major export product category from Brazil to

China. The next major export product category is Ores, slag and ash (worth USD 16.4 billion). Other product categories include

mineral fuels, pulp of wood or of other fibrous cellulosic materials, sugars and sugar confectionery, raw hides and skins, animal or

vegetable fats and oils.

Exports to USA include mineral fuels, oils and distillation products, iron and steel, machinery, nuclear reactors, boilers, aircraft,

spacecraft, beverages, spirits and vinegar etc.

1.20%1.27%

1.39%1.32% 1.33%

0.00%

0.40%

0.80%

1.20%

1.60%

2009 2010 2011 2012 2013

Brazil's Share of World Exports

-

10.00

20.00

30.00

40.00

50.00

Major Export Market from Brazil in USD Billions(2009-2013)

2009

2010

2011

2012

2013

Source: data.worldbank.org, trademap.org


Brazil – Foreign Investment

11

Brazil is one of the top three major destinations of capital investment in Latin America. Foreign Direct Investment in Brazil increased

to USD 4.979 billion in October 2014 from USD 4.214 billion in September 2014. FDI is expected to increase to USD 5.27 billion in

2015.

According to the United Nations Conference on Trade and Development (UNCTAD), Brazil was the sixth largest destination for global

FDI flows in 2013.

There are several tax incentives in Brazil, depending on the industry and location of the investment, such as Manaus Free Trade

Zone, Infrastructure projects, Oil and Gas industry, and the automotive industry.

Factors influencing Investment: Rising middle class, strong demographic growth, stable financial environment, public and private

commitment to infrastructure and financial investment.

31,481

53,345

71,53976,111

80,893

0

20,000

40,000

60,000

80,000

100,000

2009 2010 2011 2012 2013

FDI inflow to Brazil in USD Millions

InvestorApproximate Investment

in 2012Sector

PortugalUSD 39,893,139.1

(i.e. BRL 77,791,621.33)

Manufacturing of non-metallic materials,

Telecommunications

ItalyUSD 32,979,855.7

(i.e. BRL 64,310,718.55)

Construction, Sustainable Energy, Naval

Industry, Luxury market

SpainUSD 13,348,630.9

(i.e. BRL 26,029,830.25)Construction

ChinaUSD 11,117,661

(i.e. BRL 21,679,439.02)

Oil and Gas, Agriculture, Mining, Steel,

Electricity, Manufacturing

FranceUSD 10,006,546.7

(i.e. BRL 19,512,766.16 )

Manufacturing, Retailing, Electricity, water

and gas, Transportation, storage and

communication, Housing and food

USAUSD 8,125,179.4

(i.e. BRL 15,844,099.83)Education, Infrastructure

World Cup in 2014 and 2016 Summer Olympics were the major drivers of FDI in Brazil. Principle sources of FDI in Brazil are

USA, UK, Spain, China, Germany, Japan and France.

Source: data.worldbank.org, tradingeconomics.com, iflr.com, state.gov, thebrazilbusiness.com, blogs.ft.com


Brazil – Exchange Rate

12

In 2016, the Brazilian Real is expected to decrease to 2.62 against USD

Recent collapse in crude oil prices have sent disruptive shocks to currencies and substantial policy adjustments is expected on the

BRL in the near term.

In an effort to address the macroeconomic imbalances and to recover investor confidence; major adjustments are expected and

Brazilian real (BRL) is likely to maintain a weakening bias over the next 6 months.

USDBRL is estimated to reach 2.60-2.70 range in 2015.

In order to handle the impact over inflation, a higher interest rate environment is expected in Brazil .

The year 2015 will be marked by a period of necessary adjustments, which in combination with a broad-based trend in favor of the

US dollar (USD), will likely exert depreciating pressures into the BRL.

2.76

2.35 2.332.51

2.873.11

0

0.5

1

1.5

2

2.5

3

3.5

2009 2010 2011 2012 2013 2014

EUR vs. BRL

Source: Federalreserve.gov, tradingeconomics.com, gbm.scotiabank.com


1.991.76 1.67

1.952.15

2.32

2.65

0

0.5

1

1.5

2

2.5

3

2009 2010 2011 2012 2013 2014 2015

USD vs. BRL

Brazil – Trade Agreements

13

In 2011, Agreement on Trade and Economic Cooperation has been signed between USA and Brazil to enhance trade and

investment.

India - MERCOSUR Preferential Trade Agreement: Aims to expand and strengthen the bilateral trade relations between

MERCOSUR (Argentina, Brazil, Paraguay and Uruguay) and India and promote the growth of International trade by granting

reciprocal fixed tariff preferences with the final objective of creating a free trade area between the MERCOSUR and India. Major

sectors covered under the India - MERCOSUR Preferential Trade Agreement are: meat, chemicals, leather products, iron and steel

products, machinery items and electrical machinery.

Free Trade Agreement MERCOSUR – Egypt: In 2010, MERCOSUR (Southern Common Market) signs a Free Trade Agreement

with the Arab Republic of Egypt. Top trade partners of Egypt within Latin America are Brazil and Argentina. Main objectives include:

increase and improve their economic cooperation to raise the living standards of their populations; eliminate difficulties and

restrictions on International trade in products, including agricultural products; promote, through the growth of reciprocal trade, the

development of their economic relations; provide fair conditions of International trade competition; create conditions for further

encouragement of Foreign direct investment particularly for the development of joint investments; and, promote international trade

and cooperation between them in other country markets. The agreement will allow preferential treatment for Egyptian products

entering the markets of Latin America and will reduce the cost of Egyptian imports for key items including sugar, meat and soy oil.

Free Trade Agreement MERCOSUR – Israel: The objectives of the Trade Agreement include: eliminate barriers to International

trade, and facilitate the movement of export products between Southern Common Market and Israel; promote conditions of fair

competition in the free trade area; increase substantially Foreign direct investment opportunities; create efficient procedures for the

implementation, application and accordance with this Free Trade Agreement MERCOSUR - Israel, and its joint administration; and

set up a framework for further bilateral and multilateral cooperation to expand and improve the benefits of the Free Trade Agreement

MERCOSUR - Israel.

European Union - MERCOSUR Agreement: The European Union was the 1st biggest trade partner of MERCOSUR (21% of total

trade of MERCOSUR (Argentina, Brazil, Paraguay and Uruguay)). The agreement will cover not just goods, but issues such as

services, investment government procurement or trade and sustainable development. It also aims at ensuring adequate protection of

intellectual property rights and geographical indications, effective competition policies.

Source: en.reingex.com, dw.de

The agreements benefit the client in terms of reduced tariff on the export/import of products, reduced export/import duty,

eliminating the trade barriers, protection of intellectual property rights etc.


MINING ORES (HS 26 SERIES)


Mining Ores – Market Trends

15

Brazil is rich in minerals and one of largest producers of iron ore in world. In 2012, about 77% of total industry output was

exported to China.

33%

14%8%6%

5%

34%

Top Exporters of HS 26 series Mining Ores in 2013

Australia

Brazil

Chile

South Africa

Peru

Others

14.45

30.84

44.22

33.24 35.08

0.00

10.00

20.00

30.00

40.00

50.00

60.00

2009 2010 2011 2012 2013

Export of HS 26 series Mining Ores from Brazil (in USD Billions)

370 373398 398

0

100

200

300

400

500

2010 2011 2012 2013

Production of Iron Ore in Brazil (in million Metric Tons)

Brazil is the major player in the export of Niobium, Iron Ore,

Manganese, Tantalite, Graphite, Bauxite and Ornamental

Rocks. It imports Copper, Diatomite, Phosphate and Zinc.

Production of iron ore is expected to increase by 451 million

tons by 2016.

Increase in Supply: Brazil along with Australia, two leading

iron ore producing countries are expected to increase their

supply to 90% by 2020.

Mining giants VALE and Rio Tinto continue to increase

output.

Fall in prices have been witnessed due to oversupply and

decrease in demand from the major consumer (China).

Source: International Trade Centre, statista.com, mining.com, ibram.org.br


Mining Ores – Suppliers in Brazil

16

0

5

10

15

20

25

China Japan Netherlands Germany Korea

Top Importers of HS 26 series Mining Ores from Brazil (in USD Billions)

2009 2010 2011 2012 2013

Brazil has the world's top four biggest iron ore mines including the world biggest Carajas iron ore mine, which is wholly owned and

operated by VALE (world's biggest iron ore producing company).

The world's second biggest iron ore mining operation Samarco Alegria is owned and operated by a 50-50 joint venture between

Samarco and BHP Billiton.

Brazil also hosts Anglo American's wholly-owned Minas-Rio iron ore mine which is the world's ninth biggest by reserves.

Source: International Trade Centre, mining-technology.com, platts.com

Supplier Locations


OIL SEEDS (HS 12 SERIES)


Oil seeds – Market Trends

18

11.57 11.18

16.53 17.68

23.03

0.00

10.00

20.00

30.00

2009 2010 2011 2012 2013

Export of HS 12 series Oil seeds from Brazil (in USD Billions)

75,30066,500

82,000 86,70094,000

3,351 3,239 2,230 2,900 2,580

0

20,000

40,000

60,000

80,000

100,000

2010 2011 2012 2013 2014

Production of Soybean and Cottonseed Oil seed in Brazil (in 1000 Metric Tons)

Soybean Oilseed Cottonseed Oilseed

227

295326

364

290

83116 110

195 200

83 88 95 95 950

100

200

300

400

2010 2011 2012 2013 2014

Production of Peanut, Sunflower and Peanut Oil seed in Brazil (in 1000 Metric Tons)

Peanut Oilseed Sunflowerseed Oilseed

Palm Kernel Oilseed

27%

23%7%

5%

4%

34%

Top Exporters of HS 12 series Oil seeds in 2013

USA

Brazil

Canada

Agentina

Netherlands

Others

Soybean is the primary oilseed produced in Brazil followed by Cottonseed.

Source: International Trade Centre, gain.fas.usda.gov


Oil seeds – Suppliers in Brazil

19

0

5

10

15

20

China Spain Netherlands Thailand Taipei

Top Importers of HS 12 series Oil seeds from Brazil (in USD Billions)

2009 2010 2011 2012 2013

Though some states and regions of Brazil are likely to witness dryness; with the introduction of new soybean seed genetics and

improved farm management practices, yields are expected to increase marginally at a national level.

Brazil’s Agriculture Research Corporation (Embrapa), Brazilian Association for Non-GE Producers (ABRANGE), and Mato Grosso

Soybean Producer’s Association (Aprosoja) launched “Free Soy” (“Soja Livre”) to pursue development of commercially competitive

non-GE varieties to aid Brazil’s continuing role as the main supplier of European and Asian markets of these products.

Source: International Trade Centre, gain.fas.usda.gov


Supplier Locations

MINERAL FUELS (HS 27 SERIES)


16.2719.84

31.62 31.42

22.40

0.00

10.00

20.00

30.00

40.00

50.00

2009 2010 2011 2012 2013

Export of HS 27 series Mineral fuels from Brazil (in USD Billions)

Mineral fuels – Market Trends

21

11%

10%

5%

5%

1%68%

Top Exporters of HS 27 series Mineral fuels in 2013

Russia

Saudi Arabia

UAE

USA

Brazil

Others

Recent discoveries of large offshore, pre-salt oil deposits could Increase domestic oil production

More than 90% of Brazil's oil production is offshore in very

deep water and consists of mostly heavy grades.

The world's largest oil discoveries in recent years have come

from Brazil's offshore, pre-salt basins.

Along with the potential to significantly increase oil production

in the country, the pre-salt areas are estimated to contain

sizable natural gas reserves as well.

In March 2013, Brazil launched a 10-year energy plan that

aims to expand oil production to over 5 million barrels/day by

2021, a decrease from its previous plan of over 6 million

barrels/day by 2020. The plan sets targets for oil exports of

over 2.25 million barrels/day by 2021.

1,812.231,950.36

2,054.67 2,105.41 2,061.23 2,023.87

445.67363.03

444.61514.89

598.23

752.20

0.00

200.00

400.00

600.00

800.00

1,000.00

1,200.00

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

2008 2009 2010 2011 2012 2013

In b

illi

on

cu

bic

feet

In 1

,000 b

arr

els

/day

Production of Crude Oil and Natural Gas in Brazil

Crude Oil Natural Gas

Source: International Trade Centre, eia.govNote: Crude oil production in 1,000 barrels/day and natural gas production in billion cubic feet


Mineral fuels – Suppliers in Brazil

22

0

1

2

3

4

5

6

7

China USA Netherlands india Chile

Top Importers of HS 27 series Mineral fuels from Brazil (in USD Billions)

2009 2010 2011 2012 2013

About 18% of the total exports of mineral fuels is sent to ship stores and bunkers across different regions.

State-controlled Petrobras is the dominant participant in Brazil's oil sector, holding important positions in upstream, midstream, and

downstream activities.

Royal Dutch Shell was the first foreign crude oil producer in the country, and it has now been joined by Chevron, Repsol, BP,

Anadarko, El Paso, Galp Energia, Statoil, BG Group, Sinopec, ONGC, and TNK-BP.

Source: International Trade Centre, eia.gov


Supplier Locations

MEAT (HS 02 SERIES)


Meat – Market Trends

24

9.89

11.8813.72 13.70

14.79

0.00

10.00

20.00

2009 2010 2011 2012 2013

Export of HS 02 series Meat from Brazil (in USD Billions)

3015 3130 3195 3369.616 3464.52

10215.5 9940.3510692.556

11421.73 11532.84

9024 9395 9115 9030 9307

0

2000

4000

6000

8000

10000

12000

14000

2008 2009 2010 2011 2012

Production of Meat (Pig, Chicken, Cattle) from Brazil (in 1,000 tons)

Meat, Pig Meat, Chicken Meat, Cattle

13%

12%

9%

8%

7%

51%

Top Exporters of HS 02 series Meat in 2013

USA

Brazil

Germany

Netherlands

Australia

Others

29050 28450 28900 29150 29500

21500 21600 22000 21800 23000

0

5000

10000

15000

20000

25000

30000

35000

2008 2009 2010 2011 2012

Production of Meat (Goat, Horse) from Brazil (in tons)

Meat, Goat Meat, Horse

The industry in Brazil has achieved strong growth over the decade particularly due to investments in herd rebuilding through

genetics, changing of production systems to feedlot systems, as well as other infrastructural developments.

Source: International Trade Centre, mordorintelligence.com


Meat – Suppliers in Brazil

25

0

0.5

1

1.5

2

2.5

China Russia Saudi Arabia Venezuela Japan

Top Importers of HS 02 series Meat from Brazil (in USD Billions)

2009 2010 2011 2012 2013

Brazil is the world's largest beef exporter with the world's largest commercial cattle herd; however, the production cycle needs to be

more efficient to supply internal and external demands in the future.

Large farm land availability, ample feedstuffs supplies, a large domestic consumer market, and liberalization of trade barriers have

allowed large firms to achieve economies of size that have made the country a major, growing source of meat production.

Brazil dominated the South American market until it shifted from Venezuela towards the Middle East. Argentina filled the void and

surpassed Brazil in 2013 and have a market share of suppliers with about 41% followed by Brazil at 40%.

Source: International Trade Centre, animalfrontiers.org, brazilianbeef.org.br, apps.fas.usda.gov, thebrazilbusiness.com


Supplier Locations

AUTOMOTIVE (HS 87 SERIES)


Automotive – Market Trends

27

Industry aims at fostering innovation and intensifying the local productive chain in the automotive industry as well as

delineating the requirements for automakers and suppliers.

18%

11%

10%

6%1%

54%

Top Exporters of HS 87 series Automotive in 2013

Germany

Japan

USA

Mexico

Brazil

Others

120.994

189.941

223.388

132.953

187.089

30.021 40.53 49.37336.63 40.111

0

50

100

150

200

250

2009 2010 2011 2012 2013

Production of Trucks and Bus in Brazil (in 1,000 Units)

Trucks Bus

8.46

12.0913.76

12.6014.10

0.00

10.00

20.00

2009 2010 2011 2012 2013

Export of HS 87 series Automotive from Brazil (in USD Billions)

Source: International Trade Centre, wsj.com, bloomberg.com, rolandberger.us, anfavea.com.br


2,546 2,575 2,585 2,519 2,589 2,723

670 608797 888 813

989

0

500

1,000

1,500

2,000

2,500

3,000

2008 2009 2010 2011 2012 2013

Production of Cars and Goods Carriers in Brazil (in 1,000 Units)

Cars Goods Carriers

Automotive – Suppliers in Brazil

28

0

2

4

6

8

10

Argentina Mexico Chile Peru USA

Top Importers of HS 87 series Automotive from Brazil (in USD Billions)

2009 2010 2011 2012 2013

Brazil sells about 85% of production to the domestic market, and the rest goes to neighboring Argentina, a regional trade partner.

On the other hand, import duties paid by other foreign clients, Brazil's expensive labor, electricity and other costs have made the

country's vehicle sector uncompetitive.

Despite Brazil’s current severe economic slowdown, Brazilian car makers will have the capacity to manufacture six million veh icles

annually by 2017

Brazil has logged some new plants of its own. In 2014, Nissan opened a USD1.5 billion complex in Resende, and Chery Automobile

has a USD530 million factory in São Paulo state that will start production this year, marking the Chinese automaker’s first major

investment outside its home country. Source: International Trade Centre, thebrazilbusiness.com, businessweek.com, rolandberger.us


Supplier Locations

INDUSTRIAL MACHINERY (HS 84

SERIES)


Industrial Machinery – Market Trends

30

Brazil's capital goods sector is in the process of ongoing modernization of production supported predominantly by domestic

manufacturers rather than imports.

19%

12%

11%

7%1%

50%

Top Exporters of HS 84 series Industrial Machinery in 2013

China

Germany

USA

Japan

Brazil

Others

8.06

10.89

14.08 13.8812.89

0.00

10.00

20.00

2009 2010 2011 2012 2013

Export of HS 84 series Industrial Machinery from Brazil (in USD Billions)

55,024

71,763

63,427 64,456

73,061

986 2,234 2,929 2,939 2,1394,503

7,007 7,630 7,485 8,778

3,865 5,948 6,177 7,420 8,549

0

20,000

40,000

60,000

80,000

2009 2010 2011 2012 2013

Production of Agricultural Machinery in Brazil

Wheel Tractors Crawler Tractors Tillers Combines Loaders & Backhoes

In 2013, the performance of Brazilian machine and equipment

sector was weaker than in 2012, with net revenues falling by

approximately 5%.

Exports decreased by 11%, while imports registered a 7%

increase.

Although some subsectors of the industry related to

agriculture and transport performed well, others linked to

infrastructure were hit by weak demand largely due to low

rate of investments.

However, government spending on infrastructure will continue

in the coming year of elections, a fact that will ensure a

steady demand for machinery and equipment.

Source: International Trade Centre, cdn-www.securities.com


Industrial Machinery – Suppliers in Brazil

31

0

0.5

1

1.5

2

2.5

3

3.5

USA Argentina Mexico Netherlands Germany

Top Importers of HS 84 series Industrial Machinery from Brazil (in USD Billions)

2009 2010 2011 2012 2013

The prospects for the sector are favorable due to expectations for continued domestic demand and recovery of the global markets.

Although imports will continue to affect the locally manufactured capital goods, analysts estimate that the volume of imports will

gradually fall in the coming years. Another boon for the sector is the forecast for about BRL 1.19 trillion worth of investments in

transport, logistic, sanitation, energy and real estate by 2018.

Source: International Trade Centre, cdn-www.securities.com


Supplier Locations

SUGAR (HS 17 SERIES)


Sugar – Market Trends

33

Sugar confectionery is expected to register a steady volume and a constant CAGR of 2% between 2013 and 2018. With

increasing purchasing power among low-income consumers, it is expected for the trend to continue.

23%

6%

6%

5%5%

55%

Top Exporters of HS 17 series Sugar in 2013

Brazil

Thailand

France

Germany

USA

Others

8.57

12.95

15.15

13.0312.01

0.00

10.00

20.00

2009 2010 2011 2012 2013

Export of HS 17 series Sugar from Brazil (in USD Billions)

31,048 32,95738,006 35,924 38,244 37,709

0

10,000

20,000

30,000

40,000

50,000

2008 2009 2010 2011 2012 2013

Production of Sugar in Brazil (in 1,000 metric tons)

Centrifugal Sugar

Due to weather related problems in the center-southern

producing region, a decline in the production of sugarcane is

expected.

Sugar Confectionery consists of Boiled Sweets, Liquorice,

Lollipops, Medicated Confectionery, Mints (Power Mints,

Standard Mints), Pastilles, Gums, Jellies and Chews, Toffees,

Caramels and Nougat

Rising raw material costs continue to influence the prices of

sugar confectionery, driven mainly by the volatility of the price

of sugar.

Source: International Trade Centre, thecropsite.com, euromonitor.com, reuters.com


Sugar – Suppliers in Brazil

34

0

0.5

1

1.5

2

China UAE Algeria Bangladesh Russia

Top Importers of HS 17 series Sugar from Brazil (in USD Billions)

2009 2010 2011 2012 2013

Brazil’s center south region is the main sugar crop growing region.

Approximate Sugar and Gum Confectionery Market Share in Brazil: Mondelez (56%), Arcor (10%), Riclan (9%), Perfetti Van Melle

(8%), IindtFerrero (7%)

Source: International Trade Centre, confectionerynews.com


Supplier Locations

IRON AND STEEL PRODUCTS (HS

72 SERIES)


Iron and steel products – Market Trends

36

Industry will witness an increased competition in nearly all the products especially as there is a focus shift to high-value,

higher margin steel products.

33.7

26.5

32.835.2 34.7 34.2

0

10

20

30

40

50

2008 2009 2010 2011 2012 2013

Production of Crude Steel in Brazil (in million metric tons)

Crude Steel

10%

9%

7%

6%

2%66%

Top Exporters of HS 72 series Iron and steel products in 2013

China

Japan

Germany

Korea

Brazil

Others

6.728.39

12.0110.71

8.37

0.00

10.00

20.00

2009 2010 2011 2012 2013

Export of HS 72 series Iron and steel products from Brazil (in USD Billions)

World's largest iron ore mine, Carajas Mine is located in the

Northern Brazil.

Steel demand is forecasted to grow at a 3.6% per annum

buoyed by the world cup infrastructure demand

Steel end-user markets in 2016 is forecast at 8.4%

(Infrastructure), 7.56% (Construction), 6.34% (Automotive),

5.7% (Oil & Gas).

However, prevailing overcapacity and low utilizations are

projected to maintain the prices under pressure.

Source: International Trade Centre, ey.com


Iron and steel products – Suppliers in Brazil

37

0

1

2

3

4

USA Netherlands Argentina China Japan

Top Importers of HS 72 series Iron and steel products from Brazil (in USD Billions)

2009 2010 2011 2012 2013

Brazil comprise 14 private companies, controlled by eleven business groups and operating 29 mills in 10 states.

More and more steel manufacturers have integrated mining into the value chain to protect their margins.

Source: International Trade Centre, ey.com, acobrasil.org.br


Supplier Locations

SHIPS & BOATS (HS 89 SERIES)


Ships & boats – Market Trends

39

24%

19%

11%5%

4%

37%

Top Exporters of HS 89 series Ships & boats in 2013

Korea

China

Japan

Brazil

Poland

Others0.12 0.18

1.151.55

7.93

0.00

2.00

4.00

6.00

8.00

10.00

2009 2010 2011 2012 2013

Export of HS 89 series Ships & boats from Brazil (in USD Billions)

1,417,797

1,230,856

919,103

464,342

85,200 81,000 68,240 22,310

-

500,000

1,000,000

1,500,000

Orders by Ship Type in Brazil (in Gross Tonnage) in 2013

Tanker FPSO Drilling Ship Offshore

Containership Bulk Carrier Gas Tanker Others

Brazilian shipbuilders completed 29 merchant ship new

buildings in 2012 representing 275,072 of gross tonnage.

The recovery of the Brazilian shipbuilding industry was seen

as a prestige project of national importance, and a vote-

winning policy, creating much-needed employment

opportunities.

However, the picture for the Brazilian shipbuilding industry is

far from rosy as the global shipbuilding industry suffers from

major overcapacity.

In 2013, Petrobas' P55 Floating Production Unit was installed

in a water depth of 1790m in the Campos basin.

Source: International Trade Centre, ihsmaritime.wordpress.com, fpso.com, bureauveritas.com


Ships & boats – Suppliers in Brazil

40

Brazil’s state-owned Petrobras and its transportation subsidiary, Transpetro, are driving the majority of vessel constructions.

The largest ships for delivery are wholly owned by Transpetro while many of the other new buildings will ultimately end up operating

for the same company under long-term charters.

Ship completions during 2012 were dominated by the offshore support vessel sector, which accounted for 22 of the 29 vessels built.

Source: International Trade Centre, ihsmaritime.wordpress.com


Supplier Locations

0

1

2

3

4

Panama Netherlands Switzerland Mexico

Top Importers of HS 89 series Ships & boats from Brazil (in USD Billions)

2009 2010 2011 2012 2013

ANIMAL FODDER (HS 23 SERIES)


Animal fodder – Market Trends

42

Brazil’s animal feed production in 2013 was estimated to be about 64.6 million tons, which was about 2.6% up from 2012.

15%

15%

9%

8%6%

47%

Top Exporters of HS 23 series Animal Fodder in 2013

Argentina

USA

Brazil

Netherlands

Germany

Others

4.88 5.045.99

6.90 7.14

0.00

2.00

4.00

6.00

8.00

10.00

2009 2010 2011 2012 2013

Export of HS 23 series Animal Fodder from Brazil (in USD Billions)

Brazil is the major producer of feed in South America and

ranks third in the global feed production.

Demand for meat products promotes the market needs of

animal feed and feed additives stimulate the rapid

development of feed industry.

Poultry feed and swine feed contributes to about 80% of the

total feed production. Corn and soybean are the main

ingredients for animal feed in Brazil.

Poultry feed production has seen a growth of 3.6% in 2014

compared to 2013.

Poultry, 58%

Swine, 24%

Dairy, 8%

Beef, 4%

Dog & Cat, 3%

Horse, 1% Aqua, 0.80%

Others, 1.20%

Brazilian feed consumption by species

Source: International Trade Centre, feed-pellet-mill.com, sindiracoes.org.br, wattagnet.com


Animal fodder – Suppliers in Brazil

43

0

0.5

1

1.5

2

2.5

3

Netherlands France Germany Korea Thailand

Top Importers of HS 23 series Animal Fodder from Brazil (in USD Billions)

2009 2010 2011 2012 2013

Brazilian feed industry was challenged with legal uncertainties, rights and duties issues, successive changes in legislation and

regulatory frameworks, excessive bureaucracy and complex procedures, as well as the heavy charge on costs and prices due a

cumulative system of taxes (the Brazilian feed industry was affected by a particular set of taxes, mainly the combination of the

PIS/COFINS on livestock production chains, and on most of the feedstuffs used for poultry and swine).

Source: International Trade Centre, feed-pellet-mill.com, sindiracoes.org.br, wattagnet.com


Supplier Locations

CEREALS (HS 10 SERIES)


Cereals – Market Trends

45

Quality is also expected to increase with better seed varieties and improved farm management practices.

15%

15%

9%

8%6%

47%

Top Exporters of HS 10 series Cereals in 2013

Argentina

USA

Brazil

Netherlands

Germany

Others1.64

2.60

4.03

6.557.07

0.00

2.00

4.00

6.00

8.00

10.00

2009 2010 2011 2012 2013

Export of HS 10 series Cereals from Brazil (in USD Billions)

58,93350,720 55,364 55,660

71,07380,538

12,061 12,651 11,236 13,477 11,550 11,759

0

20,000

40,000

60,000

80,000

100,000

2008 2009 2010 2011 2012 2013

Production of Cereals (Corn, Rice) in Brazil (in 1,000 tons)

Maize Rice

6,027

5,056

6,1715,690

4,418

5,718

239 253 395 373 431 479

0

2,000

4,000

6,000

8,000

2008 2009 2010 2011 2012 2013

Production of Cereals (Wheat, Oats) in Brazil (in 1,000 tons)

Wheat Oats

Source: International Trade Centre, gain.fas.usda.gov, agrocharts.com


Cereals – Suppliers in Brazil

46

0

0.2

0.4

0.6

0.8

1

Korea Japan Taipei Iran Egypt

Top Importers of HS 10 series Cereals from Brazil (in USD Billions)

2009 2010 2011 2012 2013

Corn and Rice are the major cereals produced in Brazil and the cereal crops industry is broken down into three segments: wheat,

coarse grains (barley, oats, sorghum and other coarse grains), and rice.

In 2013, Kellogg remains by far the leader in breakfast cereals with a 39% value share mainly due to its long presence in the

category and investments in new packaging, promotion and advertising campaigns.

Source: International Trade Centre, gain.fas.usda.gov, agrocharts.com


Supplier Locations

WOOD PULP (HS 47 SERIES)


Wood Pulp – Market Trends

48

Despite currency volatility and slowing demand from China and Europe, Brazil, Chile and other key Latin American markets

continue to churn out wood pulp for export, and the sector is seeing increased interest from international players.

20%

15%

11%6%6%

42%

Top Exporters of HS 47 series Wood Pulp in 2013

USA

Canada

Brazil

Chile

Sweden

Others

3.32

4.76 5.00 4.715.19

0.00

2.00

4.00

6.00

8.00

10.00

2009 2010 2011 2012 2013

Export of HS 47 series Wood Pulp from Brazil (in USD Billions)

12.697 13.315 14.164 13.922 13.97714.995

9.409 9.428 9.978 10.159 10.26 10.428

0

5

10

15

20

2008 2009 2010 2011 2012 2013

Production of Pulp and Paper in Brazil (1,000 Tons)

Pulp Paper

Owing to many years of genetic improvement work, Brazil’s

eucalyptus plantations have the world’s best growth rates,

averaging about 40 m3 per hectare per year.

Brazilian industry is the world’s lowest cost producer of

bleached eucalyptus pulp. Brazil currently produces 12.8

million tons of market chemical pulp per year.

The social and economic development and the increase in

the population’s income have resulted in a greater demand

for books, notebooks, newspapers and magazines, packaging

for food, medicines and personal hygiene items.

Source: International Trade Centre, paperonweb.com, cfs.nrcan.gc.ca, gfmag.com, bracelpa.org.br


Wood Pulp – Suppliers in Brazil

49

0

0.5

1

1.5

2

China Netherlands USA Italy Belgium

Top Importers of HS 47 series Wood Pulp from Brazil (in USD Billions)

2009 2010 2011 2012 2013

Optimistic perspectives in the economy and the demand from emerging markets maintain investment programs in the sector

By the end of 2017, when forests planted in 2010 will have completed a new growth cycle, pulp production is expected to go from

13.4 million to 20 million tons. During the same period, paper production will also increase from 9.3 million to 12.5 million tons, and

planted forest areas will be 25% larger.

In addition to high quality, Brazilian pulp is known for its environmental attributes, i.e., originates from 100% highly productive planted

forests, a renewable natural resource that absorbs and stores large CO2 volumes from the atmosphere.

Source: International Trade Centre, bracelpa.org.br


Supplier Locations

COFFEE, TEA AND SPICES (HS 09

SERIES)


Coffee, tea and spices – Market Trends

51

39,100

53,30044,800

54,50049,200

57,600

0

20,000

40,000

60,000

80,000

2008 2009 2010 2011 2012 2013

Production of Green Coffee in Brazil (in 1,000 60kg Bags)

Green Coffee

4,752 4,6864,278

3,520

1,496

0

2,000

4,000

6,000

2008 2009 2010 2011 2012

Production of Tea in Brazil (in tons)

Tea

3.98

5.40

8.32

6.02

4.95

0.00

10.00

2009 2010 2011 2012 2013

Export of HS 09 series Coffee, tea and spices from Brazil (in USD Billions)

11%

9%

7%

7%

5%

61%

Top Exporters of HS 09 series Coffee, tea and spices in 2013

Brazil

Vietnam

Germany

India

China

Others

Source: International Trade Centre, knoema.com, faostat.fao.org


Coffee, tea and spices – Suppliers in Brazil

52

Brazil is the largest producer of coffee followed by Vietnam, Colombia and Indonesia. Brazil contributes to about 30% of the global

coffee output.

Weather in Brazil's arabica-growing regions has been less than favorable and hence the industry has witnessed a surge in price for

Arabica coffee.

There has also been an expansion to the production of specialty teas such as herbal tea and fruit tea. Brazilian green tea is also

enjoying success. New plantations in the southern state of Paraná are steadily increasing their production of green tea.

0

0.5

1

1.5

2

USA Germany Japan Italy Belgium

Top Importers of HS 09 series Coffee, tea and spices from Brazil (in USD Billions)

2009 2010 2011 2012 2013

Source: International Trade Centre, brecoder.com, iandmsmith.com, cnbc.com, wsj.com, teagenius.com, dailycofeenews.com


Supplier Locations

ELECTRICAL, ELECTRONIC

EQUIPMENT (HS 85 SERIES)


Electrical, electronic equipment – Market Trends

54

Machinery and equipment production accounts for approximately 7% of the overall Industrial Production Index

27%

8%

7%

7%USD 4.747 billion, 0%

51%

Top Exporters of HS 85 series Electrical, electronic equipment in 2013

China

USA

Germany

Korea

Brazil

Others

5.26 5.00 5.14 4.92 4.75

0.00

2.00

4.00

6.00

8.00

10.00

2009 2010 2011 2012 2013

Export of HS 85 series Electrical, electronic equipment from Brazil (in USD Billions)

Industry consists of about 4,000 companies of which around

80% of them are small sized companies.

Between 2003 and 2011, the industry registered a growth of

about 110% in Sales due to continuous increase in domestic

demand.

Major Export Segments: Electrical and electronic

components, industrial equipment, power generation and

transmission & distribution are the major export segments

from Brazil.

56.1

70.7

82.573.9 72.6

0

20

40

60

80

100

2009 2010 2011 2012 2013

Sales of Electrical, electronic equipment in Brazil (in USD Billions)

Source: International Trade Centre, wesgro.co.za


Electrical, electronic equipment – Suppliers in Brazil

55

0

0.5

1

1.5

2

Argentina USA Colombia Germany Chile

Top Importers of HS 85 series Electrical, electronic equipment from Brazil (in USD

Billions)

2009 2010 2011 2012 2013

Top destination markets for exports of machinery and equipment from Brazil are United States with 21%, followed by Argentina

(15.4%), Mexico (6.6%), Germany (5.4%), Netherlands (4.7%), Colombia (3.7%), Chile (3.6%), Paraguay (3.4%), Peru (2.9%) and

Venezuela (2.7%)

Source: International Trade Centre, wesgro.co.za


Supplier Locations

AERONAUTICAL (HS 88 SERIES)


Aeronautical – Market Trends

57

37%

18%

14%

6%

1%

24%

Top Exporters of HS 88 series Aeronautical in 2013

USA

France

Germany

UK

Brazil

Others

4.19 4.36 4.345.22

4.37

0.00

2.00

4.00

6.00

8.00

10.00

2009 2010 2011 2012 2013

Export of HS 88 series Aeronautical from Brazil (in USD Billions)

Industry Overview: According to the Brazilian General Aviation Association, Brazil has the third largest helicopter fleet in the world.

In 2012, there were 1,893 registered helicopters, mostly concentrated in the State of Sao Paulo (690), Minas Gerais (219), and Rio

de Janeiro (422). More than one third of the fleet is less than 5 years old.

Boeing and Airbus are contributing to the development of aircraft industry in Brazil by choosing the São José dos Campos

Technology Park as the site for their research and technology centers.

It is expected that Boeing’s research center will focus its work on sustainable biofuels for aviation, advanced traffic management,

advanced metals and biomaterials, and technology for support and services.

Aeronautical products must meet the Brazilian aeronautical requirements and obtain the certification issued by ANAC (Agencia

Nacional de Aviação Civil), the Brazilian agency responsible for the regulation and the safety of civil aviation. The certification is the

recognition that the design of a product is in accordance with the airworthiness requirements adopted by the country

Source: International Trade Centre, Aerospace Resource Guide


Aeronautical – Suppliers in Brazil

58

0

0.5

1

1.5

2

USA Ireland Venezuela China Kenya

Top Importers of HS 88 series Aeronautical from Brazil (in USD Billions)

2009 2010 2011 2012 2013

The industry is led by Embraer, the world’s third largest aircraft manufacturer. In 2013, Embraer delivered 215 aircraft, which

consisted of 90 commercial jets, 119 business jets, and 6 military aircraft. The other key player is Helibras, the Brazilian subsidiary of

Airbus Helicopters. Every year the company delivers around 36 helicopters produced in Itajuba, State of Minas Gerais.

Helibras, the Brazilian subsidiary of Airbus Helicopters has been producing helicopters in Brazil since 1978 and is taking a position as

a world class helicopter manufacturer. Helibras has delivered more than 500 helicopters to the Brazilian civilian, military, and law

enforcement markets.

Source: International Trade Centre, Aerospace Resource Guide


Supplier Locations

Disclaimer


The Analysis and Statements in this Report represent the considered views of Dragon Sourcing Ltd (DSL). The

Report includes ‘forward looking statements’ and opinions based on the analyst’s current analysis and judgment

of the Industry. Although DSL believes the outcomes expressed in such ‘forward looking’ statements are based

on reasonable assumptions, such statements are not a guarantee of future performance and actual results or

developments may differ materially from those in forward- looking statements. Factors that could cause actual

results to differ materially from those in forward- looking statements include the general economic,

environmental, market, business or government conditions. While DSL has made every reasonable effort to

ensure the veracity of the information presented, it cannot expressly guarantee the accuracy and reliability of the

estimates, forecasts and conclusions.

No part of this report may be distributed, copied or reused without prior written permission from Dragon

Sourcing Ltd

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