Brazil Economic Weekly

Transcription

1 Macroeconomic Research Department Macroeconomic Research Department Brazil Economic Weekly April 1 st 216 BNDES lending continues to decrease this year Daniela Cunha de Lima Over the past few years we have witnessed a substantial increase in the credit lines granted by the BNDES. The portfolio more than doubled from 27 to 215, reaching approximately R$68 billion. This growth occurred in both the BNDES on-lending portfolio and the BNDES direct lending portfolio. Despite the deceleration in the second half of last year, the beginning of this year has shown a more pronounced decline in lending. Several factors explain this trend, including, in our view, tighter credit conditions, a slowing economy (and thereby lower demand) and the decrease or end of government programs. When comparing the BNDES trends with the performance of the credit market as a whole, we can see a moderation in the former for the first time since 212 it will grow at a slower pace than the national consolidated average. We are forecasting growth of 4.7% this year for consolidated credit issued through the National Financial System, which is a decline from the 6.7% growth recorded last year. For the directed credit portfolio (including BNDES and housing, among others), we expect an increase of 7% this year against the 9.8% increase recorded last year. For the BNDES inventory alone, growth is expected to reach 3%. Major commodities prices are expected to remain relatively stable in the coming months Myriã Tatiany Neves Bast BRAZIL ECONOMIC WEEKLY International prices for major commodities have shown some recovery in recent weeks, even though there have been no significant changes to the fundamentals since the beginning of the year. In most cases, we are still facing a situation of oversupply. In our view, this recent rise in prices is more closely linked to the risk of deliberate cuts in oil supply and the possible effects of La Niña on grain prices. Given that we currently see a low probability of these risks materializing in a significant way, we are not contemplating a sustained upward trajectory for prices. 1

2 BNDES lending continues to decrease this year Daniela Cunha de Lima Over the past few years we have witnessed a substantial increase in the credit lines granted by the BNDES. The portfolio more than doubled from 27 to 215, reaching approximately R$68 billion. This growth occurred in both the BNDES on-lending portfolio, which are lines that use commercial banks as intermediaries as well as the BNDES direct lending portfolio wherein companies take out loans directly from the BNDES. In 215, almost the entire BNDES portfolio (9%) was linked to credit connected to investments, while agricultural loans accounted for 8% of the bank s portfolio and working capital lines, 2% On-lending Direct + 14% BNDES Portfolio (R$ million) * (*) 216 until February In the chart below, we can see the high growth rates of the BNDES direct lending portfolio, immediately after exiting the 28 crisis, and the BNDES on-lending portfolio, from 21 on. Despite the downturn, even during 211 until mid-214, the rapid pace of inventory growth continued. Since then, the inventory of BNDES on-lending lines has declined, and, in February this year, they fell 7% over the same period last year, in nominal terms. At the same time, the inventory of BNDES direct lending continues to grow, but at a slower rate BNDES Concessions - in R$ million Domestic Outlook % jan-fev/15 jan-fev/16 2

3 Nominal and interannual variation of BNDES credit inventory 75,% 65,% 55,% 68,8% 51,9% Direct On-lending 45,% 41,9% 35,% 28,9% 25,% 15,% 14,% 5,% 19,9% 2,2% 7,% 25,8% 5,9% 21,3% 11,3% 19,5% 8,8% 25,1% 15,1% -5,% -15,% Feb-8 May-8 Aug-8 Nov-8 Feb-9 May-9 Aug-9 Nov-9 Feb-1 May-1 Aug-1 Nov-1 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15-1,7% Aug-15 Feb-16-7,% Despite the deceleration in the second half of last year, the beginning of this year has shown a more pronounced decline in lending. In the first two months, lending fell by 3% from the same period last year. We believe that several factors are behind this trend. First, credit conditions are tighter. Since mid-215, the BNDES has been increasing its interest rates on disbursements, which are now approaching the levels recorded in ,7 1 12,2 13,2 9, 11,5 Working Capital Total Investments Agroindustrial 1, 9,3 13,6 13, 9,8 11,1 14, 12,5 12, BNDES financing interest rates - % p.a. 8 7, ,2 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 5,7 8,1 4,9 7,1 5,8 8,6 Domestic Outlook Yet due to the weakening economy, the uncertainties related to this scenario and the idleness present in various segments such as the automotive, steel and capital goods segments, we have seen a sharp decline in investments. Last year, the pace of the decline reached 14% and we expect a decrease of 11% in 216. Since BNDES credit is related to the investment cycle, there has naturally been a decline in demand from borrowers. Finally, it is also worth highlighting the end or reduction of government programs such as the PSI program, created in 29, which aimed to stimulate the production, acquisition and export of capital goods and innovation. With the closure of the program at the end of last year, these loans will once again have the TJLP long-term interest rate as the prime rate. When comparing the BNDES trends with the performance of the credit market as a whole, we can see a moderation in the former for the first time since 212 it will grow at a slower pace than the national consolidated average. We are forecasting growth of 4.7% this year for consolidated credit issued through the National Financial System, which is a decline from the 6.7% expansion recorded last year. For the directed credit portfolio (including BNDES and housing, among others), we expect an increase of 7% this year against the 9.8% increase recorded last year. For the BNDES inventory alone, growth is expected to reach 3%. 3

4 * Depec - Bradesco Total Credit 2.6% 18.8% 16.4% 14.5% 11.3% 6.7% 4.7% Free Funds 16.9% 15.8% 14.2% 7.7% 4.6% 3.8% 2.5% Individuals 2.5% 12.5% 1.8% 7.3% 5.5% 2.8% 2.5% Corporations 13.2% 19.5% 17.7% 8.1% 3.8% 4.9% 2.6% Directed Funds 27.% 23.5% 19.9% 24.3% 19.6% 9.8% 7.% Annual growth of the credit stock - nominal variation Production and (*) projection: BRADESCO Domestic Outlook 4

5 Major commodities prices are expected to remain close to current levels in the coming months Myriã Tatiany Neves Bast International prices for major commodities have shown some recovery in recent weeks, beating the market consensus from the beginning of the year, which forecast stability at lower levels. There were no major changes in the fundamentals behind major products since the start of the year and, in most cases, we are still facing an oversupply situation. In our view, this recent rise in prices is more closely linked to the risk of deliberate cuts in oil supply and the possible effects of La Niña on the prices of major grains, as well as the dollar having lost value in relation to other currencies. Given that we currently see a low probability of these risks materializing in a significant way, we are not contemplating a sustained upward trajectory for prices. Below, we set forth our outlook for the major commodities. Oil: Prices are expected to remain close to US$4/barrel in the coming months The fundamentals of the oil market have not changed significantly in recent months. We still have an oversupply scenario exacerbated by the entry of a new player (Iran) and extremely high inventory levels worldwide. Yet, we have seen prices rising in recent months, reaching close to US$4/barrel. Speculation about an agreement to deliberately freeze OPEC production played a decisive role in this increase. Nevertheless, Iranian officials have signaled they will not participate in this stabilization of supply, given that they are still recovering their export levels with the end of international sanctions. OPEC s main producer, Saudi Arabia, is not expected to participate in this plan if Iran does not take part. As a result, the effect of such agreement if it happens would tend to be limited in terms of the global oil supply. In addition, the weakening of the dollar against other currencies is also exerting upward pressure on commodities prices in general, including oil. In the coming months, the trend of a weakening dollar should remain, but by the end of the year we believe there will be a reversal of this movement, which is expected to exert downward pressure on commodities markets. More recently, unplanned outages in Iraq have also contributed to rising prices. Reflecting these risks, investment funds increased their net long positions since February, betting on rising prices. Nevertheless, oil futures prices remain at low levels, which is necessary to reduce global supply, particularly from the US. In summary, given that (i) we do not expect significant cuts in oil production, (ii) we believe the dollar will strengthen by the end of the year and (iii) the fundamentals still show excess inventories worldwide this year, we expect oil prices to remain near US$4/ barrel in the coming months, ending the year at around US$45/barrel ,97 WTI price Non-commercial position and international price WTI Oil Global Outlook Nov-7 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar ,45 27,94-1 (*) Position of the non-commercial investment funds. The more positive it is, greater the expectation for rising prices (net purchased position). The opposite is also true when the net position is sold. 1 WTI forecasts, with the spread with Brent expected to be approximately US$2/barrel. 5

6 WTI Oil Price: current and one-year future ,59 91,2 16,43 93,54 81,42 Maturing T + 12 Maturing T + 1 (spot) ,44 64, ,88 51,56 4,45 48,7 34,73 41,25 44,53 39,79 27,45 24/1/214 24/2/214 24/3/214 24/4/214 24/5/214 24/6/214 24/7/214 24/8/214 24/9/214 24/1/214 24/11/214 24/12/214 24/1/215 24/2/215 24/3/215 24/4/215 24/5/215 24/6/215 24/7/215 24/8/215 24/9/215 24/1/215 24/11/215 24/12/215 24/1/216 24/2/216 24/3/216 Grains: Low probability of an increase in prices, subject to climate risks There were also no significant changes in the fundamentals behind grains, which continue to have good supply conditions and high inventory levels worldwide. In fact, recent reports continue to suggest that this good supply scenario will be maintained, with the possibility of Argentina increasing its wheat exports, the expected strong increase in the planted area of corn in the US and with strong prospects for the Brazilian soybean crop. The risk existing in this scenario is basically focused on climate issues, with the high probability of a La Niña event occurring this year. Depending on the intensity and duration of this event, the effects on the US crop may be large and lead to major productivity losses. The presence of this risk has led investment funds to decrease or eliminate their net short positions, expecting a price increase. While La Niña is, in fact, expected to occur 2, we are not, at this time, expecting it to be a major event. Therefore, we do not expect a significant price recovery this year US$ cents por bushel Soy price Nov-7 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar and international price Soy (*) Position of the non-commercial investment funds. The more positive it is, greater the expectation for rising prices (net purchased position). The opposite is also true when the net position is sold. Global Outlook and international price Corn (*) Position of the non-commercial investment funds. The more positive it is, greater the expectation for rising prices (net purchased position). The opposite is also true when the net position is sold , , , Corn price , Nov-7 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar , According to the NOAA, there is little more than a 5% chance of La Niña after September of this year. 6

7 Wheat price and international price - Wheat Nov-7 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar (*) Position of the non-commercial investment funds. The more positive it is, greater the expectation for rising prices (net purchased position). The opposite is also true when the net position is sold. Iron Ore: The fundamentals of the Chinese economy do not support higher prices Just as in the case of oil, the iron ore market has been facing an excess of supply since mid-214, with an attempt to expel some market players (notably Chinese mining companies). However, we saw strong increases in iron ore prices recently, nearly 4% on average from December 215 to March. Global Outlook , ,9 121,1 158,9 11,4 141,8 139,7 119,4 98, 87,3 14, 119, 18/8/11 13/1/11 8/12/11 2/2/12 29/3/12 24/5/12 19/7/12 13/9/12 8/11/12 3/1/13 28/2/13 25/4/13 2/6/13 15/8/13 1/1/13 5/12/13 3/1/14 27/3/14 22/5/14 17/7/14 11/9/14 6/11/14 1/1/15 26/2/15 23/4/15 18/6/15 13/8/15 8/1/15 3/12/15 28/1/16 24/3/16 91, 65, 47, 59, 39, 64, 59, Spot market price of iron ore in China (US$/ton) This strong rise in ore prices was linked to the prospect of improved economic activity in China. While the overall scenario is one of an economic downturn, the prospect of cuts to excess industrial capacity including the steel production chain and to incentivize infrastructure projects, somewhat alleviated the market s concerns about the Chinese economy. Given that we do not foresee a recovery in Chinese steel demand (since the real estate industry will remain weak and China s exports are expected to decrease), we remain wary of iron ore prices. Therefore, we believe that a return to levels below US$5/ton is still possible this year. In any event, Chinese mining companies are expected to continue suffering at the current price levels, which will, at some point, reduce that supply and support a fundamentally sound increase in prices. 7

8 Bradesco Macroeconomic Forecast Bradesco Macroeconomic Forescast * 217* DOMESTIC ACTIVITY, INFLATION AND INTEREST RATES GDP (%) Agriculture (%) Industry (%) Services (%) Private consumption (%) Government consumption (%) Investment (%) Exports of goods and services (%) Imports of goods and services (%) GDP (R$ billion - current prices) 2,72 3,19 3,333 3,885 4,373 4,85 5,316 5,687 6,12 6,384 6,98 GDP (US$ billion) 1,396 1,695 1,668 2,27 2,611 2,459 2,463 2,416 1,837 1,612 1,681 Population (million) Per Capita GDP (US$ - current prices) 7,281 8,716 8,469 11,83 13,229 12,343 12,255 11,919 8,985 7,822 8,97 Industrial Production - IBGE (%) Unemployment Rate - IBGE (%) Retail Sales - (%) CPI - IPCA - IBGE (%) CPI - FIPE (%) WPI - IGP-M - FGV (%) Nominal Interest Rates - Selic target (end of period - %) Nominal Interest Rates - Selic target (12-month - %) ,82 1,81 1,81 1,81 Real Interest Rates - Selic (12-month - %) ,25 4,54 4,54 4,54 EXTERNAL ACCOUNTS AND FX Trade Balance (US$ billion) Exports (US$ billion) Imports (US$ billion) Trade flow (exports + imports) (% of GDP) Deficit of Services and Income (US$ billion) Current Account Deficit (US$ billions) Current Account Deficit (% of GDP) Foreign Direct Investment (US$ billions) FX - end of period (R$ / US$) FX - yearly average (R$ / US$) Nominal FX devaluation (YoY - %) Nominal FX devaluation (average - %) International Reserves (US$ billion) Total Medium and Long term External Debt (US$ billion) FISCAL ACCOUNTS Primary Surplus (R$ billions) Primary Surplus (% of GDP) Public Sector Nominal Balance (% of GDP) Gross Public Debt (domestic and external) (R$ billion) 1,542 1,74 1,973 2,11 2,243 2,583 2,748 3,252 4,49 4,719 5,462 Gross Public Debt (domestic and external) (% of GDP) As of April 1 st (*) Forecast. na = not available. Source: Official figures Production and forecasts(*): BRADESCO 8

9 Team Octavio de Barros - Macroeconomic Research Director Marcelo Cirne de Toledo Global economics: Fabiana D Atri / Felipe Wajskop França / Thomas Henrique Schreurs Pires / Ellen Regina Steter Brazil: Igor Velecico / Estevão Augusto Oller Scripilliti/ Andréa Bastos Damico / Myriã Tatiany Neves Bast / Daniela Cunha de Lima / Ariana Stephanie Zerbinatti Brazilian sectors: Regina Helena Couto Silva / Priscila Pacheco Trigo Proprietary survey: Leandro Câmara Negrão / Ana Maria Bonomi Barufi Internships: Gabriel Marcondes dos Santos / Wesley Paixão Bachiega / Carlos Henrique Gomes de Brito Team - BRADESCO does not accept responsibility for any actions/decisions that may be taken based on the information provided in its publications and projections. All the data and opinions contained in these information bulletins is carefully checked and drawn up by fully qualified professionals, but it should not be used, under any hypothesis, as the basis, support, guidance or norm for any document, valuations, judgments or decision taking, whether of a formal or informal nature. Therefore, we emphasize that all the consequences and responsibility for using any data or analysis contained in this publication is assumed exclusively by the user, exempting BRADESCO from all responsibility for any actions resulting from the usage of this material. We all point out that access to this information implies acceptance in full of this term of responsibility and usage. The reproduction of the content in this report (partially or in full) is strictly forbidden except if authorized by BRADESCO or if the sources (the name of the authors, publication and BRADESCO) are strictly mentioned. 9