Brazil s economic growth

Transcription

1 Brazil s economic growth Real gross domestic product, Percent change from preceding year Source: International Monetary Fund, World Economic Outlook, April 2011.

2 Brazil s per capita GDP Based on purchasing power parity (PPP) US$ Source: International Monetary Fund, World Economic Outlook, April 2011.

3 Brazil s inflation rate Average consumer prices Percent change from preceding year Inflation target rate: 4.5% Source: Brazilian Institute for Geography and Statistics (IBGE).

4 Real-ly strong Exchange rate, January March 2011 Brazilian Real per US$ Sources: IMF-IFS, Bank of America and IHS Global Insight.

5 Copom determined to curb inflation Selic target rate Percent March 2011: 11.75% Source: Banco Central do Brasil (BCB).

6 Brazil s international reserves US$ billions Source: Banco Central do Brasil (BCB).

7 Brazil foreign direct investment Net flow US$ billions BCB estimate: $55 billion Sources: UNCTAD, Banco Central do Brasil (BCB).

8 Brazil international trade Percent change from preceding year 80 Exports Imports Source: IMF, International Financial Statistics (IFS).

9 Brazil s exports destination China 6.2% Others 16.7% Latin America and Caribbean 26.9% Others 17.5% Latin America and Caribbean 23.5% China 15.6% United States 18.2% Asia (excl.me and China) 9.1% European Union 22.9% United States 9.4% Asia (excl.me and China) 12.6% European Union 21.4% Source: Banco Central do Brasil (BCB).

10 Brazil s ethanol production By type, crop years Billions of Liters 30 Hydrous Anhydrous Sources: Brazilian Sugarcane Industry Association, UNICA and Ministry of Agriculture, Livestock and Food Supply, MAPA.

11 Fortune Global 500 Brazilian companies, 2010 Rank Company Revenues (US$ billions) 54 Petrobras $ Itaú Unibanco Holding S.A. $ Banco Bredesco S.A. $ Banco do Brasil $ Vale $23.31 Source: Fortune Magazine.

12 Top Brazilian companies Market cap, 2011 Company Market cap (US$ billions) Petrobras $ Vale $ Itaú Unibanco Holding S.A. $ Companhia de Bebidas Das Américas $89.63 Banco Bredesco S.A. $77.80 Source: University of Western Ontario Libraries.

13 World s top billionaires Brazil, 2011 Name Fortune (US$ billions) Eike Batista $30.0 Jorge Paulo Lemann $13.3 Joseph Safra $11.4 Marcel Herrmann Telles $6.2 Dorothea Steinbruch & Family $5.4 Source: Forbes.

14 Panel Brazil: Too Hot, Too Fast? May 4, 2011 Speaker: Marcela Meirelles, TCW Group

15 The Brazilian Currency War from a global perspective Ample global liquidity and very low US dollar funding rates. Perception that G3 Central Banks will keep interest rates low for a long period of time. Emerging markets assets offer high returns and the cost of hedging the exchange rate risk is at historical low levels.

16 The Brazilian Currency War from a global perspective

17 Capital controls produced a shift in the type of Inflows, but the overall volume of foreign investments remains very high

18 Strong foreign capital inflows may lead to overheating through two channels: 1) Lowering domestic borrowing rateslimited signs of that in Brazil Monetary policy rate and bank spreads remain at elevated levels Capital controls have made it more challenging to arbitrage between foreign and local interest rates 2) Generating an excessively strong domestic currency, which fuels domestic consumption- currently a bigger risk for Brazil Source: Central Bank of Brazil.

19 If an excessively strong exchange rate may lead to a boom in consumption and economic overheating, are further capital controls the adequate policy response? No, they are just a temporary fix. The long term solution addresses a change in the macroeconomic policy mix:

20 Brazil Growing Too Fast? Tomas Malaga

21 Growth Potential GDP

22 Investment and savings Source: IBGE, BCB e Itaú.

23 Demographics Demographic bonus starts to revert in 2023, implications for labor force and savings

24 Productivity growth

25 Productivity growth Privatized vs. Partially or Non- privatized sectors

26 Productivity growth Proceeds Breakdown by Sector

27 Income Distribution and Consumption A new middle class arising

28 A new middle class arising Source: FGV; Itaú.

29 Banking Loans (% of GDP) and Delinquency Rates

30 Inflation pressures Several causes: commodity prices; fast growth; unanchored expectations; FX intervention Source: FOCUS.

31 Brazil: Selected Macroeconomic Indicators Source: Itaú E 2011E 2012E Brazil External Sector & Exchange Rate BRL / USD - eop BRL / USD - year avg Exports - USD bn Imports - USD bn Trade balance - USD bn Total Trade Flows (exp + imp) - % GDP Current Account - USD bn Current Account - % GDP Foreign Direct Investment - USD bn Foreign Direct Investment - % GDP International reserves, cash - USD bn International reserves - % GDP Economic Activity Nominal GDP - USD bn 1, , , , , , ,749.2 Real GDP growth - % Inflation IPCA - % IGP M - % Interest Rate Selic - eop - % Selic - year avg - % Public Finances Primary budget surplus - % GDP Nominal budget surplus - % GDP Net Debt - % GDP