BRAZIL 2015 Outlook. Joaquim V. F. Levy New York February

Transcription

1 Joaquim V. F. Levy New York February

2 BRAZIL 2015 LEARNING BY DOING

3 Hitachi Feb 2014 BRAZIL 2015 LEARNING BY DOING Nissan Apr 2014 Nissan Apr 2014 Brotas 2014 Saint Gobain May 2014 Knauf June 2014 Itaipava Brewers Apr 2014 Basf 2014 And dozens of others

4 BRAZIL 2015 LEARNING BY DOING Brazil Monthly Average Oil and Gas Production Petrobras Investment Spending (R$ Billion)

5 % GDP BRAZIL 2015 Outlook The fiscal slippage was significant in 2014 and it is being corrected! Non Financial Public Sector Primary and Nominal Balance * Primary Nominal Budget Estimates Market Source: Central Bank / Projections from 2015 to 2017:Budgetary Guidelines Law Revised Draft 2015 for Budget, and Focus Report as of (01/30/2015) for Market. * The projections assume Real GDP growth equal 0.8% in 2015, 2.0% in 2016, 2.3% in

6 * 2016* 2017* BRAZIL 2015 Outlook Expansionary Fiscal Policies led to a rise in the Gross Debt / GDP ratio General Government Gross Debt vs. Net Public Sector Debt (as % of GDP) * 70% 60% GGGD 58.8% 56.7% 63.4% 64.1% 63.3% 62.5% Budget 50% 40% NPSD 35.3% 33.6% 36.7% 37.4% 37.4% 37.1% Budget 30% 20% ¼ of the public debt (17,2%of GDP is backed by non-monetized international reserves 17.2% 37.0% 36.2% 36.0% Reserves Market 10% 0% 10.6% Public Financial Institutions Source: Central Bank / Projections from 2015 to 2017: Budgetary Guidelines Law Revised Draft 2015 for Budget, and Focus Report as of (01/30/2015) for Market. * The projections assume Real GDP growth equal 0.8% in 2015, 2.0% in 2016, 2.3% in

7 Expanding Debt/GDP ratios have not been uncommon in recent years General Government Gross Debt / GDP Ratio Selected Emerging Markets (Base 100 = 2008) A Median e Russia South Africa BBB Median Mexico Brazil Colombia India Turkey Peru Source: Central Bank (Brazil) and IMF (Fiscal Monitor). For Brazil 2014 s debt ratio reflects year-end number. 7

8 Additional Treasury Loans to BNDES are not a policy instrument anymore BNDES funding sources BRL bn - cumulated Source: National Treasury, BNDES 8

9 Tax breaks and tax expenditures contributed to the fiscal slippage Revenue losses doubled in the period, reaching 2% of GDP Tax/Contribution BRL bn Payroll for selected sectors CIDE-fuel IPI (industrialized) all categories Cesta Básica (Ninimum Consumption Basket) Simples and MEI (Individual Micro-entrepreneur) IOF (Consumer s Credit Lines) Nafta and Ethanol Corporate Profit Public Transportation Broad band Telecom Networks Other Total Source: MoF/RFB 9

10 Social Transfers rose faster than the Federal Public Sector Payroll Payroll - % of GDP Other Expenditure - % of GDP 4.81% 4.68% 4.46% 4.45% 4.37% 4.31% 4.30% 4.31% 4.42% 4.33% 4.24% 4.18% 4.28% 4.10% * Unemployment Benefits rose from 0,5% of GDP to 1,1% of GDP Main Social Transfers - % of GDP The General Regime Social Security transfers rose from 6,0% to 7,2% 10

11 There are some short terms challenges, but we have NOT wasted the commodities bonus ( STN presentations) The message from 2005 is still true, and despite some slippages, the government has the will and the means to make the necessary adjustments to respond to the new global environment and foster a new cycle of growth, with improved fiscal indicators and increases in labor productivity

12 Adjustments include significant structural reforms (MP 665) Nominal Expenditure Growth - % Y-o-Y Source: National Treasury, CSFB, Social Security, Min. of Labor 12

13 The Current Account Deficit has widened, but FDI remains strong [(Current Account Deficit + FDI) * (-1)] - % of GDP Current Account Balance x FDI (US$ bn) »High FX linked debt» 02 FX-Reserves: USD 38 bn»low FX linked debt» FX-Reserves:USD mi (Jan/15) Current Account FDI Brazilian share on world s FDI (%) Source: Central Bank * *2016*2017* Source: Central Bank - Market Expectations (FOCUS 01/30/15) FDI in USD has doubled in the 2010s vis-à-vis the 2000s 13

14 The participation of the private sector in infrastructure investment is a reality Infrastructure Program (US$ bn) Concessions have been a successful way to expand the infrastructure in the last 20+ years Source: EPL, EPE, MME., National Treasury / US$ 1 = R$

15 Economic Policy Growth in installed capacity in GW Electricity Potential Production keeps increasing 15

16 Economic Policy Electricity Consumption has grown significantly especially among households Growth in Consumption GWh GWh var. % GWh var. % GWh var. % GWh var. % GWh var. % Brasil ,2% ,2% ,5% ,4% ,2% Residential ,4% ,4% ,1% ,2% ,7% Industrial ,9% ,3% ,1% ,6% ,6% Services (commerce) ,0% ,2% ,8% ,6% ,3% Other ,2% ,2% ,5% ,4% ,2% Consumption in 2014 compared with previous years Consumption share by segment Brasil % % % % Residential % % % % Services % % % % Residential Industrial Service ,8% 43,2% 16,6% ,9% 42,4% 17,0% ,3% 40,9% 17,7% ,0% 39,8% 18,1% ,8% 37,8% 18,9% 16

17 Local-currency Project Bonds have shown new ways to finance infrastructure Outstanding volume ( BRL mn) and Yield (% p.y.) % 2, % 7.93% 8.00% 7.05% 2, % 6.81% 7.37% 7.39% 7.00% 6.28% 5.47% 5.55% 6.00% 6.10% 5.00% 1,247 1, % 4.00% % 2.00% % 0.00% 5Y 7Y 8Y 10Y 11Y 12Y 13Y 14Y 15Y 17Y Volume - BRL bn Yield % p.y. + CPI NTNB Treasury Curve Source: National Treasury, Anbima,Bloomberg Note: Debentures Yield Rates represented by and average at issuance date. NTNB curve reflect secondary market rates as of Feb-10 th

18 Infrastructure Debentures Holders - as of Dec-14 Total Outstanding BRL bn Public Debt Holders Dec/ % 4.89% 77.38%»Non resident investors hold roughly 14% of these debentures compared to 18% of domestic debt» Retail Investors hold BRL 5.20 bn (34.35%) of the outstanding debentures. They are deposited either in banks or brokers. Source: National Treasury, Cetip, Anbima, BTG Pactual 18

19 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 BRAZIL 2015 Outlook Real Interest Rates have shown a secular decline and Inflation expectations are converging again Medium and Long Term Real Interest Rate* Expected Inflation (%) 9.5% 8.5% 7.5% 6.5% 6.12% 5.5% 4.5% 3.5% Source: National Treasury * NTN-B: CPI linked bonds. Until Jan-10, maturing in 2024, 2035 and 2045, after that maturing in 2030, 2040 and Source: Central Bank * Market Expectations Central Bank FOCUS January 30 nd

20 Return BRAZIL 2015 Outlook Public Debt Management Long Term Securities yields continue to be attractive (and above the Selic) Average Return of Public Bonds ANBIMA Market Index (IMA) vs Overnight Rate (CDI) 1st 2nd 3rd Average IMA-B IMA-B IMA-B CDI IMA-B IMA-B 17.00% 15.10% 26.70% 8.10% 14.50% 12.66% IRF-M IRF-M IRF-M IRF-M IRF-M IRF-M 11.90% 14.50% 14.30% 2.60% 11.40% 10.94% CDI CDI CDI IMA-B CDI CDI 9.70% 11.60% 8.40% % 10.80% 9.72% Source: ANBIMA Obs.: IRF-M considers all fixed rate bonds outstanding (LTN and NTN-F). IMA-B considers all inflation linked bonds outstanding (NTN-B). IMA-Geral is the most comprehensive index and is the sum of IRF-M, IMA-S (floating rate index), IMA-C (NTN-C) and IMA-B.» Brazilian Local Government Bond market presents opportunities in both fixed rate and inflation-linked securities. 20

21 NOW (2015) THEN (2003) Remembering policy commitments & goals. Pillars of Development Fiscal e Monetary Responsibility Effective & affordable Social Security safety net Entrepreneurship Inflation and Fiscal Targets; Respect of contracts Social Security reform BOLSA-FAMÍLIA Credit, Tax, and Judiciary reforms; Incentives to innovations and Trade Focus on the gross public debt Accelerate concession/ PPP opportunities Increasing technical and college-level training Foster increase in labor supply Changes in Federal and State VAT Expansion of the SIMPLES and doing busines initiatives Focus on increasing international Trade Working hard towards 21

22 getting ready for 2016! Thank you