DOING BUSINESS IN BRAZIL. CESAR CUNHA CAMPOS DIRECTOR, FGV PROJETOS

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1 DOING BUSINESS IN BRAZIL CESAR CUNHA CAMPOS DIRECTOR, FGV PROJETOS Greece, September

2 ABOUT FGV AND FGV PROJETOS Fundação Getulio Vargas (FGV) was founded in 1944 FGV is the leading Think Tank in Latin America and Top 25 in the world Mission: boost the socioeconomic development of Brazil and increase its important role in the international scene FGV s technical advisory unit to public, private and third-sector institutions in Brazil and abroad Develops projects in different areas: economics, administration, and public policy 30 years experience Over 1300 projects developed 2

3 AGENDA 1. INVESTMENT CLIMATE BRAZIL OVERVIEW GLOBAL COMPETITIVENESS TAXATION TRADE PROFILE BRAZIL 2. TRADE: BRAZIL, EUROPEAN UNION AND GREECE BRAZIL - EUROPEAN UNION BRAZIL - GREECE 3. CONCLUSION WHY DOING BUSINESS IN BRAZIL GOVERNMENT SUPPORT PARTNERS 3

4 1. INVESTMENT CLIMATE 4

5 BRAZIL OVERVIEW GEOGRAPHY AND POPULATION Total Population 196 M (85% Urban, 15% Rural) Largest City: São Paulo (20 M) 2nd Largest City: Rio de Janeiro (12 M) Capital: Brasília (3.7 M) Official Language: Portuguese Area: (million sq km) Natural Resources: Minerals, Petroleum, Hydropower Currency: Real 95 5 Source: PNAD - National Survey by Household Samples and IBGE

6 BRAZIL OVERVIEW POLITICAL SYSTEM Democratic regime, federal republic; representatives elected by direct voting Composed of 3 independent branches: Executive, Legislative and Judicial The President heads the executive branch composed of 40 Ministers Legislative power is exerted by a National Congress consisting of Senate (81 senators) House of Representatives (513 representatives) Voting is compulsory from of Main Ruling Parties: PT, PMDB, PSD, PSDB, PSB 6

BRAZIL OVERVIEW ELECTIONS 2014: MAIN CANDIDATES Candidates DILMA ROUSSEFF AÉCIO NEVES MARINA SILVA Party Strategic Outlook Economic Development with environmental sustainability Economic Development

7 BRAZIL OVERVIEW ELECTIONS 2014: MAIN CANDIDATES Candidates DILMA ROUSSEFF AÉCIO NEVES MARINA SILVA Party Strategic Outlook Economic Development with environmental sustainability Economic Development with environmental sustainability Focus on Sustainability Private investment 7 7 1st round, October 5th: All presidential candidates 2nd round, October 26th: If none of the candidates obtains majority (50%+1), then the top two candidates will run again in this round

8 BRAZIL OVERVIEW ELECTIONS 2014 VOTING INTENTION (2014, SEP) - IBOPE INSTITUTE 1 st ROUND 2 nd ROUND Marina Silva 46 Marina Silva (PSB) SOURCE: IBOPE INSTITUTE (SURVEY: 2014 /SEPTEMBER,3 ); NA: NO ANSWER; BL/NL: BLANK/NULL 8

9 BRAZIL OVERVIEW ELECTIONS 2014 VOTING INTENTION (2014, SEP) - DATAFOLHA INSTITUTE 1 st ROUND 2 nd ROUND Marina Silva (PSB) 34 Marina Silva SOURCE: DATAFOLHA INSTITUTE (SURVEY: 2014 / SEP) NA: NO ANSWER; BL/NL: BLANK/NULL 9

10 BRAZIL OVERVIEW MACROECONOMIC International Reserves (US$ bi) Inflation - IPCA (% anual) 6.5% Source: BNDES Macroeconomic tripod Primary Surplus Floating Exchange Rate Inflation Targeting 10

11 BRAZIL OVERVIEW MACROECONOMIC Public Debt / GDP Decreasing 48% 34% Investment Rate 18% 16% 15% 17% Source: BNDES Stable 11

12 BRAZIL OVERVIEW SOCIAL Brazilian Social Pyramid A NEW MIDDLE CLASS: 60% OF THE POPULATION Source: BNDES A Gini of zero = perfect equality The closest to zero, the better inequality in the distribution of household per capita income has improved in Brazil 0.56 Gini Coefficient Gini worldwide (OECD Data, 2011) USA 0,4 UK 0,3 Greece 0,3 Total OECD 0, Source: IPEA

13 BRAZIL OVERVIEW ECONOMY 7th biggest economy in the World by GDP: US$ 2.2 Trillion (share of world total 2.83%) 55th biggest economy in GDP per capita: US$ 12 Thousand GDP Growth (2014 estimate): Unemployment rate: 5% 1.6% Full employment OCDE Percentage of GDP by sector *Commerce Finance Telecommunications * 13 Source: World Economic Forum 2013, World Bank, IMF, Brazilian Central Bank

14 BRAZIL OVERVIEW ESTIMATED INVESTMENTS Estimated Investment ( ) 1.8 US$ Trillion Investments from BNDES by Sector Source: BNDES Unit: US$ billion current Source: BNDES 14

BRAZIL OVERVIEW ESTIMATED INVESTMENTS During the period from 2014 to 2017, infrastructure investments amounting to US$ 261.

15 BRAZIL OVERVIEW ESTIMATED INVESTMENTS During the period from 2014 to 2017, infrastructure investments amounting to US$ billion are expected, with the following distribution amongst sectors: Infrastructure Investment Forecasted for The main energy-sector projects are hydroelectric plants, followed by nuclear and wind power In telecommunications, third-generation mobile service and broadband wireless internet are at the forefront Logistics investment is led by the railway segment followed by roadway and port projects Source: National Bank for Economic and Social Development (BNDES) 15

BRAZIL OVERVIEW ESTIMATED INVESTMENTS During the period from 2014 to 2017, investments amounting to US$ 524.

*Sugarcane industry, Textile and Clothing The Oil and Gas segment concentrates 42% of the estimated investment in

16 BRAZIL OVERVIEW ESTIMATED INVESTMENTS During the period from 2014 to 2017, investments amounting to US$ billion are expected in the following sectors: oil & gas and industrial sector Estimated Investment *Sugarcane industry, Textile and Clothing The Oil and Gas segment concentrates 42% of the estimated investment in infrastructure * Mining will be responsible for 5% Pulp and Paper segment concentrates 2% of the total Source: Ministério da Fazenda. 16

BRAZIL OVERVIEW ESTIMATED INVESTMENTS Pre-Salt t The discovery of new deepwater oilfields (pre-salt) has opened a new frontier for the oil and gas industries

2020 t Pre-salt development also represents overcoming challenges related to technology, infrastructure and logistics, regulation, taxes and human capital

17 BRAZIL OVERVIEW ESTIMATED INVESTMENTS Pre-Salt t The discovery of new deepwater oilfields (pre-salt) has opened a new frontier for the oil and gas industries t Development of the pre-salt will bring Brazil to a new position in the oil market by increasing proven reserves and doubling the production capacity by 2020 t Pre-salt development also represents overcoming challenges related to technology, infrastructure and logistics, regulation, taxes and human capital SÃO PAULO RIO DE JANEIRO 300 KM PRE-SALT LAYER TOTAL INVESTMENT RELATED TO THE OIL AND GAS SECTOR IS ESTIMATED AT US$ 400 BILLION OVER THE DECADE. 17 ATLANTIC OCEAN

18 GLOBAL COMPETITIVENESS RANKING (144 COUNTRIES) Brazil in the world Brazil and the BRICS (Brazil, Russia, India, China, South Africa) 57th position Worldwide 18 Source: World Economic Forum, Global Competitiveness Report ; *BRICS: Brazil, Russia, India, China, South Africa

19 TAXATION MAIN TAXES AND CONTRIBUTIONS Imports Products/Services II (Customs Duties) 0% - 35% IPI (Excise Tax) 0% - 330% ICMS (Value-added Tax on Sales and Services) 4%, 7%, 12% PIS/Cofins (Social Contribution on Gross Revenue) 0.65% or 1.65% ISS Service Tax 2% & 5% The rates depend on the tax classification of the product, the existence of trade agreements and, in the case of ICMS, the state where the imports will occur Companies with operations based in Brazil Same as above with the exception of II Additionally: - IRPJ (Corporate Income Tax) 15% and CSLL (Social Contribution) 9% & 15% - Taxes on Payroll (Social security 20%, occupational environmental risks 1% & 3% and social programs) 3.1%; - Taxes on property (real state tax and property transfer) 0.03% - 20% 19 ISS Service Tax 2% & 5%

20 TRADE PROFILE EXPORTS: BRAZIL 2O13 US$ 242 Bi Total Exports 20 Brazilian Ministry of Development, Industry and Foreign Trade (SECEX/MDIC) Note: % will not add to 100% because we are missing other countries; All numbers FOB: Free On Board

21 TRADE PROFILE IMPORTS: BRAZIL 2O13 US$ 240 Bi Total Imports 21 Brazilian Ministry of Development, Industry and Foreign Trade (SECEX/MDIC) Note: % will not add to 100% because we are missing other countries; All numbers FOB: Free On Board

22 TOP 10 BRAZILIAN EXPORT & IMPORT COMPANIES Exports Imports TOP 10 Brazilian Export Companies 2013 Sector US$ Bi TOP 10 Brazilian Import Companies 2013 Sector US$ Bi Metals & Mining 27 Oil & Gas 14 Oil & Gas 40 IT Solutions 4 Agribusiness, Food & Bioenergy 7 Petrochemicals 3 Food 5 Automotive 3 Beef, Lamb and Poultry processing 5 ICT 3 Agricultural processors 4 Aircraft 4 Food and Agriculture 4 Aircraft 3 Automotive 3 Automotive 2 Beef, Lamb and Poultry processing Oil & Gas (Platforms builder) 4 4 IT Solutions 2 Agribusiness 2 22 Source: Brazilian Ministry of Development, Industry and Foreign Trade (SECEX/MDIC). All numbers FOB: Free On Board

23 2. TRADE: BRAZIL, EUROPEAN UNION AND GREECE 23

24 TRADE PROFILE BRAZIL- EUROPEAN UNION ( ) Commercial Trade: Brazil European Union US$ 51 Bi IMPORTS US$ 48 Bi EXPORTS Year COMERCIAL TRADE BALANCE 24 Source: Brazilian Ministry of Development, Industry and Foreign Trade (SECEX/MDIC). All numbers FOB: Free On Board

25 TRADE PROFILE BRAZIL-GREECE ( ) Commercial Trade: Brazil Greece 1.1% OF BRAZILIAN SERVICES IMPORTS ORIGINATED FROM GREECE Mi US$ 151 Mi EXPORTS 0.06% of Brazil total exports US$ 115 Mi IMPORTS 0.05% of Brazil total imports Year COMERCIAL TRADE BALANCE 25 Source: Brazilian Ministry of Development, Industry and Foreign Trade (SECEX/MDIC). All numbers FOB: Free On Board

26 TRADE PROFILE MAIN IMPORTS/EXPORTS PRODUCTS BRAZIL-GREECE MAIN IMPORT GOODS FROM GREECE 2013 US$ Mi %TOTAL IMPORTS BRAZIL-GREECE 1 Naphtha for Petrochemical 80 70% 2 Marble and derivatives 6 5% 3 Razors Blades 3 3% 4 Virgin Olive Oil 2 2% 5 Aluminum plates sheets and strips 2 2% MAIN EXPORT PRODUCTS TO GREECE 2013 US$ Mi %TOTAL EXPORTS BRAZIL-GREECE 1 Coffee beans 59 40% 2 Sugar from Sugar Cane 22 15% 3 Tobacco 20 13% 4 Aluminium ore 10 7% 5 Other Sugars 6 4% 26 Source: Brazilian Ministry of Development, Industry and Foreign Trade (SECEX/MDIC). All numbers FOB: Free On Board

27 TRADE OPPORTUNITIES BRAZIL-GREECE IMPORT GOODS BRAZIL 2013 (TOP 5) US$ Bi CRUDE OIL 16 PASSENGER CARS 9 FUEL-OIL 8 MOTOR VEHICLES PARTS 8 MEDICINES 7 WE IMPORT MEDICINES FROM GERMANY, USA, SWITZERLAND; WHY NOT FROM GREECE AS WELL? EXPORTS GOODS GREECE 2013 (TOP 5) US$ Mi PETROLEUM OILS, OTHER THAN CRUDE 14 MEDICINES 1,3 FISH, FRESH OR CHILLED; OLIVE OIL AND ITS FRACTIONS ALUMINIUM PLATES, SHEETS AND STRIP 0,7 1,2 EXPORT GOODS BRAZIL 2013 (TOP 5) US$ Bi IRON ORES & DERIVATES 33 SOY 23 CRUDE OIL 13 SUGAR CANE 9 DRILLING & EXPLORATION PLATFORMS 8 WE EXPORT CRUDE OIL TO CHINA, USA, INDIA; WHY NOT TO GREECE AS WELL? IMPORTS GOODS GREECE 2013 (TOP 5) PETROLEUM OILS AND OILS OBTAINED FROM BITUMINOUS MINERALS, CRUDE OIL US$ Mi PETROLEUM OILS, OTHER THAN CRUDE 4,4 MEDICINES 3 PETROLEUM GASES AND OTHER GASEOUS HYDROCARBONS CRUISE SHIPS, EXCURSION BOATS, FER- RY-BOATS, CARGO SHIPS, BARGES ,6 27 Source: Brazilian Ministry of Development, Industry and Foreign Trade (SECEX/MDIC). All numbers FOB: Free On Board

28 28 3. CONCLUSION

29 WHY DOING BUSINESS IN BRAZIL? 1. Stable democracy 2. Leading regional economy & global player 3. Strong financial system and largest stock market in Latin America 4. Gateway to Latin America: Mercosul & ALADI member 5. Safe investment environment: 5th in global FDI inflows (2013: US$ billion 64; 2.5 % of GDP) 6. Huge domestic market: large and fast growing consumer market 7. Infrastructure investments Source: Brazilian Investment Information Network (RENAI). 29

30 GOVERNMENT SUPPORT PARTNERS In Brazil Local Partners 30

31 INVITATION RIO OLYMPIC GAMES 2016 TOTAL INVESTMENT OF US$ 29 BILLIONS 31

32 THANK YOU CESAR CUNHA CAMPOS Director, FGV Projetos 32

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