BRAZIL SUMMIT2011 CONFERENCE REPORT

Transcription

1 BRAZIL SUMMIT2011 CONFERENCE REPORT THE HARVARD CLUB NEW YORK CITY APRIL 18, 2011

2 BRAZIL SUMMIT 2011 OFFICERS & DIRECTORS PRESIDENT EMERITUS Vincent J. Bonnard In Memoriam OFFICERS PRESIDENT & CHAIRMAN OF THE BOARD John D. Landers Delta National Bank & Trust Company EXECUTIVE DIRECTOR J. Roberto de Azevedo VICE PRESIDENTS René Boettcher BNY Mellon Cassio A. Calil J.P.Morgan CO-TREASURERS Valmor A. Bratz JB Investments Francis E. Larkin Crowley Maritime Corp. SECRETARY Gregory Maskel Quinn Emanuel Urquhart & Sullivan LLP ADVISORY COUNCIL Honorary Chairman: Ambassador Osmar Chohfi Consulate General of Brazil in New York MEMBERS: Richard S. Aldrich, Jr. Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates Márcio M. Moreira McCann Worldgroup William R. Rhodes Chairman, President and CEO Citibank N.A.; Senior Vice Chairman Citigroup, Inc. Tony E. Sayegh Saymar Stone Inc. Carlos Alberto Vieira Banco Safra S.A. DIRECTORS Charles Achoa, Jr. RBS Securities Inc. S. Wade Angus Jones Day Paul S. Aufrichtig McCarthy Fingar LLP Marcio M.S. Baptista TozziniFreire Advogados Celso V. Barison Citrus Products, Inc. Celso V. Barison, Jr. Metropolis Wine Merchants Lino Otto Bohn International Business Consultant Paul A. Burkhardt Citrus Products, Inc. Henry Guy Burnett Crowell & Moring LLP Arthur E. Byrnes Deltec Asset Management LLC Julia Chen Itaú BBA USA Securities, Inc. Stephen M. Cunningham Deutsche Bank Thomas J. DeCoene Global Capital Access Roberto De Paula Royal Consulting, Inc. Moses Dodo Espírito Santo Investment Lee M. Elman Elman Investors Inc. Michael J. Gillespie Deveboise & Plimpton LLP José Luiz Godoy Multiplas International, Inc. Mark W. Gross Knox & Co. Carlos Novis Guimarães LAIG - Latin America Investment Group Theodore M. Helms Petróleo Brasileiro S.A. - PETROBRAS Alexandre L. Ibrahim NYSE Euronext Edmund Lee Chartis International Ricardo de Figueiredo Lima Univercidade Centro Universitário da Cidade Marcus de Albuquerque Mello Guara Eco-Consulting Associates Zélia de Cardoso Mello Aquila Associates LLC Sergio Millerman SM Consultant Daniel C. Miranda Mattos Filho, Veiga Filho, Marrey Jr. E Quiroga Advogados G. Edward Montero Citigroup, Inc. Simoni Morato Safra National Bank of New York Renata Neeser White & Case LLP Roberto Medeiros Paula Banco Bradesco S.A. Paulo S. Pereira Far Hills Group, LLC Lucio Pimenta Eduardo Pupo PricewaterhouseCoopers, LLP Natalia Quesada American Airlines James J. Quinn Law/CPA Offices of James J. Quinn Alexei Remizov HSBC Securities (USA) Inc. Luiz Romano Rocha Banco Votorantim Securities, Inc. José Sampol TAM Airlines Oswaldo Parré dos Santos Banco do Brasil Roberto R. Schott BTG Pactual Hunter C. Smith Bunge Limited Renato M. Tichauer Tremond Alloys & Metals Corp. Paulo Vieira da Cunha Tandem Global Partners 2 WWW. BRAZILCHAM. COM

3 BRAZIL SUMMIT 2011 JULY 28 MESSAGE TO THE MEMBERS OF THE CHAMBER: Over 250 leaders from the public and private sector gathered at the Harvard Club in New York City on Monday, April 18th, 2011 for the 2011 Brazil Summit. The 8th edition of this annual conference was marked by an unbounded energy and excitement over the landmark visit of President Obama to Brasília. Speakers and attendees alike were inspired by the formal acknowledgement of the strong relationship and shared commonalities between our two nations. This exciting moment, combined with the presence of H.E. Guido Mantega, Finance Minister of Brazil; H.E. Henrique Meirelles, former President of the Central Bank of Brazil; H.E. Ambassador Mauro Vieira, Ambassador of Brazil to the United States, and H.E. Ambassador Thomas A. Shannon, Ambassador of the United States to Brazil, made for an inspiring program that covered all of the most important aspects of Latin America s largest economy. Special emphasis was placed on the outlook for the US-Brazil bilateral relationship, while addressing Brazil s macroeconomic scenario and the prospects for its ethanol and biofuels sector. This report serves as a record of the 2011 Brazil Summit. I would like to extend my gratitude to our sponsors whose support made the Summit possible. I would also like to thank our distinguished speakers and attendees whose presence added to the prestige and success of the program. CONTENTS 04 AGENDA 07 SPEECHES 61 SPONSORS 85 LISTS OF REGISTRANTS John D. Landers President and Chairman of the Board Brazilian-American Chamber of Commerce, Inc.

4 BRAZIL SUMMIT2011 AGENDA MONDAY, APRIL 18, 2011 THE HARVARD CLUB 27 WEST 44TH STREET NEW YORK CITY 8:00 A.M. - 8:30 A.M. 8:30 A.M. - 8:35 A.M. REGISTRATION AND CONTINENTAL BREAKFAST OPENING REMARKS AND ANNOUNCEMENTS J. Roberto De Azevedo Executive Director, Brazillian-American Chamber of Commerce, Inc. WELCOMING REMARKS John D. Landers - Conference Chairman President and Chairman, Brazillian-American Chamber of Commerce, Inc. 8:35 A.M. 9:20 A.M. 9:20 A.M. - 9:50 A.M. 9:50 A.M. - 10:15 A.M. 10:15 A.M. - 10:45 A.M. 10:45 A.M. - 12:15 P.M. 12:30 P.M. - 2:30 P.M. BRAZIL-U.S. RELATIONS OUTLOOK H.E. Ambassador Anthony S. Harrington - Moderator Co-Chair, Brazil-U.S. Business Council & President and CEO, Albright Stonebridge Group H.E. Ambassador Mauro Vieira Ambassador of Brazil to the United States, Brazilian Embassy H.E. Ambassador Thomas A. Shannon Ambassador of the United States to Brazil, U.S. Embassy CONFERENCE KEYNOTE SPEAKER H.E. Henrique Meirelles Former President of The Central Bank of Brazil COFFEE BREAK OUTLOOK ON ETHANOL AND BIOFIELDS Theodore M. Helms Executive Manager - Investor Relations, Petróleo Brasileiro S.A. PETROBRAS Michael McAdams President, Advanced Biofuels Association PROSPECTS AND MACROECONOMIC OUTLOOK Paulo Vieira da Cunha - Moderator Partner & Head of Research - Emerging Markets, Tandem Global Partners Claudia Ribeiro de Castro Vice President, Senior Analyst, Oppenheimer Funds, Inc. Eduarda La Rocque Municipal Secretary of Finance, City of Rio De Janeiro Shelley Shetty Head of Latin America Sovereigns, Fitch Ratings Ltd. Marcelo Salomon Chief Economist, Barclays Capital LUNCHEON KEYNOTE SPEAKER H.E. Guido Mantega Finance Minister of Brazil, Ministry of Finance 4 WWW. BRAZILCHAM. COM

5 BRAZIL SUMMIT2011 SPONSORS IN ASSOCIATION WITH Brazil-U.S. Business Council CORPORATE TABLE Safra National Bank of New York PLATINUM SPONSORS Banco Bradesco S.A. EVENT SPONSOR Agência Estado Banco do Brasil Petróleo Brasileiro S.A. - PETROBRAS TAM Airlines EVENT PARTNER Financial Times GOLD SPONSORS Delta Air Lines, Inc. Veirano Advogados MEDIA PARTNERS International Finance Review Latin America Monitor Latin Business Chronicle SILVER SPONSORS Banco Votorantim S.A. Pinheiro Neto Advogados Latin Trade Magazine Private Banking Project Finance International Revista Capital Aberto WWW. BRAZILCHAM. COM 5

6 2011 BRAZIL SUMMIT REPORT PUBLISHED BY Brazilian-American Chamber of Commerce, Inc. 509 Madison Avenue, Suite 304 New York, NY USA Tel (212) Fax (212) Website: EXECUTIVE DIRECTOR Roberto David de Azevedo CONTRIBUTING EDITORS Janine Hirt and Alex Ladd PRODUCTION COORDINATOR Ivelisse Soto PRINTING Galvanic Printing & Plate Co., Inc. Moonachie, NJ Brazilian-American Chamber of Commerce, Inc WWW. BRAZILCHAM. COM

7 BRAZIL SUMMIT 2011 BRAZIL SUMMIT2011 SPEECHES WWW. BRAZILCHAM. COM 7

8 J. ROBERTO DE AZEVEDO EXECUTIVE DIRECTOR, BRAZILIAN-AMERICAN CHAMBER OF COMMERCE, INC. Good morning everyone, especially our members, sponsors, our guests, and particularly our guest speakers and Ambassadors. For over ten years, the Brazilian-American Chamber of Commerce has been organizing this event, and this year I have the honor to announce to you our association with the Brazil US Business Council, represented here And one of the tools that we need to use is more feedback from our members. That s why I d likely to introduce today a new product called Yorn. It means yes or no. It s a feedback process. It was introduced to us by our good friends Larry Nippon and Paul Dejoe. Larry and Paul are here with us today, and you have the address and their card. Once you go to that site, you will be able to communicate directly with us. You can express your opinion about any speaker, send any questions and comments, and analyze the program. This is all confidential; it will be processed by the Chamber. And it will be instrumental in planning other programs for the future. So, I appreciate your dedicating a minute or two on each segment to issue your opinion and help us in building our future. Thank you. And again, it is confidential. Not even Wikileaks has access to this. Believe me. Steven Bipes and Roberto Azevedo today by its Co-Chairman, Ambassador Harrington, and its Executive Director, Steven Bipes. Thank you for our association. It has been very fruitful. Thank you. At this moment, I d like to invite John Landers, our President and Chairman of the Board, to officially open the conference. Thank you very much. First, I d like to thank our sponsors. Without them and our members, this event would not be possible. We at the Chamber have been trying to make sure we understand the demands of our members, and what they anticipate from the membership. 8 WWW. BRAZILCHAM. COM

9 JOHN D. LANDERS PRESIDENT AND CHAIRMAN OF THE BOARD, BRAZILIAN-AMERICAN CHAMBER OF COMMERCE, INC. Thank you, Roberto. Good morning Ambassador Shannon, Ambassador Vieira, Minister Wladimir, representing Ambassador Chohfi, ladies and gentlemen. I would like to welcome you all to the 2011 Brazil Summit. This year s summit is taking place during a remarkably exciting time for US Brazil relations. The recent visit of President Obama to Brazil underlined the importance of a strong tie between our two nations and opened a new horizon for working together on a bilateral and global scale. Likewise, the anticipated visit of President Rousseff to Washington poses enormous hope for a relationship of ever greater cooperation and opportunity. Furthermore, we all know that Brazil has captured the world s attention as the host of the upcoming 2014 World Cup and 2016 Olympic Games. Both of these events will entice Brazil to address the issue of infrastructure and make the critical changes and improvements necessary to ensure its continued stability and success in the global arena. I would now like to introduce Ambassador Anthony Harrington, President and CEO of Albright Stonebridge group and Co-Chair of the Brazil-US Business Council and the Advisory Council of the Brazil Institute at the Woodrow Wilson Center. Ambassador Harrington served as US Ambassador to Brazil during a time of unprecedented bilateral engagement between the two countries. He was nominated by President Clinton and confirmed by the US Senate with bipartisan support in a record twelve days. He carried out a mandate to upgrade the level of relations between the US and Brazil, and worked closely with both US and Brazilian companies to strengthen business and economic ties. In recognition of his accomplishment, the government of Brazil conferred on Ambassador Harrington the Order of Rio Branco, Grand Cross. Please join me in welcoming the Ambassador. Finally, Brazil has, without a doubt, established itself as a major player in the energy sector. This is not due only to the recent instability in the Middle East but also because of the worldwide need to find sustainable energy sources. All this, surrounded by the impressive economics of Latin America s largest economy, will be the focus of today s program. Ambassador Mauro Vieira, John Landers, Ambassador Thomas Shannon and Minister Wladimir Valler Filho WWW. BRAZILCHAM. COM 9

10 AMBASSADOR ANTHONY S. HARRINGTON CO-CHAIR, BRAZIL-U.S. BUSINESS COUNCIL PRESIDENT AND CEO, ALBRIGHT STONEBRIDGE GROUP Thank you, John. Good morning, and welcome to all of you joining us today for this 2011 Brazil Summit. We are fortunate to have a very distinguished and informative group of speakers, and the attendance is a testament to the interest in Brazil and the growing success of Brazil economically and on the world stage, more generally. On behalf of the Brazil-US Business Council, I want to express our pleasure in joining with the Brazilian- American Chamber of Commerce to sponsor this important conference, as we did last year for the 2010 Economic Conference held at the US Chamber in Washington. US business engagement in Brazil and Brazilian investment here in the US is expanding, as is investor interest in Brazil, generally. Some of you may have noted recent Bloomberg surveys of investors indicating that Brazil was number one and number two among countries in the world in terms of the level of interest by investors in the country. The gathering today is particularly timely coming soon after a very successful visit by President Obama with President Dilma Rousseff in Brasília, on a weekend of all things. It was unprecedented in having the US President visit a new president not just in Brazil but pretty much any country before they had visited in Washington. And the delegation was exceptional in the breadth and inclusiveness of the delegation the Secretary of Treasury; the Secretary of Commerce; the Secretary of Energy would have been there but for the nuclear catastrophe in Japan, causing him to stay behind; Chief of Staff Daley; the Ex - Im President Hochberg; EPA Administrator Jackson; Assistant Secretary of States and Energy; and National Security Adviser Tom Donilon I am told was there to Ambassador Shannon, maybe you saw him, no one else did. He was in the secure communications facility all the time dealing with Libya and turmoil in the world, I think. So, he has to come back to Brazil to enjoy the country more. I had the privilege to join in leading the business delegation that was a component of the presidential visit. And President Obama made a major address to the gathering of hundreds of Brazilian, US, and other business and governmental leaders during the visit, and to the business delegation. Among other things, President Obama emphasized his view, capturing a key theme that he had for the visit and the relationship: That it was high time for the US and Brazil to have a relationship on a par with that the US has with China and with India. President Rousseff, for her part, at the official presidential luncheon, celebrated their unique respective status as the first woman president in Brazil and the first African-American president here in the U.S. New initiatives were launched on high-level economic and financial dialog, strategic energy cooperation, education, air travel, infrastructure, and beyond. Both presidents stressed the importance sort of an overlay of importance of striving to build innovation economies, both in Brazil and the US, and working together to bring that about. I m sure our two ambassadors can tell us more about 10 WWW. BRAZILCHAM. COM

11 the visit and the outcomes and plans. President Rousseff has demonstrated strong leadership and vision as she begins her new administration, and she appears to embrace and welcome this increased level of dialog between the US and Brazil. A very good foundation was laid for even more collaborative engagement in bilateral matters and in working together on global issues. President Rousseff s anticipated visit later this year should help assure momentum in this relationship. I ve noticed [during her time as] Chief of Staff and as Minister of Mines and Energy that she is a doer. She likes action and results, so her coming here later in the year means that the ambassadors and their teams are going to be busy helping to assure that the foundation laid is built upon. And I know that our Secretary of State Hillary Clinton has a very strong interest in a higher level of focus on the bilateral relationship, notwithstanding the conflicts around the world that take too much of the oxygen. It s a privilege then for me to introduce our two distinguished diplomats and public servants, and I m proud to call both friends. Ambassadors Vieira and Shannon will each have observations on our bilateral governmental and economic relationship, but we will plan to save some time so that we can have a few questions, a little discussion, and comments as well. Ambassador Mauro Vieira is an accomplished steward of the bilateral relationship as Ambassador of the Federative Republic of Brazil in Washington. It has been a pleasure to watch him work and to enjoy his company in Washington. Before he came to Washington, he held the highly prized diplomatic post of Brazilian Ambassador to Argentina. And he has served as Chief of Staff to both the Foreign Minister and to the Secretary General in the Ministry of External Relations in Brazil, and [has been] posted to Paris, Mexico, Montevideo, and posted in Brasília to important federal agencies, including the Ministry of Science and Technology speaking of innovative economies. Ambassador Tom Shannon, likewise, is doing a superb job in the bilateral relationship as US Ambassador in Brazil, something that I personally was very much supportive of and looking forward to seeing. Tom is an ideal representative of the US at this time in Brazil. He had previously served as the Principal Officer at the State Department for the Western Hemisphere, Assistant Secretary of State under both Presidents Bush and Obama, and he had served as Senior Director and Special Assistant to the President, the top post at the National Security Council and the White House for the hemisphere. He was Director for the Hemisphere when I was Ambassador in Brazil and helped make my life easier and my work more productive. He understands Brazil very well and I think is well received, from Brazilian interlocutors with whom I speak. So, first, let me ask Ambassador Vieira to share some thoughts with us, followed by Ambassador Shannon, and then we ll open the floor. Join me in welcoming Ambassador Vieira. H.E. Ambassador Anthony S. Harrington WWW. BRAZILCHAM. COM 11

12 AMBASSADOR MAURO VIEIRA AMBASSADOR OF BRAZIL TO THE UNITED STATES, EMBASSY OF BRAZIL Good morning to you all. Thank you very much for this invitation, for this traditional event. I d like to thank Mr. Landers for the personal invitation he addressed to me. And, also, I would like to thank Ambassador Harrington for the presentation. I m very glad to be here, and I am especially very glad to speak before both Ambassador Harrington and Ambassador Shannon. Ambassador Shannon, as you all know, has been a wonderful ambassador to Brasília. He is doing a wonderful job, and he worked very hard to prepare President Obama s visit to Brazil. And he made it a success. And Ambassador Harrington, as a former ambassador to Brazil, and a good friend of Brazil, and also with all of his positions and responsibilities at the Brazil US Business Council, also worked a lot and made the private business sector of the visit a success. So, speaking after both speakers would be very difficult for me; I wouldn t have anything new to add. So, I am very glad to start. I d like to thank you all once again for being here, and I think this is a very timely moment for this discussion because it s been one month since President Obama visited Brazil. I think that the two basic messages, or the two important signs that we can realize and that we can confirm after his visit are: One, the first one, would be the recognition of Brazil s rise as a truly global leader and the assessment of the potential for a truly global partnership between Brazil and the United States. One that pushes the boundaries of our relationship to encompass more and more strategic areas, making our bilateral relations, which were already at a very excellent and high level, even deeper and more comprehensive. President Obama visited Brazil for the first time. He said it more than once, that he had the pleasure and the honor to visit Brazil for the first time as the President of the United States. And he found maybe a different country than the one he had heard about and that he had read about in previous years. Brazil has made, especially after the last eight years, a lot of progress in the social area, but, also, the whole stabilization program that began before this period also led the country to very important economic achievements. I am not the right person to speak about this because you will have, during lunch time, the Keynote Speaker the Minister of Finance who is, of course, the right person to tell you more about this. I just would like to stress that, after last year s [GDP growth] by 7.5 percent, the total GDP of Brazil is over two trillion dollars. This makes the economy of Brazil the seventh largest in the world. Large reserves, an important and dynamic foreign trade, and Brazil is receiving a lot of foreign investment too, and Brazilian companies are investing a lot abroad. By the end of 2010 the stock of investment by Brazilian companies in the United States was around US $14 billion. And during the year of 2010 only, this number was US $3.4 billion of investments, in very important areas, creating a lot of jobs. Ac- 12 WWW. BRAZILCHAM. COM

13 cording to the data I have, these Brazilian investments in the United States create something like 120,000 jobs. Also, the ratio of investments in the two countries is very important data. About 10 or 15 years ago, [for] each dollar that Brazil invested in the United States, twenty one dollars would go to Brazil, and last year this ratio was two to one. But all of this was achieved with a lot of social justice and growth, especially, social justice all of these important economic developments. The unemployment rate in the last eight years fell from 12.5% to 7 or 6.8%, creating 14 million new jobs. There was an important increase in real wages, and at the same time the government implemented one of the largest programs in the world of income distribution, benefiting over 48 million men, women, and children. Just as a final remark on [the] economic and social aspects, I d like to mention that [as a] result of these policies, GDP per capita increased by some 20% in the last 10 years. Thirty-one million people joined the ranks of the middle class which now surpasses 100 million people. And over twenty-four million were lifted out of extreme poverty. And all of this was achieved under democracy and the rule of law a point that President Obama stressed over and over during his trip, as he did in [his] address to the Brazilian people in Rio. He said that those who argue that Democracy stands in the way of economic progress, they must contend with the example of Brazil. So this is the country that President Obama saw and visited. And, as I ve said, we have always had excellent relations, but I think that this background is a good tool, is a good instrument, for even more enhanced relations. And President Obama and President Dilma Rousseff stressed the opportunities that Brazil s rise represents to both countries in a number of areas. from trade to political dialog, from investment to cooperation, for the development of third countries. We have had excellent and traditional relations. I always liked to stress that the United States was the first country to recognize the independence of Brazil, back in We have had resident diplomats in both countries since then. We have also had an important history of bilateral state visits. This was not the first visit of a head of state, of an American head of state, to Brazil. This was the 15th visit over our life as an independent country. And Brazilian heads of states have paid 20 visits to the United States. And an important and curious aspect reminds us that the first head of state of Brazil who visited the United States was back in 1876: The Emperor, Dom Pedro II, who came for the centennial of the American independence and visited Philadelphia he visited the world exhibition in Philadelphia and met with President Ulysses Grant. The first president of the United States to visit Brazil was President Hoover on December 28 he visited as president elect. And after that, of course, we have had the series of bilateral visits that I just mentioned. But, I just would like to say that it was recently, maybe around 2008, that Brazil, after having acquired the economic and social progress I just mentioned, started having a more visible place in the world scenery and started sharing with the United States discussions of not only bilateral and regional issues but also having a global agenda. From then on, especially from 2008 on, after the financial crisis, Brazil was very active in all different forums. And from then on we became a key player in the G20 the main global economic and financial forum. And Brazil has also been playing such a bigger role in the IMF and the World Bank and is at the forefront of the efforts to effectively reform the global financial governance. Our commitment to global governance reform goes much beyond that, of course. Brazil is widely recognized as a key country in addressing global challenges, from climate change to nuclear nonproliferation and is a natural candidate for a permanent seat in the reformed UN Security Council. I d also like to add that - as you all saw at that press conference by both presidents, [when the] joint communiqué was also read that President Obama expressed his support for the expansion of the UN Security Council. That improves the effectiveness and efficiency of this body and also reflects a better representation. And he expressed his appreciations for Brazil s aspirations to become a permanent member. So, a very important aspect of President Obama s WWW. BRAZILCHAM. COM 13

14 trip was the recognition of Brazil s emerging global leadership. To quote from President Obama s speech in Brasília, the US doesn t simply recognize Brazil s rights, we support it enthusiastically. So, as a result of the good understandings that were reached during the visit, I think that the visit produced very important results, which I will mention [shortly]. But I think that one of the most important results was establishing and enhancing the partnership between the two countries. One that truly reflects the potential of their economies and their societies and that draws on the many shared values that make us natural partners, as big, diverse democracies with a multiethnic background, a commitment to free markets and free people, and a firm belief in social justice. To that end, many interesting agreements were signed and I ll get to them in a while. But the outstanding result of the trip, in this context, was establishing and streamlining the channels through which the partnership will be managed. We have had, for a year now, the global partnership dialogue. One through which we address the many issues that make up the universal bilateral dialogue. And as a matter of fact, we are having a new edition of this global partnership dialogue, probably in the end of May or the first days of June. This important channel of communication, this dialogue, is shared by Foreign Minister Antonio Patriota of Brazil and Secretary of State Hillary Clinton. But two other important channels were created during this visit, and they all now report directly to both presidents. The second one was the economic and financial dialogue, and the third is a strategic energy dialogue. The strategic energy dialogue deserves some special attention, as this issue over the years is becoming increasingly central to our bilateral relations. The pre-salt oil reserves means Brazil could become a stable and independent supplier of oil to the United States in this very hemisphere. And President Obama has expressed, in very clear terms, his willingness to become one of Brazil s best customers of oil in the future. The other important initiative in energy involves biofuels, where we have been cooperating for some years now. We have just expanded that cooperation to developing ethanol for aviation, and we are also getting our best scientists together to develop second generation ethanol. As for the economic and financial dialogue, President Obama has stated his commitment to treating our engagement to Brazil on economic issues as seriously and as deeply as we the United States do with nations like China and India. Our officials have been talking for a while now on global financial issues such as the World Trade Organization, the Doha Rounds, and the global trade flows. And as President Rousseff made clear, it s essential that, in building a stronger partnership, we will also address our contradictions, so that we are both committed to fully discussing But I think that one of the most important results was establishing and enhancing the partnership between the two countries. the issue of trade flows and to continuing to carry on with this dialogue. When I mention trade flows, I mention the fact that in the last few years we changed our position, Brazil s position, in our bilateral trade, from having a small surplus of around US $1 billion, US $1.5 billion in 2007, to a huge deficit of US $11 billion, according to the numbers and the statistics from the Department of Commerce. And of course, we are ready to discuss and to implement measures, and discuss agreements and solutions for this imbalance. We would like to have a deeper, a greater, a much larger trade with the United States, but we d also like to have a more balanced one. 14 WWW. BRAZILCHAM. COM

15 I am almost finished I don t want to do give you the impression that I m finishing with a negative note. I think it s very important to underline here that the mechanisms for addressing those issues are in place, and there seems to be political will on both sides to address them. And also, unlike what happened in the past trade disputes, today [they] no longer have the effect of contaminating our bilateral agenda. and in Washington now is that this is the moment to build a lasting partnership between our countries. One that will benefit both our societies and allow our two countries to work together for the sake of the values we share. Thank you. But, besides this, and to give a more positive note, I also would like to stress two commitments that highlighted the forward-looking nature of our partnership. And I refer to the commitment by both presidents to increase cooperation on education and innovation. During our conversations, President Rousseff expressed the wish to have more postgraduate students in the United States and, if possible, doubling the number of Brazilians who come to the United States to specialize and to have their PhD degrees in hard sciences, especially in medicine, science, technology, and innovation. We also have a lot to gain from mutual cooperation on innovation. Both presidents have stressed their desire to make substantial progress here. And this is a two-way street, as Brazil has a lot to offer here, with expertise we ve built in areas such as biofuels and biotechnology. I think together we can make a big stride towards building the green economy of the future. So, as a conclusion, I would like just to sum up saying that we have very high and intense relations. The visit was a landmark in establishing a global partnership and recognizing Brazil as a global leader. The opportunities as a result of the trip the opportunities that Brazil represents to the United States and also for the good of our own country, in terms of cooperation, meant that we have a very frank, a very open and transparent dialog, on all issues, even on those on which we do not agree completely. I think this is the important lesson to be taken from this visit, because I think that a strategic partner is one that discusses all items and all difficult or easy points in our bilateral agenda. And the important thing is to try to build consensus and to be always ready to talk and to discuss and to find mutually beneficial solutions for both parties. So, as a final remark, I d like to say that the feeling in Brasília WWW. BRAZILCHAM. COM 15

16 AMBASSADOR THOMAS SHANNON AMBASSADOR OF THE UNITED STATES TO BRAZIL, U.S. EMBASSY Good morning. It s a real pleasure to be here. Thanks to our host today and our many sponsors for an opportunity to meet and talk with all of you about Brazil - US relations. As Ambassador Harrington and Ambassador Vieira have noted, this is a remarkable moment coming after the President s visit to Brazil, and [we will discuss] what it means for the future of this relationship, which I believe is important not only to the well -being of both of our own countries and our many citizens but also to the region and more broadly to the globe itself. As both Ambassador Harrington and Ambassador Vieira have noted, the visit had many historic aspects to it. It captured, I think, in many ways the dynamism of American democracy and Brazilian democracy democracies that were capable of electing our first African-American president and Brazil s first female president, but doing so in a context, an international context, of enormous dynamism and challenge probably the most challenging period we ve faced globally in many, many decades. And, as we think about the US-Brazil relationship, we really do need to think about it globally. And I believe Ambassador Vieira captured that well by highlighting the fact that, as Brazil has transformed itself domestically and internationally and has emerged as an important global leader, it has begun to appear in places and on themes where historically it has been absent, and historically we have not encountered it. But whether it s the Middle East, whether it s Africa, whether it s Asia, whether its energy security or food security, whether it s the very important and aggressive stand that Brazil takes in the WTO and in the United Nations, the fact of the matter is Brazil is part of a larger global scenario, and it s not going away. And this means that the United States needs to understand and respect that and factor this into a larger engagement with Brazil. But not just in terms of our bilateral relationship, but in terms of our global agenda. And to recognize, as President Obama did, that this is a very good thing for the United States. As Ambassador Vieira noted, President Obama made it clear that, in his trip to Brazil, he was not only recognizing Brazil s rise in the world, he was celebrating it. And celebrating it on behalf of Brazil, but also on behalf of the United States. It is important to understand that Brazil has done some really remarkable things in a very short period of time. This is my second tour in Brazil as a foreign service officer. I served there first from 1989 to At that time I was special assistant to the ambassador, first Harry Shlaudeman and then Rick Middleton. And my offices then were only about 15 feet away from where they are now. So, I have not advanced very far in my career. In fact, it s been sort of a horizontal slide. I do have a window, though, which is an important accomplishment. But, when I arrived in Brazil in 1989, Brazil had just finished negotiating, and was in the process of ratifying, the constitution that was going to take it out of its era of military government and into an era of civilian government. It was four years into 16 WWW. BRAZILCHAM. COM

17 its re-democratization experiment - some would insist that it s a democratization experiment, not a re-democratization experiment, but, either way - it was four years into civilian government. Of course, the civilian government was led by a very able and competent politician, José Sarney, who today is still an important player in Brazilian politics. But as you remember, he was selected to be Vice President. And when Tancredo Neves died, he was the one who had to step in and take over this monumental task. So, Brazil was attempting to move towards a first direct election since 1964, ratify a constitution that was going to define its democratic institutions, and then deal with all the energy that was pent up over many, many years of military government. [It was attempting] to create the channels and the processes, and the structures of dialog necessary to begin to address Brazil s real development problems. Economically, Brazil had inflation that was off the charts. It was almost impossible to put a number against. It had a currency that was devaluing dramatically over time. It had industries that had been protected by large tariff barriers and were very uncertain about their ability to compete globally. And it was quite uncertain about its place in the world. And then socially, of course, it was stuck with one of the most dramatic inequality coefficients in the world and wondering how in the world it was going to manage not only the very rapid urbanization that had taken place, not only manage the conflict and differences that existed between urban and agricultural life, and industrial and rural life, but also how it was going to address its larger problems of poverty. Here we are 25 years later. Brazil s democracy is consolidated. It has shown over time that its constitution and its institutions are able to address very significant political challenges, including the impeachment of its first directly elected president. Over the past 16 years, it has enjoyed superb executive leadership under Fernando Henrique Cardoso and Ignacio Lula da Silva. And it almost certainly is going to continue on that path with President Rousseff. In fact, I would argue that, with President Rousseff, you might be looking at Brazil s greatest president. But, economically, of course, it has addressed its problem of inflation, it has addressed its fiscal and monetary policy in a significant way. In an important way it has emerged, as Mauro noted, as the seventh largest economy in the world, very soon to become the fifth largest economy in the world, probably before the Rousseff administration is finished. And if you believe analysts, at Goldman Sachs and elsewhere, by the middle of the century it will become the fourth largest economy in the world. This is a remarkable economic accomplishment, but what is striking for me is that, in the course of this economic accomplishment, it also has been accomplishing a social revolution, by pushing tens of millions of people out of poverty, dramatically expanding the size of the middle class, so that it now encompasses more than half of Brazil s population, and effectively showing that markets and democracy can deliver development. And in this regard, it s worth noting that what Brazil has done is effectively fashioned a social revolution peacefully, using democratic institutions and processes that it created, and an economy that it built as it engaged with the world, and as it committed itself to regional integration and globalization, and active participation in the WTO. So, as we look at Brazil today, I think we can assume that this pace of change that we ve seen over the past 25 years is going to continue. And, in the same way that I m shocked positively at the enormous change that has taken place since I worked in Brazil in the late 1980s and where it is today, I would hope that if my current special assistant were to come back 25 years from now as ambassador to Brazil, that the changes would be just as dramatic, and just as stark, and just as positive. And, this brings me to the President s trip to Brazil. Because as both Mauro and Tony noted, this trip had a vision towards the future. It was a conscious effort on both President Rousseff s part and President Obama s part to take a pretty well-developed structure in the relationship but to refine it, to give it a 21st-century vision, and then to connect it at a ministerial level to ensure that our cabinet secretaries and ministers were talking to each other, report- WWW. BRAZILCHAM. COM 17

18 ing back to presidents, and driving a larger bilateral agenda, which is necessary for us to kind of capture the wealth that exists for this relationship. And, as the two leaders spoke to each other, several things for me were striking. First of all, although Brazil has been on a strong growth path over time, and has been able through its social policies to capture more and more of Brazilian society - in other words, distributing more wealth over time- President Rousseff is not satisfied with the linear approach to growth. She s looking for some kind of accelerant that will push growth even higher. And in order to do this she is looking for mechanisms that will accelerate that growth. And for her, those are science and technology, innovation, education, regulatory reform, and infrastructure development. And if you look at that agenda, guess what? It sounds like our agenda. It sounds like President Obama s agenda, if you read his State of the Union address. And what was striking in the conversation between the two leaders is that they both understand their economies as facing the same kinds of challenges, although maybe different sizes. 15 trillion to 2 trillion, but still big economies pushing very hard and intent on growth and intent on expanding that growth, so that the benefits of that growth disseminate rapidly through to our populations. But they came away with a clear understanding that, because these agendas line up pretty nicely, there are ways we can work together at the level of partnership, recognizing that we both have things to offer each other in important areas. And in this regard Mauro and Tony mentioned the importance of energy and the strategic energy dialog that was established during this visit. And what s striking about this strategic energy dialog we ve had energy dialogs in the past is that this is the first time that we ve decided to describe this dialog as strategic. And the reason we ve done so is for two reasons. First, from the point of view of Brazil, obviously, the pre-salt finds of oil and gas make Brazil the holder of the 10th largest reserve of oil and gas in the world. And that s pretty remarkable. But it s a big challenge for Brazil because, as President Rousseff has made clear, Brazil has made enormous progress in cleaning up its energy matrix over time, and uses more and more renewable energies, and is not particularly keen on drawing into its economy the oil and gas that comes from the pre-salt finds. So, they really look at that pre-salt oil and gas as an export commodity, and they are looking for markets. And there are many markets out there. But there are two big ones. I ll just mention ours. We obviously have an interest in that oil and gas. And President Obama made that clear in his conversations with President Rousseff. But at the same time, President Rousseff indicated that she did not want a traditional energy relationship that was just buying and selling oil and gas. She wanted to find a way to fashion it so that all the subsidiary industries that you build around an oil and gas find can be developed and turned into world-class industries. And she viewed the United States as the country most capable of providing both the financing, the technology, and the expertise necessary to do that. And for me, that was a striking insight because it meant that she understood the importance of this find, and in a way that went beyond the commerce of the find, went beyond what that would do for current account balances, or addressing a trade deficit in the relationship from Brazil s point of view. It was really about using [it] as part of a broader industrial policy, which was quite remarkable. And from our point of view, what was striking and strategic about this find, of course, is that this oil and gas is far from the Middle East. Far from the Persian Gulf, far from the Straits of Hormuz, there is not an Iranian Revolutionary guard in sight, and the oil will flow along sea lanes that are patrolled by friendly nations and the United States Navy. And this is, I think, important for the United States, I think it s important for Brazil. And I recognize that we want to have some time for comments and questions, so I m not going to dwell any longer on the visit. I just want to say that I came away very encouraged, impressed by the level and the quality of the conversation that took place between the two leaders, impressed by the level and the quality of the engagement between the cabinet ministers and secretaries that President Obama brought on the trip and their Brazilian counterparts. Impressed by the fact that the Brazil - US CEO Forum was linked to this visit and, through the Brazil - US Business Council and its many partners, we were able to establish a 18 WWW. BRAZILCHAM. COM

19 larger US - Brazil business summit that gave a very strong commercial and investment focus to this visit. [We] came away believing that, as we look ahead, and as we understand how we are going to build this relationship, that focusing early on the fundamentals, focusing early on our commerce and on our investment relationship and how we improve that and how we direct it toward strategic sectors, is going to be vital to making a bigger argument in our own societies for the importance of the strategic relationship. From Tony s point of view, from Mauro s point of view, from my point of view, the strategic nature of that relationship is obvious. But it is still not obvious to many of our own citizens and this was one of the reasons why President Obama s trip was so important. I think when President Rousseff returns the favor and visits the United States, we will give it the same kind of focus and input. time, and very happy to be working with Ambassador Vieira, and a gentleman of enormous depth and experience such as Ambassador Harrington. So I thank you very much. as we look out over the world, as we look at the kinds of challenges the United States is facing today, Brazil is a country that shares our interests, that shares our values. But at the end of the day, the fact of the matter is, as we look out over the world, as we look at the kinds of challenges the United States is facing today, Brazil is a country that shares our interests, that shares our values. It has existed in our hemisphere alongside us facing the same kinds of problems and challenges, both domestically and regionally, that we have. But also, Brazil and the United States are two countries that have never allowed themselves to be defined by their geographic address. Although we are a North American country and we have important relations with Canada and Mexico, that does not define the entirety of our national existence. And although Brazil is a South American country, with 10 neighbors, as important as those are, that does not define its national existence. We are countries that have global purposes. And for this reason, I cannot imagine a better partner than Brazil at this point in time. I m very proud to be representing the United States and Brazil at this WWW. BRAZILCHAM. COM 19

20 H.E. HENRIQUE MEIRELLES CONFERENCE KEYNOTE SPEAKER FORMER PRESIDENT, THE CENTRAL BANK OF BRAZIL Well, thank you. It is a pleasure to be speaking to this audience once more, to a packed house. The audience has been increasing throughout the years. It shows the changes taking place in Brazil for the better. My idea today is to address two basic related subjects. If I remember and bring to the audience the conclusions of a study conducted by the Central Bank, on the G20 members in the early 2000s, a very interesting conclusion can [be drawn] from it. That study was about countries which had showed a low level of growth during a long period, and in that group they found two subgroups. One, countries which had changed up and improved the average growth rate, and the other ones, the ones which had not achieved that. And the conclusion was that the countries which had succeeded were the ones which had been able to define what I would call the problems which were in the critical path of growth the important problems, relevant ones. Because every country that has a low level of development has a long list of problems. And the secret for those countries was to focus on the important problems, and only those, and solve those. And then move forwards. Brazil did that. And the first set of problems that Brazil faced was the fact that we had built macroeconomic imbalances throughout the years. And that was the critical path. And I m going to address that. But that changed, and if we analyze Brazil today, under the same set of analytical tools, now the challenges are different. What is in the critical path is not the same. Now we are talking about infrastructure. Now we are talking about skilled labor. Now we are talking about a different set of challenges. My point is that, for the very same reasons that Brazil was able to cope with the first set of challenges, which were difficult ones, it is going to be able to cope with the second, which is already under way. Then, I would like to thank the Chamber. I would like to salute Ambassadors Shannon and Mauro Vieira, Mr. Landers, Mr. Harrington, Roberto Azevedo, and thank you all for inviting me here once more. I would like only to clarify a point, regarding the Olympic public authority in Brazil. I am not the Olympic public authority in Brazil, at this point, for a very simple reason. The Olympic public authority in Brazil is a consortium between three levels of government: Federal, state and municipal. The City of Rio, the State of Rio, and the federal government. And it is under the approval process, the agency; it [has to be] approved by the national congress, and the state assembly in Rio, and the municipal chamber. And that is at the end of this process. Then we have to have the bylaws done, in summary, to have the entity in place, to get to know what that is, really. After that, the President will then send a name to the Senate, for the Presidency of the Authority. After the Senate approves that name, then we will have the Olympic authority in Brazil, whoever that person will be. Anyway 20 WWW. BRAZILCHAM. COM

21 But let s now talk about these issues. Evidently, when I am talking about the infrastructure, I will talk as an independent analyst about the Olympic effort, which Brazil is going to face. I go back now to the point of the macroeconomic challenges and and in New York. What happened is, Brazil leveraged itself off. The government, public debt and private. Which means Brazil did enjoy a very high rate of growth during that period. But the imbalances, you could clearly see, they were being built. Mr. Volker took over and brought inflation down in the U.S., changed monetary policy, and then push came to shove, and many countries faced severe deleveraging challenges, which is the case for many countries today. Roberto Azevedo and H.E. Henrique Meirelles imbalances that are in the critical path of Brazil, to set the record, and then, based on that, we can analyze the future. Being out of the position I was at the Central Bank, I can take a longer term view of the country. Not be focused on monetary policy and foreign exchange, and all that, banking regulations. But anyway, for a very long period, from 1900 to 1970, Brazil enjoyed a very high average growth rate. Ups and downs, but high in general. Taking advantage of the same phenomenon which is taking place in Asia, which is the massive migration of skilled manpower from the countryside to the cities, industrialized. And unskilled manpower as well, but able to be trained. Then, cheap manpower that fueled the industrialization of Brazil throughout the years. That process ended, exhausted itself, in due time. Fifties, sixties, seventies, and the dynamics changed. At some point Brazil embarked on an effort to improve that growth rate, taking advantage of the high level of liquidity in the international markets in the 70s. Now the history becomes familiar to what we are discussing nowadays in the US, and in Europe, and in the emerging markets, and all over the world, But with one important difference. It s that emerging market economies learned that lesson the hard way. When they face a deleveraging problem, they have another problem, which is the access to foreign exchange and to international markets. And that is a very critical difference from this kind of deleveraging process, which takes place in economies which are either able to have reserve currencies or are able to have more guaranteed access to international markets. In summary, emerging markets faced together not only fiscal [problems], some inflation, but also a foreign exchange crisis. That happened with Brazil, and then we had a long period of crisis foreign exchange, high vulnerability to the international markets, high level of external debt, fiscal problems related to debt, and inflation for a long period, as a result high-level cost of capital and so on and so forth. And that was the problem that Brazil faced. In 03, when we took over, the situation in Brazil was that the basis [for change] was already under way. We already had a fiscal responsibility law approved, which has been instrumental for the control of the government budget and the public debt in Brazil. We already had an inflation targeting regime [in place] and a free-floating foreign exchange regime. But having said that, vulnerabilities were still there. If we take the situation in 03, we had a high level of dependence on international markets. The WWW. BRAZILCHAM. COM 21

22 external debt of the treasury coupled with the domestic dollar-linked debt, were the majority of the public debt, plus a short-term profile, and you move on and on. We had inflation, which was about 17% per year, twelve months in May of 03. The debt to GDP level was 62% and, again, the country risk at that time was about 1,400 points above treasury. The way [we addressed] those issues was with a very interesting approach, when we compare it with the kind of adjustments which are taking place today. Very austere monetary policy was applied in order to leave no doubt about the commitment of the Central Bank and of the government in bringing inflation down to the target path, which had then been adjusted at that moment, with a downward path. We had a fiscal surplus, a primary surplus of the budget set at 4.25% of GDP, and actually, it was a little more than that in 03, more than five. And Brazil embarked on a program also to address the external problem. It is important to note that at that moment one of the reasons for the vulnerability was not only the high level of external debt, but [also] the low level of reserves, in spite of the free-floating foreign exchange regime. The levels of reserves were substantially lower than the debt with the IMF, to give you an idea. That worked. There was no doubt that there was a commitment there. And markets bought the story because it was serious. And the inflation came down to target, in due time, where it remained during the last eight years. The debt-to-gdp level began to drop, and today it is about 40% of GDP the net debt. The first six months of 03 were painful. That was our strategy in terms of having a tough but short adjustment period. The level of domestic consumption fell 6%. Fifteen percent of the industrial output shifted from domestic consumption to exports. The current account deficit of 6% became a 2% surplus in two years. That gives you an idea of the dimension of the adjustment going on when compared to the adjustments today. That s relevant when we analyze the kinds of challenges that Brazil has to face in other areas now, because it shows the capacity of the country to face those. And, evidently, Brazil has doubled, more than doubled, its average growth rate during that period over solid ground. Debt to GDP level, 40%. US $310 billion international reserves, Brazil is a net external creditor, and so on and so forth. The debt profile has improved substantially. And having said that, the question now is: What s happening? Well, there are good things, and problems brought as a result of that. Sixty four percent of Brazilians today are part of the middle class. Thirty six percent of Brazilians became part of the middle class during the last eight years. That s very good you create markets, you create better social conditions. You create more ability for the country to grow based on domestic consumption. The social programs incorporated in the market a much larger audience. The family scholarships provide help for families to send children to school and to have food and all of that. All of that is creating the basic conditions for Brazil to have a market, a strong market. Brazil is investing, heavily, on its competitive advantages. Basically, taking advantage of its natural resources grains, and minerals, and now oil, etc., and alcohol, and then Brazil is generating a higher capacity to generate foreign exchanges, and so on and so forth. But, having said that, that also poses a challenge, because that creates a different demand for skilled labor, for transportation, for energy you name it - in the private and public sector. And the whole country was geared towards a lower level of growth, and now it has to be geared towards a higher level of growth. And it is not a focused level: Well, somebody has to do this or that. If you go to the large Brazilian cities today, you will see the problems with the traffic. And that is challenging because that s a municipal effort, together with the state level effort, and some federal. That is a very large challenge. Not to mention all of the other well-known infrastructure questions. But what is the important point? I think Brazil has the basic conditions to face that. Why? Again, the same conditions which enabled the country to face and win the first macroeconomic round. How? Very simple. Let s name a few. Let s talk about competitive advantages. For starters, Brazil today has a very large domestic consumer market, which poses a problem, but [is 22 WWW. BRAZILCHAM. COM

23 also] a strength. Second, there is a challenge for education, sure; for skilled labor, sure; shortage of skilled labor, sure all of that is true because the country is growing at a much higher rate. But there is a well-trained, very substantial group of workers, of professionals, and excellent schools there is a basis for that. Capital markets are well developed, [becoming] larger and larger, and sophisticated. Brazil lives under the rule of law that is very important. An independent judiciary, an independent district attorney system, an independent and free press, all of that provides a strong basis for growth; it poses challenges, sure. But, that s all there. All of that, and the good news is that today that is what is in the headlines in Brazil, which is being discussed by policymakers. This means that Brazil is now focused more on longer term challenges rather than short term crises, etc. Let me address a little this effort towards the Olympics to give you an idea of what I am talking about. The Olympic games are very interesting, symbolic, and important, because, number one: They involve the City of Rio the Olympic Games are in Rio. It is a project of the City of Rio. The State of Rio has very important infrastructure projects to be delivered. The subway, this, that, the Maracanã Stadium all of that is state as well, besides the city. And then you have the federal government. Several very important projects are to be delivered by the federal government. And Brazil developed this concept, which is an interesting one, of this Olympic Authority. The agency is a consortium between the three governments in order to coordinate the efforts of the three governments to deliver that project. In summary, it s going to be a challenge, yes. To give an example: You talk about journalists. Journalists will go to Rio to cover the Olympics that s great, that s good. Sure. The total availability of hotel rooms in Rio today is around twenty-five thousand rooms. That is an interesting number. But the number of journalists expected to be present at the games the accredited journalists are something between 29 and 31, 000. It starts to become challenging. public work. It s very complex. It s very large, as you are noticing. Very diversified. Several things happening at the same time. Done at the same time. At the same time, the games themselves are being organized by the organizing committee. And all of that together. And it is a public work which has a fixed date for inauguration it can t be changed. It has to be ready at that date. Working well under severe specifications is a good challenge, I think. And a good thing for the country to have that. A good opportunity for the country to get itself organized to do that. And I think that, again, [it is] symbolic. And Brazil has the conditions to do it. Evidently, we are talking now about more urgent matters regarding infrastructure. I mentioned traffic in the large cities, we have ports, we have highways, railroads. But again, those are problems which are serious, because they are problems, but again, they are good problems, having come about as a result of a higher rate of growth. That s very, very, very important to keep in mind. Then I would like to end my speech saying that, indeed, people are optimistic about Brazil, which I think is for a good reason. Investors are interested in Brazil also, with good reason. It s important that we know the problems. It is important that we, on the one hand, don t overreact when we see the problem but, on the other hand, that we take the problem seriously. Because [the problems] are wellknown now. They are being addressed. They will be addressed. But, again, it is very important that the same level of focus, concentration and effort with which Brazil addressed the question of the macroeconomic imbalances is applied now to all the efforts. And I am talking about infrastructure not only as a public sector [challenge], [but as] a private sector challenge. The public sector will not address that alone. It is very important private sector investments in infrastructure, in building the country, and in manufacturing. Well, that s it. Thank you very much. And, tourists, etc., and you go on, and on, and on. And there is another very interesting feature in that WWW. BRAZILCHAM. COM 23

24 THEODORE M. HELMS EXECUTIVE MANAGER INVESTOR RELATIONS, PETRÓLEO BRASILEIRO S.A. - PETROBRAS Thank you to the Brazilian-American Chamber of Commerce. Originally, my CFO Almir Barbosa was supposed to be here, but he got pulled away into the China trip last week and so he could not make it. And then, of course, the title Outlook of Ethanol in Biofuels : Actually, once we put together the presentation we realized Petrobras is largely an oil and gas company, at least at the time. So, I m going to set the stage then for that future. What is also good is that we listened to the Ambassadors talk about certain things that I think we ll address. One of them is what s going to be happening long-term. Secondly, the level of growth and how that plays into it. Maybe, thirdly, is the energy relationship. What this conference is PRIMARY DEMAND FOR ENERGY BREAKDOWN BY NONRENEWABLE FUEL not about, I guess we ve heard enough of over the years: Enough about how corn ethanol is a dumb idea relative to sugar and how the tariff makes no sense. So, we ll stay away from those topics and really go into more interesting [topics]. First of all, and I apologize if you can t all read this, but we begin with just a quick review of Petrobras, excuse me, of the Brazilian energy matrix. And what you ll see is that, really, the energy matrix of Brazil is the envy of the world. Not only does it have a much higher percent of its energy from renewable sources, as you ll see there 45% versus 13% - but also the non-renewables, which we ll see in a moment, are found in abundance. And through the continued investment within Brazil, we not only achieve self-sufficiency on an overall global balance, but also even through most of the products. And we can do that and do that over time, despite the fact that Brazil will grow at four times the pace of energy consumption as the rest of the world. And also within that whole system, [there is] great flexibility we ll see in a minute. And finally, as we know, as you become self-sufficient, maybe even a small net exporter, we know that imports can subtract from income, and so being energy sufficient and not having to import a portion of your energy needs for the country is a very strategic and important long-term value. 24 WWW. BRAZILCHAM. COM

25 Again, here, we see that changing the energy matrix for the world is not an easy task. So despite what will be greater and greater efforts of using renewables and others, the most you ll do for the whole world is renewables going from 13% to 16% and in the case of Brazil from 45% to 46%. Actually, after doing the math, the total of tons of oil is equivalent to the world going from 12.2 billion to 16.7 renewables. What s interesting is that Brazil s share then goes from 2% today to about 3% of the total of bio-renewable fuels. Turning now to non-renewables: What s interesting about this is a couple things. First, just that Brazil is growing its non-renewables, energy, and oil and gas at a rate really four times that of the rest of the world. This is in accordance with the International Energy Agency and our own predictions. to gasoline because of some price differentials. In fact, I just read that the US is going to be exporting ethanol, this on a short-term basis. Importing ethanol to Brazil. I call it a man bites dog story. As you ll see also, diesel consumption is up 40%, but interestingly biodiesel is now 5% of diesel consumption zero just five years ago, showing the flexibility, the building in of biorenewables. In fact, there is bio diesel capacity for 10%, but there is still some logistic and feedstock issues as well as issues of what machines can do. But this shows you how the country is developing in that respect. And finally, jet fuel consumption really was flat for a number years, but up 30% just in the last five years, which, again, it s that whole concept that the middle-class is no longer taking 10-hour bus rides but taking flights. You ll see that gas becomes a growing part of the energy matrix, and some additional coal. I think these are thermoelectrics signed some time ago. But the [important] fact is that Brazil is growing very fast in non-renewables, but yet can support that growth, as we ll see. This chart is interesting. What it does is show the main transportation fields by sector. A couple things to highlight: First, in the first five years of the decade of 2010, [we see] really not that much growth. This accelerated growth is now happening. You can see this actually in energy consumption: 8% the first five years, as the Lula administration and the consolidation was happening and then, as it has happened, really taking off. Here, very quickly: The top line is total vehicles. A couple of things [that are] interesting: I think this shows that demand will continue over time. Vehicles in Brazil and maybe people think São Paulo go from 20 million to 70 million. Very interesting. Just as we see that the benefits to the middle class are increasing. Secondly, really just in 2005, essentially there were no flex fuel vehicles. But by 2012 they will literally be half the fleet. And, obviously, they will be BUSINESS PLAN : INCREASED INVESTMENT FOR INTEGRATED OPERATIONS IN BRAZIL A couple [interesting] things to note: From 2000 to 2009, gasoline consumption increased 12%, while ethanol went to 258% we ll see that in a minute. It only stopped in 2010, [when] ethanol declined relative WWW. BRAZILCHAM. COM 25

26 virtually all the fleet by What is interesting also is that natural gas vehicles will be catching up to gasoline vehicles. And what I think this also demonstrates is that it is easy to replace the fleet vehicle. What s hard we re seeing this in the US is to replace the entire infrastructure, so that every gasoline station can sell e100 and there s enough natural gas stations. Here, very quickly Petrobras is very proud, Brazil is very proud, of the fact that they ve achieved energy sufficiency over time, back in And that was really done. [Here you can see], the red is oil consumption in Brazil, the blue is the production of oil in Brazil, so they finally crossed those lines. Here I just added the ethanol consumption to the oil consumption. What I would say is, if it were not for ethanol, Brazil would still not be self-sufficient in product. Here also, another way to illustrate the same thing. It s actually just through 2008, so it needs to be updated. But a couple of very interesting things: First of all, with the oil price shock back in the late 70s, through a period of 20 years, Brazilian demand did not increase. Then, what happened? You had the real plan combined with very low gasoline prices, being there was really no ethanol consumption. Here you have what we ll call the consolidation, if you will. The early 2000s, the kind of slow growth combined with the fact that now gasoline was getting expensive relative to ethanol. So, that was backing it out. But now, with that increasing growth, despite the ethanol happening we re seeing it once again taking off. Accelerating growth with demand. Just to give you a sense, I would say that the final thing is, again, the important lesson learned here: if it were not for really the deepwater production, which is really making Brazil self-sufficient, onshore, shallow water really has been flat for a number of years. So, going out to those new frontiers, drilling them, exploiting them responsibly - has been what gives us our great benefit. When we look here at gas, I remember eight years ago all the investors saying: Why are you investing anything in gas infrastructure? Well, we ve actually taken gas consumption from 15 million cubic meters to 30 million cubic meters. What you ll also see is that - this is hydroelectric - we have to build in great flexibility, because now, in a sense, the only way you can use this renewable source hydroelectric is if you have a backup. And, in this case, it s gas. And so, this was a wet year with low industrial demand. But as it picks up, gas, we ve actually gone from periods where we ve gone from zero megawatt generation to 6,500. We ve gone from 40 million cubic meters of daily consumption to 80 million. So, we ve built in great flexibility precisely for that. I d also point out that this is natural gas, and that is now about 30,000 barrels per day. Or about 10%, or the equivalent of 10% gasoline sales. So, [there is] great flexibility in the system. Here, very quickly, is our famous US $224.1 billion plan. This will be updated very shortly. Just maybe the point to mention is: Despite the fact we have all these great upstream resources, we don t neglect our downstream. We don t want to, over time, import margin into Brazil. We want to use our resources to have the flexibility and the whole system. What is also interesting to say is that eight years ago our capex was 5 billion a year. It is now 45 billion a year. Why? Because oil prices went up. And what s unique about Brazil is that the Brazilian government didn t tax us as oil prices went up. We think it makes sense to be integrated and to grow. So, we ve reinvested in the downstream and in other aspects to be integrated and to provide the fuels that Brazil needs. Here, very quickly, as we ve seen this before, but we produced about 2 million barrels of oil in We think we re going to go to 4 million barrels by 2020, we project that. This is before any adjustments to our new 1115 plan. And we see the pre-salt, by 2020, will contribute about 1 million barrels a day, out of that total of 4 million barrels a day. And again: Why can we grow? Because I ve got almost 16 billion in reserves and we think between what we found so far in the pre-salt, double that number. Again, on the downstream side, just to point out and show how the country is evolving: Back in 80 we finished our last refinery, 180,000 barrels a day, we re producing 1 million barrels a day. So, for 25 years we didn t invest in downstream. We caught up. We now have this needs to be up- 26 WWW. BRAZILCHAM. COM

27 dated 2 million barrels a day of production. We didn t build a refinery, we re at 1.8. So now Brazil is becoming very dependent on products, which means, overtime, we re going to build additional refineries to supply the market. And, I ll conclude with this last slide, which talks about what are we doing ourselves in the biofuel business. First of all, you can say the good news is that we are tripling our ethanol production. Infrastructure for ethanol exports, that should go up more than double. Our biodiesel going up another 50 percent. But again, relatively speaking, this is a small part of the business, as we say, by total investments about 3.5 billion out of 224 billion. This number could change with a new plan. And, then again, this represents, when you add this up it s about 10,000 barrels versus the 2 million barrels that I currently will be refining. So, again, it s small but growing. It is the future, which is good. And we now have Mike who will now talk more about the long-term future of biofuels. WWW. BRAZILCHAM. COM 27

28 MICHAEL McADAMS PRESIDENT, ADVANCED BIOFUELS ASSOCIATION I m delighted to be with you this morning, honored guests. I m delighted to be speaking with this group. Last week, I got a chance to speak, to testify, in front of the Senate Environment Committee in the Senate Energy Committee. Let me just say that with four dollar gasoline approaching five, the United States Congress and the folks in Brazil are all very keenly interested in what the future of biofuels will be and what the contributions are going to be. So, what I ve tried to do is focus a little bit on the second generation biofuels and give you a feel for some of the policy moving forward. So, the Advanced Biofuel Association has been around for five years. We represent 32 secondgeneration biofuels companies. When I talk about second-generation biofuels I m talking about companies that are not corn ethanol and are also not soybean biodiesel using a fatty acid methyl ester technology. What you are seeing here is some of the real cutting-edge companies. Several of these companies have already gone public, with great success. But you are seeing a set of companies that represent the wide range of diverse platforms in the advanced biofuels area. We have some of the more prominent algae companies in Solazyme and Sapphire. So, in two companies right there, you have an algae company that is going to use algae as a fermenting mechanism, which is going to be metabolically changed, and in an algae setting and in a squish contest, for lack of better term, you have Sapphire, that is going to use an open pond. You have several of the top gasifications companies across this list. You have some of the majors on this list. You have some of the best hydroprocessing companies on this list. Isomerization processes on this list. You have two companies on this list that, between the two of them, currently produce 700 million gallons of renewable diesel. You have some of the most fascinating waste-to-energy companies. You ve got some of the most interesting pyrolitic companies, acid hydrolysis, cellulosic companies and, last but not least, certainly some of the more interesting synthetic biology companies. So, what do we advocate? When I am before the United States Congress, or when I am before any body in the world that does public policy, we advocate three things, because history has shown us that policymakers have a tremendous track record of picking the wrong technology. So, what we suggest to the policymakers is: Take a technology neutral approach. The second thing we ve suggested around the world is be feedstock agnostic, because these research and development efforts and these commercialization efforts are not a linear effort. They are step change efforts. And so, what I would submit to you and this audience today, is that you re going to see a lot of firstgeneration feedstocks used in second-generation technologies to make advanced molecules which will have a lot of environmental benefits. And I like to say: 40% of something is better than 60% of nothing. And those happen to be the two GHD 28 WWW. BRAZILCHAM. COM

29 numbers in the current law. And then lastly, I talk about subsidy parity. This is probably the most famous slide we use. It s a slide that lays out the US law. It will give you a context, whether you re from the US or Brazil, as to what s driving the current market. As I told the Senate environment committee last week, this is the single most important public policy in the United States. This is a 36 billion gallon mandate by It is divided into four buckets. Our association, we advocated for two buckets. But the way politics was, we wound up with four; there must have been two guys who need to get reelected somewhere. So, you have a conventional bucket that is 15 billion gallons that is specifically set aside for corn ethanol. The corn ethanol guys wanted to make absolutely certain that the Brazilian ethanol didn t take any of their gallons, so Brazilian sugarcane ethanol is actually, for purposes of this statute, an advanced biofuels. So, it fits in the 21 billion gallon bucket. You also have a biomass-based diesel standard. This is different than the standard in Pennsylvania or the standard in Brazil because this is a standard which is technology neutral for advanced diesels. Biodiesel is a trademarked term. When you use the word biodiesel, you re specifically talking about a AST spec diesel. That is non-fungible and is an ester by definition from a fatty acid metal ester technology. When you re talking about a renewable diesel or a synthetic diesel, you could be producing that diesel from a Fisher- Tropsch process on the back of the gasification unit. Or you could be producing that from a standard fermentation technology using one of the new advanced synthetic biologies. defined as having it come from hemi-cellulosic or ligacellulosic material. That is the category that is falling up short. This year, the mandate under the law was 250 million gallons. This year the EPA has waiver authority, and they have rolled that mandate back to 6.5 million gallons. What is of interest is the EPA has such interest and optimism about the advanced pool that they left the 240 million bogey that came from this and was embedded in the advanced number, in the advanced pool. So, this year we should have 13 billion gallons of renewable fuels mandated under this statute, of which about 12.5 to 13 billion are going to be corn ethanol. And Ted was right, the gentleman s right. This month for the first time we are probably going to, if you talk to the traders, export somewhere between 100 million and 140 million gallons of corn ethanol to Brazil. This is the world ethanol production. This is from the BP statistical analysis. I left this in the slide pack for those of you who want to delve into a little more detail. This is the US refined products split. I wanted to bring this in the room because when we currently talk about ethanol, we re talking about ethanol only being used in the gasoline pool. It s a higher octane. It has got higher RVP. But you can put it in US REFINED AND IMPORTED FINISHED FUELS AND OTHER REFINED PRODUCTS US Refined and Imported Finished Fuels and Other Refined Products The last category is the cellulosic category. That is specifically, statutorily, WWW. BRAZILCHAM. COM 29

30 the gasoline pool here and take an off spec gasoline and make a valuable product. It is why refiners did it before you had the mandates. Now, you have 290 billion gallons a year of US product. And one of the things that I was trying to get across to both the Senate Energy and the Senate Environment Committee is that a lot of these advanced technologies are going to make molecules of higher value. They are going to make diesels, they are going to make heating oils, they are going to make jet fuels. And so, the policy has to be harmonized both at the regulatory and statutory level to allow these new molecules to come in the marketplace. In the last 20 years, the only thing we ve used in this marketplace is alcohol ethanol alcohol or bio diesel. We got rid of MTBE in So, when you look at the various different pathways, I ve left you this chart because I think that in one shot it gives you a feel. There are a whole range of different feedstocks that you can put into play. There are a whole range of different technologies that are currently being brought forward to the commercial stage, and they re making a whole range of products. So, when I go anywhere I try to talk to people about how to look at biofuels. Because biofuels are confusing to a lot of people. So, there s three easy ways to talk to anybody in the biofuel sector and to come to ground real quick on what they re doing. The first thing is to ask, what technology are you involved in? Are we doing dry milk corn ethanol here? Are we doing fermentation? Are we using a synthetic biology and augmented medium, like the yeast or an e. coli? Or the bacteria? What are we putting in the machine? So, it the first box is the machine, the second question to ask anybody in the biofuels world is: What are you putting in the machine? So, what s the feedstock? Is it sugar, is it corn, is it wood, is it grass, is it animal fat? What s going in the machine? And that feedstock piece is a large driver in terms of your lifecycle greenhouse gas reductions. The last thing to ask and believe, me the Congress really didn t think about this when they first did the RFS two- is: What s the molecule coming out? And what I m excited to tell you, and what s really exciting for Brazil, is that the molecule coming out of a lot of these second-generation technologies is the same exact molecule that comes out of the refinery from a barrel of oil that we ve been using the last 50 years. That s the great leap. If you think about first-generation technologies in biofuels- and my colleagues and the corn ethanol guys don t like this- but I call them the wall phone. And I stand in front of you today with some companies making these fuels today and others who are about to make them in the next 36 months in large quantities I stand in front of you with a smartphone. What a great option that is. So, if you re looking at it, now you ask yourself: I m running a biofuels company; what would be the five properties I would want in a biofuel? Well, I d want it to be energy dense. I d want to go as far in the gallon of renewable fuel as I went on the one that came out of a barrel of oil. And so, if I make an isobutanol, that s probably 100,000 BTUs. If I make an isoprene that s 120,000 BTUs. If I m making renewable diesel that s 126,000 BTUs. If I m making gasoline out of a barrel of oil, it s 124,500. If I m making ethanol from corn stover, or from sugar, or from corn, I m getting a 76,600 BTU molecule it is a third less energy dense. How about environmental advantage? What is the greenhouse gas use? What is the ground-level ozone use? What is the water use? What s the habitat impact? There s a lot of disagreement on what an environmentally advantaged product is. It s one of the fundamental pieces that is driving biofuels policy all over the world. Is it fungible? Can I use it without having to wait for 20 million vehicles to be changed over a 20 year period? Can I use it in the planes, trains, and automobiles of today? Well, a lot of advanced fuels from these products are usable in the current infrastructure. They don t need blenders pumps. They don t need separate pipelines. They don t need new cars. They re good to go today. Is it scalable? Can you make a lot of it? Well, that s again a question about feedstock. Is it assimilable? Is there lots of it? And, last but not least, is it economically competitive? So, I pull my hair out when I see a loan guarantee 30 WWW. BRAZILCHAM. COM

31 US-BRAZIL MOU So, if you look across that list I put up there -BP, Shell, DuPont, just to name a few - are already way, way out front in terms of reaching out to Brazil and looking for partnerships. The other thing that is very helpful here is the transportation piece and the infrastructure pieces. Brazil has a lot of experience with changing the fleets out, the blenders pumps and the infrastructure requirements. offered by this government for a technology from Canada that, on its face, is starting out at $16.50 a gallon to make ethanol from a wood. That s slightly off the market from a commercial standpoint. So the MOU I m going to collapse these two slides into one real quick - the MOU is very important in a couple of ways. The MOU was the first major conversation between our governments. It started under the Bush administration. It s been carried forward over in the Obama administration. It s a seminal development because both of our countries have unique scientific and agricultural processes in place that are very significant, and are world leaders. And so, what the US has been trying to do is have the Brazilians teach us how they can grow energy cane effectively. We have a whole range of states. Mississippi Governor Haley Barbour is trying to grow the stuff now down in southern Mississippi. The state of Alabama s looking at it, the state of Florida is looking at it, southern Texas is looking at it, Hawaii is looking at it. So, they grow a better brand, a more efficient brand of energy cane than we grow. So, there is a technology transfer opportunity in the agricultural side from Brazil our way. From our way, we have all these technologies, and it s regrettable: I spoke to the energy ministers from Latin America two years ago, and I said, I ve got great news for you. We re inventing all these tremendous technologies. They are about to be deployed. Some of them are about to go commercial and they use cheap sugar. And because of the US sugar program, we won t be using them in the US. We re going to be building them in Brazil. Well, if you could move to these advanced fuels that aggregated those, right now, the number to change, that in the US is somewhere in the neighborhood of US $8-$20 billion. We are having that discussion about whether we should shift the money from the VTEC to infrastructure right now. And I would submit that it might be a real smart thing to build the second generation companies and skip the infrastructure. That might be something we might want to consider. But we can learn there from the Brazilians as well. So, let me conclude. We have a unique opportunity. The countries partner well together. The resource spaces between the countries are very strong and very deep. We already have had a long, tenured relationship between the two countries, and they have been the leader on ethanol for years and years. And in just five years the United States it took 20 years for the US to go to 2 billion gallons. We started this little project in We had 2 billion gallons in When we did Epact 2005 and you fast forward to today: We now have 14 billion gallons. We re now exporting it to Brazil because of the current sugar markets around the world. So, there is great synergy here. If we could get consistent policies here in the United States, we d see a lot of these fuels come a little quicker to market. I look forward to your questions. Thank you very much for inviting me. WWW. BRAZILCHAM. COM 31

32 PAULO VIEIRA DA CUNHA PARTNER AND HEAD OF RESEARCH, TANDEM GLOBAL PARTNERS Good morning. My name is Paulo Vieira da Cunha. I m with Tandem Global Partners, and I m the Chairman of the Banking and Capital Markets Committee. It s my pleasure to be here with you today. I think we ve assembled a really outstanding panel, now turning gears to the more economic issues. And Brazil being Brazil or almost any large country there is never a lack of interesting and contrasting issues to discuss about Brazil. I m especially glad [about] the panel today: even though we are all economists, so that s kind of a down side, we come at these issues from very different perspectives, and so that is very, very good. I won t go through their bios. They are all very distinguished professionals and the bios are in front of you. But let me just briefly say that we have here represented the viewpoints of a rating agency, so, a real top-down view; and we have the viewpoint of someone who is managing directly some of the fiscal challenges and has done so extremely successfully, so has a lot of lessons to be told, but [also] challenges that still remain. We have someone that is one of the most distinguished analysts on the sell side, so he is always looking very critically, particularly at the more short run sides. And finally, but not least, [we have] someone who looks at all of these things as an investor, and so has the bottom line view of what does this all mean. The game plan for this session is that each of them will give a first round of their opinions, and then we will open this up for discussions. But I ve been asked to sort of set the stage for this debate. So, let me try to outline to you what I mean by these interesting and contrasting views. Well, in a nutshell, as we ve discussed this morning already, we have an extraordinarily promising and, unusually for Brazil, prosperous medium term perspective. But, at the same time, we have some real short term problems. Not the least of which is a rapidly rising inflation rate, a continuous fiscal problem, and an increase in uncertainty that is reflected clearly in the markets. So, we still have that contrast between what s happening in the medium term and what is happening on the day-to-day. On the medium term, I think that Ambassador Shannon summarized that in the best way. If Brazil is G7 today, if things go as they are, Brazil will be G4 in That s an amazing, amazing accomplishment. Brazil is set to become the world s largest supplier of high protein food. It could become, as we just heard, in the last panel, one of the largest suppliers of oil. It supplies, as well, all kinds of hard commodities, not only the soft commodities. In addition to which, it is one of the largest consumer markets in the world. And there is no other consumer in the world that s as similar to the United States as the Brazilian consumer. Brazilian consumers are extraordinarily dynamic. They grow very rapidly, they re willing to go into debt, perhaps even more easily than American consumers. And so it s a boom market. 32 WWW. BRAZILCHAM. COM

33 And, Brazil also has very favorable demographics in the short run, which is something that very few other countries [have] today, in short. But the current realities are also equally challenging. As a result of the crisis, Brazil was fortunate for the first time in living memory [to see] countercyclical policies. The record, as President Meirelles said, was always Sergio Millerman and Paulo Vieira da Cunha that if there was an external crisis, or a domestic crisis for that matter, the first thing that came into mind was the external constraint: The possibility of capital flight, rapid devaluation of the currency, the need to increase interest rates to stabilize the inflation, pass through and get into gear, haphazardly, some fiscal contraction to try to balance rapidly falling revenues. So, typically, a crisis somewhere else meant an even deeper kind of pro-cyclical adjustment in Brazil. This time around things were different. And we all benefited from it, not only Brazilians but the world, as Brazil became, with China, perhaps one of the largest sources of aggregate demand in the world. But what began as a countercyclical policy ended up very quickly as overheating. And that s the situation that the economy clearly was in at the beginning of this year. You will have to see what the experts say has been happening since then. And in addition to the elements of overheating, there was a significant shift in the use of the levers of policy. And all of a sudden, public banks -which had been sort of on the back burner, they always had been active, but they had clearly been deemphasized during a couple of decades -the public banks began to be very active again. And not only public banks but the very largest state enterprises, of which the most distinguished one, and the largest by any measure, is Petrobras. So, all of a sudden, one begins to hear in Brazil again this idea that perhaps we are reliving some of those elements that we saw in the 70s and that President Meirelles alluded to. Are we reliving a new national development plan? Is there a new symbiosis that is being recreated? I would say so it s not new is there a new form of that old symbiosis of stateled kind of development, that of a policy of picking the winners? Some of which end up like Embraer, extraordinarily successful. But the history of the success perhaps hides some very large subsidies that were implied in that, and subsidies that eventually could have caused some problems. So, there is an issue here on fiscal and quasi-fiscal policy that s developing in Brazil that s very interesting, and that at the same time has very, very different new aspects. Because, obviously, there is no longer the external constraint if anything there s a surplus of capital. And there is a dearth of good investment projects, so Brazil has many of these good investment projects to offer. Some of them at the local level, as we will hear from Eduardo. But, there is this tension of what is happening. And much more importantly, and closer to the day-today, is of course the issue of inflation. And inflation will likely strip the top range of the band in the next couple of months. As I often say, Brazil does have an inflation target. It s not a price stability target; a target of 4.5% is an inflation target. And it has a wide band, so if you strip the top of the band and you start getting inflation around 7%, you are seeing a serious inflation threat. The Central Bank, of course, has been very active. It WWW. BRAZILCHAM. COM 33

34 started normalizing policy rates after bringing them down to unprecedented levels in May, in June, of last year. It did another hike in July of last year. Then it stopped. And the inflationary pressures continued to build up, of course. Like every other country, it suffered the effects of a large commodity shock. It suffered the effects of the large liquidity and the impacts of that on the exchange rate. But then it realized it had to restart in January under a new guidance, under a new governorship of Alexandre Tombini, a distinguished Central Bank Director and very, very famous for his contributions in setting up the inflation targeting regime in Brazil. But, as they started anew, they also deployed a new range of instruments. And in particular, credit policy. And that has generated quite a great deal of uncertainty. Is credit policy equivalent to interest rate policy? Does it coordinate expectations as effectively as interest rate policy? What are some of these challenges that are waiting? So, there is no lack of good questions, and I m really delighted that we have a fantastic panel to discuss this. We will start with Shelley Shetty, who is the Director of Sovereign Credit Ratings at Fitch. She has looked at Brazil intensely over many years and particularly lately, because she voted and guided to give an upgrade to the Brazilian credit. So, we ll hear the reasons for that now. 34 WWW. BRAZILCHAM. COM

35 SHELLY SHETTY HEAD OF LATIN AMERICA SOVEREIGNS, FITCH RATINGS LTD. Thanks, Paulo. Good morning to all of you, it s great to be here. First of all, I would like to thank the Chamber for inviting us to speak here, and with such distinguished panelists. I [will be] starting on a positive note for this panel, and I guess that s why you chose me to go first. Yes, a decision was obviously made at Finch to upgrade Brazil. We actually upgraded Brazil by one notch, to BBB. This was on April 4th of this year. So, I thought it would be good to talk a little bit about the rationale behind our upgrade and talk about how we are looking at Brazil from a credit perspective. So, here are some of the reasons for the upgrade. But, before I go into that, I want to set the stage in terms of where Brazil was on the Fitch scale back in It was assigned BBB-, that s the lowest rung of investment grade, back in And clearly, this upgrade has come nearly 3 years after Brazil was assigned investment grade. And clearly, a lot has changed in those three years. The world, as we knew it, has completely changed since the Lehman collapse. And that, in itself, exposed Brazil to a very severe shock. The impressive economic recovery that Brazil was experiencing, the international liquidity position that was increasing. Why did we not choose to upgrade Brazil at that point? I think at that point we were looking at an economy that was showing some signs of overheating. We were looking at very severe fiscal expansion at that point. We were also in the middle of an election cycle, even though we maintained at Fitch that we felt the new government, irrespective of whoever won, [would ensure that] the main tenets of policy would remain unchanged, in terms of inflation targeting and fiscal responsibility. However, we wanted to get a sense of the overall policy orientation of the new government. And that is why we And to a great surprise, maybe I would not say surprise, but clearly what we witnessed in terms of policy agility, in terms of economic resilience, we came to a conclusion that Brazil was now moving away from a borderline investment grade. And that was the reason why we assigned a positive outlook to Brazil s ratings last year again, in June There were obviously other reasons for that as well: Ricardo Veirano and Rene Boettcher WWW. BRAZILCHAM. COM 35

36 chose to wait. We also assigned various triggers for a further upgrade. And those were: Further strengthening of the international liquidity position, or the external balance sheet; some improvement in the overall fiscal stands; and continued management of the STRONGER EXTERNAL LIQUIDITY REDUCES VULNERABILITY economy which allows for the economy to see an eventual soft landing. In our view, these triggers were met. In addition, we felt that we had seen a smooth transition of power with the Rousseff administration taking over. We also think that the overall policy orientation of the Rousseff administration is clearly on investment. We re actually encouraged to see Brazil make that transition. It s moving from, or its trying to move from, a consumption driven economic model, and economic growth model, to more of an investment driven economic model. Not that this model is not going to have challenges. I think there are plenty of challenges on the horizon. But I think that it is an interesting transition that Brazil is in the midst of. Let me move forward in terms of trying to show you graphically some of the rating drivers on Brazil. First, just looking at the economic performance of Brazil: If you look at the left inside graph, you will see that Brazil actually, in the light blue, clearly surpassed the economic performance we saw in the triple B category. It was among the fastest growing economies in If you looked at 2011, our economic forecast is about a 4% growth in Again, Brazil does pretty well in terms of the triple B category. Again, it is pretty much in line with the triple B median. It is actually showing greater economic dynamism than some of the higher rated countries such as South Africa and Poland. What is more encouraging is that a higher economic growth in Brazil is not just the product of a better economic cycle. It s just not a product of high commodity prices. It s not just a product of a very good international liquidity position. We at Fitch do think that Brazil has moved on to a higher growth trajectory a trend growth of about 4 to 5% is what we think Brazil is at. If you look at the right inside graph, if you look at the average growth of , what is interesting to see, is that a significant part of that was driven by capital accumulation and total factor productivity growth. Again, confirming some of the anecdotal evidence that you get in Brazil that increased macroeconomic stability, lower interest rates, and greater stability of inflation 36 WWW. BRAZILCHAM. COM

37 has expanded the investment horizon for investors. And that clearly has meant greater investment and higher productivity growth. Why does higher growth matter from a rating perspective? I think there are two reasons. First, higher growth, that means that Brazil would be in a better position to start converging to higher income levels. Usually high per capita income is positively correlated with ratings. And the second reason is, by definition, if the economy is growing faster, fiscal revenues are also growing faster. Especially if growth is coming from the domestic side, which is likely to be the case in Brazil, and that, by definition, should also help with the overall debt dynamics for the government. Again, just putting in graphics what I meant in terms of international reserves and international liquidity position. If you looked at the left hand side graph, just to put this again into perspective. When we assigned investment grade to Brazil, international reserves in Brazil were up roughly about US $200 billion. So international reserves are about more than US $120 billion, compared to when Brazil was assigned investment grade. International reserves of Brazil today are about more than $60 billion compared to where they were back in June of last year, when the rating was assigned positive outlook. Now, this combined with the fact that the Brazilian central bank demonstrated clear policy agility in terms of dealing with external shocks, clearly demonstrates to us that Brazil has moved on from being a simple borderline investment and grade solvent. Again, a point on the fiscal side. Here I have two or three lines, basically you can take the series you would be interested in. The one that we might want to look at is the light blue series, which excludes the BCB repo operations in terms of common debt. The point of this slide is that despite the fiscal expansion, despite the strong increase in the BNDES loans, which were funded by the treasury, on most accounts, on all these three series, debt has broadly come down or has remained stable. And this is important because in the triple B space, what you have seen, is there are many countries where you ve seen much more unstable dynamics than what we are seeing in Brazil. Again, we are encouraged by the initial fiscal signals that are being given by the Rousseff administration, in terms of the spending cuts, in terms of the minimum-wage increase, which is fairly moderate this year, and in terms of reduced quasi-fiscal stimulus. And we do believe, obviously, that with these signals there is a higher probability that Brazil will be meeting its primary surplus target in And that, BRAZIL S EXTERNAL FINANCES: STRENGTH RELATIVE TO PEERS WWW. BRAZILCHAM. COM 37

38 coupled with healthy growth, should allow for continued reduction in debt over time. Now I want to go on talking about Brazil in the comparative sense. In the end, Brazil is a triple B sovereign because it looks like another triple B sovereign. NEAR-TERM MACROECONOMIC CHALLENGES And just to show you that, I am just going to talk about four different buckets in our rating analysis. First, talking about Brazil s macroeconomic performance and policies, we believe that Brazil, overall, is a neutral relative to peers. If you look at the top graph, on the left side, you ll see how Brazil s GDP growth a five year GDP growth is actually better than the triple B median. If you looked at the bottom left inside graph, you ll see that despite the inflationary pressures that we re seeing in Brazil, the five year inflation performance of Brazil is pretty much in line with the triple B median. However, where Brazil does not do as well, is the volatility of CPI. Clearly, more needs to be done in terms of improving the inflation record in Brazil. And similarly, if you look at the bottom right graph, you ll see that real exchange rate volatility is significantly higher than the triple B median. Again, a reflection of the high liquidity of the FX market, which generally means a greater volatility in the nominal BRL, but also higher inflation volatility. Overall, we think that, policy wise, clearly there is greater scope to improve. You have a policy mix that still delivers the highest interest rate, real interest rate, in the world. So, clearly that demonstrates that there is greater scope for Brazil to improve on the policy framework. Looking at structural features of Brazil, again we think that Brazil is broadly neutral relative to peers. If you look at the top left graph, you ll see that per capita income of Brazil, in market exchange rate terms, is actually higher than the triple B median. Again, it reflects the higher value added of Brazil and that it s moving up the value-added chain. We think that the banking system is also a relative strength compared with most countries in the triple B space. The only weakness, two weaknesses, that I would point out on this graph: First, is the ease of doing business. Clearly there are problems there, and microeconomic reforms need to be perused. And the bottom right side, which talks about the domestic savings rate, again it s on the lower side compared to the triple B median. Finally, just looking at the last couple of slides. As I said before, on the external accounts, clearly Brazil is stronger than the triple B median it s the strongest net sovereign external creditor, as you can see from the left-hand side graph. Its liquidity is clearly stronger than the triple B median, even with the deterioration in the current account balances. We think they are pretty much in line with the triple B median. And commodity dependence is where Brazil does not look as good compared to the triple Bs. But, Brazil s commodities base is much more diversified, and it s a low cost of commodity producer. And, finally, I would say on public finances, that it s still the Achilles heel of Brazil s credit profile, even though revenues to GDP are higher than the triple B median. I would point out that government debt to GDP is still high, it still needs to converge with the triple B median. Interest to revenue, which is a pretty important indicator for fiscal solvency, is also fairly high. And so is the central government debt maturities as a percent of GDP, again higher than peers. I will end here because I think I am over time. And we will have plenty of time to talk about inflation and credit growth issues in the discussion period. So, overall, we do think that Brazil has moved on from being a borderline investment grade sovereign, and we ll be happy to take questions during the Q&A. 38 WWW. BRAZILCHAM. COM

39 EDUARDA LA ROCQUE MUNICIPAL SECRETARY OF FINANCE, CITY OF RIO DE JANEIRO Thank you Paulo. Good morning. It s a pleasure to be here. I d like to thank the Chamber for the invitation. I d like also to apologize for my English. I haven t been practicing that much. But I promise that the city financial numbers are much better than my English. And just to relax a little bit, we have prepared a quick movie for you about an event that we are organizing to happen in the city, by the end of May. So, let see if it works. [MOVIE] Now I d like to come back to the presentation. Well, there is no doubt that Rio is in the spotlight. But it is not only because of all of the events we are going to host in the city in the next years, especially the Olympic Games in We have achieved an extraordinary global visibility. And what is the reason for that? Well, the main reason for Rio s turnaround was already mentioned by Mr. Meirelles. It s the final alignment between the three levels of power: The city, with the state, with the federal government. And then I will quote a book recently launched by André Urani and Fabio Giambiagi. The title is exactly: Rio, the Turnaround. And they mentioned three other reasons for this turnaround: Increasing public awareness and mobilization, they mentioned also the oil boom, and the efforts of the government to spread the benefits for future generations. And, I d like to emphasize, this last point: Both at the state and the municipal level, we are observing the adoption of appropriate public policies marking an important difference from the past, as Paulo already mentioned. Now I will present, very briefly, some economic indicators of the city our GDP per capita is US $12.6 thousand. Below Russia, but above China and India. The state of Rio has invested a lot more than all other states of the country. Our labor market is extremely heated. Brazil is doing well, and Rio is doing even better. We achieved our lowest level of unemployment rate. We didn t suffer a lot in the crisis. And we are increasing steadily our average real income. And we have just overtaken São Paulo in this item, I m very pleased to say. Well, what we have done so far in terms of public policies? Well, in the first year - this is the third year of the Mayor s, Eduardo Paes, administration - in the first year, we implemented very strong fiscal ECONOMIC INDICATORS WWW. BRAZILCHAM. COM 39

40 IMPROVEMENT IN EXPANDITURES PROFILE And by doing that, we are going to raise, in terms of present value, in terms of saving, with our debt costs, this amount of US $1.25 billion. So, it was a very important loan to achieve fiscal sustainability. We have [significantly] improved our expenditure profile by controlling our staff expenses. And then we could reach, last year, 10.9% allocated to investments of our total revenue. adjustments. We achieved a primary surplus of US $700 million, 12% of our total revenues. And then, we brought from the private sector some methodologies. We developed a strategic plan to think of Rio in the long run, And by doing that we implemented also a project management office, with which the mayor controls weekly all of the strategic projects of the City Hall. And, we also implemented a performance-based model to introduce meritocracy for the public servants a very, very important policy. Because there in Brazil we have stability for the employees, and we should try to achieve efficiency in the public sector. And we have been working very hard to improve our business environment. And we have created a business agency in order to attract private investment for the city. Last year, we achieved fiscal sustainability. And all of the numbers are available on our web site. We had a 30% increase in our total revenues. We have been investing a lot in IT systems to improve our collections. And we got a US $1 billion loan from the World Bank. By doing that, we could expand our investment capacity from less than UD $500 million in 2009 to US $2.2 billion this year. So, we multiplied almost by five our investment capacity. And by doing that, we achieved our investment grade by the end of last year. So, this World Bank loan is the first development policy loan given by the bank to a municipality in the world. It s more than US $1 billion, and we estimate gains of US $1.25 billion by reducing because by amortizing our debt with the national treasury, we are going to decrease our cost of debt from 9 to 6 percent. Our investment ratio is increasing a lot. And this year we are going to hit 18.6% of our revenues allocated to investments, in infrastructure, especially. I d like to quote what Moody mentioned last year when they upgraded us by two notches. So, we have an investment grade with positive outlook. And I hope that we will be upgraded again. And I d like to improve this, as Brazil. So, these are the reasons. Very close to what Shelley has showed us. And that s it. I will finish talking a little bit about the Rio Investors Day. Now it s Rio s time. And that time is today. Rio Investors Day will happen in Copacabana Palace, May 30th and 31st. The idea is to include Rio in the international calendar of equity events. We are going to have 12 sector panels, and we have the confirmation of many authorities. It s a closed event. The invitation was from the list of our sponsors. We still have some places that, for whom this is interesting, I will be able to send an invitation. That s it. Well, what I d like to say is that we have been working very hard. There are many opportunities in Rio. And we have been doing our homework. So, I m looking forward to seeing you there. 40 WWW. BRAZILCHAM. COM

41 MARCELO SALOMON CHIEF ECONOMIST, BARCLAYS CAPITAL Thank you, Paulo. Thank you to the Chamber. I wish this conference was at exactly where we just stopped the last presentation And I really do have to apologize because I don t have a nice film to show. I loved the songs, I loved the pictures, everything, it was perfect. Congratulations for the job well done in Rio. But what I wanted to talk about in this panel was to actually start discussing some of the ideas of what has happened in terms of macroeconomic policymaking since the 2008 crisis. Since we only have 10 minutes to talk about this, I ll be very, very brief and objective. And the idea here is that, in Brazil, we re actually working towards tropicalizing what we re calling macroprudential measures today. And I think that the best way to put it, and to start referencing what Paulo very well mentioned in the beginning of his presentation, was that bridging the gap is very difficult. Bridging the gap between the medium and longer hauls. And Brazil had the fantastic capacity in a moment of crisis to actually push forward countercyclical monetary and fiscal policies. But it s very, very difficult to push them out, or to continue countercyclical when you re actually moving on the way up of economic activity. So, I think these two graphs actually show us what happened on the fiscal side and on the monetary policy side. On the fiscal side, I have the accumulated growth rate of total expenditure above and beyond potential GDP growth in Brazil. And I included in 2011 what would happen to the growth rate if the R $50 billion package was fully implemented. And we see that there is not a big change over there. We are not back to the 2009 levels yet. So, it s good news. In our view, it is very good news that inflation is not going to be accelerating because the fiscal stimulus is going to be drawn back. But, there s a long way to go. And there s a long way to go on the fiscal side of the story as we move into 2012, 2013, and 2014, where we still COUNTERCYCLICAL IS MUCH EASIER ON THE WAY DOWN need to see some guidance of what s going on. Interest rate tightening has a limited space of happening. We have been seeing, and we will discuss this in a little bit more detail, that this new paradigm of conducting monetary policy with the use of what is called macroprudential measures is becoming a lot more intense in Brazil, and also WWW. BRAZILCHAM. COM 41

42 in other countries and other markets, to be very truthful to what s going on. So, let me just go through [some] definitions here of what this moment is we re living in, and what macroprudential really means, and then we can actually compare it with what is happening in Brazil. So here we go. Olivier Blanchard from the IMF qualified very well that we re living in very, very extraordinary times. And that we re going have to live with a different kind of monetary policy, or policy setup, going forward. The reference was also to the set of new macroprudential measures that are being put in place to actually increase the stability of the financial system. So, let me just read what was written on the 80th annual report of the BIS, which is that the broad role of macroprudential policy is to limit systemic So, macroprudential policies geared towards limiting the appreciation of the currencies, or smoothing the rate of appreciation of the currency, I think are very well put. But, what s really on the table down in Brazil when we talk about macroprudential policymaking? And here again I m going to bring a phrase which comes from the Central Bank s last inflation quarterly report. I translated it, so all of the onus of that is mine. But: The slowdown in domestic activity should persist in the coming months, reflecting monetary policy as well as macroprudential actions. I think this tells a lot. I think it tells us that macroprudential policymaking in Brazil is also being geared towards cooling down domestic demand. It s geared towards cooling down consumption, HOW MUCH EFFORT TO CONTAIN CREDIT GROWTH? risk. The risk of financial systemic disruptions that can destabilize macroeconomy. So, we can frame BRL appreciation as an event that could cause systemic risk, of course. If you let the exchange rate appreciate indefinitely or at the speed that we have been seeing, the speed we could ve seen over the course of the last year and a half, two years, we would pretty much see an undershooting of the dollar in Brazil. And we would probably snap back up with very large intensity. controlling credit creation, and this has all of the uncertainties that come with it. Because we are not aware and we re not used to interpreting these new macroprudential measures being put to work in this way, as a guidance of how we see inflation moving down. And I think that this uncertainty, which is also why we can t look beyond our normal horizon, is creating a very large diversity of opinion within the financial market and also all of the inflation fore- 42 WWW. BRAZILCHAM. COM

43 casters, that perceive that inflation could actually be either closer to 5.1% next year, where we stand. And I ve heard opinions of people, talk about inflation closer to 10-12% in Brazil next year. The use of a different instrument in a period of overheating economy brings these uncertainties forward. And I think that it is very important to qualify what is there on the table for the Central Bank to actually conduct in terms of monetary policymaking. What are the new constraints that we see for the Central Bank? First of all, there s an FX constraint. This is not unique for Brazil. It s a constraint that has been widespread through the emerging market universe because there s a lot of liquidity, especially pursuing very high yield investments. And Brazil is on the top of that notch. Imagine Rio this outlook that Rio has extrapolated for Brazil and Brazil paying % by the end of this year in terms of interest rates. It s a great story. You have to be participating in this story somehow, which pushes the exchange rate appreciation. We perceived two weeks ago a change in the speech of the government in terms of allowing a little bit more appreciation. And this, to me, is a reflection of what the Asian and most of the emerging market economies are actually suffering from. We re importing inflation from the commodity surge, from the energy surge. We re importing inflation from China, and you have to use most of the instruments that you have. In Asia, and I think this is a lot more clear today, the exchange rate appreciation will help bring down, or help control, inflation. And we believe at Barclay s that interest rates will be used more intensely if they have to be used more intensively in Asia. I think that this is becoming more important in Brazil as well. And our forecast for the next three months is that the BRL s going to touch 1.5 and probably range bound between the range for the next 8 to 10 months. So, this is the first constraint, the first point. The second point is a fear of slowdown. I think that there is a concern that the economy could slow down. But I think, also, that there is no way that inflation is going to come down if the economy doesn t slow down. So, I think that this has to be dealt with in the government in terms of choices that policies have to be done. You have to take a step back in order to create the stability of inflation environment that will generate the pickup of investments that we will see financing the World Cup, financing the 2016 Olympic Games, and also the pre-salt oil business. So, this is a critical issue that we need to hear a little bit more discussion about coming from the monetary policy and fiscal policy side. And, finally the use of macroprudential measures to try to clamp on credit, to bring credit down, and try to contain domestic demand. I ll talk about this in a second with more details, but what we perceive is that there are too many objectives for the Central Bank. The Central Bank, which did a brilliant job conducting an inflation targeting regime, keeping inflation near the targets, keeping a stable outlook of inflation, and increasing the horizon of planning in Brazil, apparently, in our view, now has to deal with growth and FX as well. They have the interest rate instrument. They ve incorporated macroprudential instruments as well, but think it s too many objectives for too little instruments. And when you try to actually gauge the intensity of the macroprudential measures in clamping credit I would like to spend a couple of seconds on these two figures here, which tells the intensity of how the policymaking environment has to move in that direction. The first picture shows us total credit growth, year-over-year. The gray line in the middle of the two lines is total, 21%, year-over-year. The blue line is earmarked credit, which is government credit, growing at 28% year-over-year; this represents 35% of total credit in Brazil. And, the dark blue line represents 65% of total credit it is marketoriented credit, which is growing today at approximately 18% or 19%. If we want to cool down credit creation in Brazil during the course of 2011 from 21% to 13%, year-over-year, with earmarked credit growing close to 20%, close to 19%, you would have to have new grantings behaving like they are WWW. BRAZILCHAM. COM 43

44 here in this picture on the dotted line, on the right. So, we have to generate a crisis which is similar to the crisis that we actually saw in So, it s a big bill to actually be shouldered by the consumer sector, if nothing changes from what we re seeing over here. And it shows how damaging the push on macroprudential measures to contain credit expansion in Brazil could actually be. It would have been cheaper for domestic GDP growth not to disanchor inflation expectations and move more preemptively in the environment where you have the perception that Brazil was growing too fast and needed to calm down on some level. And what actually gives us inflation? This is our outlook for inflation this year. Probably we re going to reach 6.6% this or next month. And we re almost going to touch the 7.5% level of year-overyear inflation by the third quarter of this year. And then we gradually move down towards the 5.1%. Our view is that the use of macroprudential measures, the use of another 50 basis point hike this week in Brazil, would actually work in 2012 and bring inflation modestly down. But we re not optimistic in seeing inflation back to the midpoint of the target. I think this is a longer haul issue that will have to be reassessed by this current administration. And I ll just stop over here with this little picture, which I think is very, very nice. This is a picture of our President, Dilma Rousseff, with the little inflationary dragon. It s under control, it s not flying around, it s not carrying anyone around. So, we have an optimistic view of what s going on. Thank you very much. 44 WWW. BRAZILCHAM. COM

45 CLAUDIA CASTRO VICE PRESIDENT, SENIOR ANALYST, OPPENHEIMER FUNDS, INC. Good morning everyone. It s a pleasure to be here. Shelley put the question very well when she presented the case for Brazil moving towards a more stable investment grade country. Usually, when that happens, investors tend to focus less on macro issues, issues of macroeconomic stability, and moving more towards microeconomic concerns in the economy. So, I will address this exposition right now from the point of view of what brings comfort to investors. I think right now, given the current policymaking and where we are on the cycle in Brazil - I m not going to play, however, bad cop, as Shelley was sort of alluding to - to start with the good news, you have to end with the bad news. It s not necessarily bad news, but rather emphasizing risks, and why I think that there are important risks that we should be aware of. The first is that the macro agenda is, as you heard from Marcelo just now, back on the table, despite this higher rating and investment-grade rating that Brazil has. I think that it is very important, or it was very important, for all of the rating agencies, the perception that there is not only policymaking and the Central Bank s will to fight and control inflation, but also that there is a consensus at the political and social level that inflation should and will at any cost be controlled. That is not absolutely to be lost because that has been what has propelled, to a large extend, a lot of the progress and modernization we have seen in Brazil. So, the first theme that I d like to address - there are two main ones - the first one is this balance between growth and inflation, and the new policy strategy of coordination between the Central Bank, I shall say the Finance Ministry, the Planning Ministry, as well as the office of the Chief of Staff of the Executive. This strategy can definitely bear fruit, although, as you probably know, investors tend to be very picky with the idea that central banks should be completely independent and be able to operate in a more technical environment. But the reason this can bear fruit is that fiscal policy then enters into the agenda to help ease the burden of monetary policy, which has traditionally been the case in Brazil. So, we need to achieve, as Marcelo was discussing, a more balanced and sustained way to grow, with minimal inflationary risks. And, the vision of the government, this does mean a transition perhaps away from consumption the consumption driver towards an investment driver. The problem, I shall say, in a few sentences, is that the current global architecture and conditions that is: high commodity prices, the good EM and Brazil s growth momentum, as well as high interest rate differentials have driven currency appreciation against the dollar, as Paulo has also mentioned, despite the fact that fundamentally, over the medium term, the forces are in action for currency depreciation, as the economy adjusts towards a current account deficit. And a deteriorating one, at a rapid pace. WWW. BRAZILCHAM. COM 45

46 The problem is not the current account deficit. I think the issue has been that some of the capital inflows have found the foreign capital inflows have found their way in the domestic economy. And they promoted an expansion of credit that has been extraordinary. There is also, of course, the issue that part of it has to do with structural changes and income changes in the economy income classes changing the economy, I should say. And a very low base of credit to GDP ratios. So, to some extent, it is very welcome that we have had this. But, the government has moved, therefore, to expand the tool kit of monetary policy to include FX measures and macroprudential measure, which as Marcelo described, are now being used mostly for demand management purposes. The Central Bank assumption in their inflation forecasts embedded in the inflation forecasts and the inflation risks currently present in Brazil is that credit moderation has to happen. And that fiscal deceleration also has to happen. This is very important for the inflation forecasts. We are currently at a moment where this is an experiment that is taking place, a strategy that is taking place that can work, but it is a risky one. And perhaps riskier than what we have seen in the past in the more recent past because there are the expectations of economists, and analysts, and companies. And the generalized view is that there is a danger that inflation can come back and be more persistent than the Central Bank is forecasting. In the past, in the very recent past, the risks were all there, but the probability was very small. And I think now, what we investors see, is that the probability is far larger. And it s not that I want to put numbers, but to give you a sense: If you think you have a 20% or 25% chance that inflation is a lot more persistent than what your baseline scenario is, well, running with that risk for too long is problematic. So, I think investors are very worried, very concerned. Also, just to end on this topic, what Paulo has mentioned: The use of macroprudential measures can be very targeted, can be efficient. But the equivalence, in terms of interest rate hikes, and the uncertainty therefore that it generates, has created this issue of inflation expectations that have continued to increase. And I think this is a very for those of you who have followed Brazil for a while this is a very sensitive topic. And again, I end this topic where I began, saying that it is very, very crucial that there remains the political and social consensus that inflation has to be within its target regime at all costs. And possibly with minimal risks. The second topic I think I d like to address is less of an immediate investible theme, perhaps, but it s nevertheless very much appropriate when we are thinking in terms of the level of comfort and the vision we have for Brazil in the future. And it goes to what the ambassador was saying: Brazil in the next 25 years joining the G4. We are aware that, despite the good progress that we have made on fiscal policy and institutions in Brazil, there is a known weakness with fiscal policy, and I think you know there is the issue of the budget rigidity, of earmarked revenues that perhaps don t have the proper performance attribution or accountability, high tax burden, including on the corporate side. So, these are issues that have to be dealt with eventually, and there is far less of a political consensus on those sets of issues. And they are needed in fact so fiscal policy can more effectively help in terms of the cyclicality of policy management. So, countercyclical policy can be had also in good times and not just in bad times, because that s very easy, as Marcelo pointed out, just now. So, I d like to bring to the table then an institution that is a world-class company: Petrobras. We know of all of the achievements of the company and of the good corporate governance it has relative to most other companies in the emerging world. I think now we have a very generous potential in terms of the oil outlook and biofuels outlook and all that into the future. By comparison this potential actually makes BNDES - the National Development Bank, which is a legacy institution, as President Coutinho likes to address - by comparison, this potential of Petrobras and oil wealth, or fossil fuels wealth, really underwhelms BNDES from any perspective you would like to think about. So, the country needs an institutional framework for this Petrobras issue of the oil blessing. This is quoting the old debate at the World Bank, at least back in the 70s or 80s, Oil blessing, or curse? that 46 WWW. BRAZILCHAM. COM

47 some of you may have heard. So, investors, to feel comfortable with Brazil, and investing in Brazil, I think it will be very important that this framework, institutional framework and fiscal framework, be set with fiscal rules, optimally, so that you can prospectively build scenarios that are more certain and that you can amass the ability to sustain shocks, which is actually what it means to be an investment grade country. It s that you have the cushions and the necessary policy flexibility, policy will with the financial establishment, political establishment, as well as the society, to adjust to vulnerabilities in the economy. So, this is all very positive for the future. But there s also the second Brazil, and the second Brazil is a Brazil that has been blessed with diverse raw materials, and that has been blessed with a lot of fuels now that have been discovered. And they can generate very swift revenues in a new globalized world. If we think [about it], we are indeed in extraordinary times right now. And there will be a post globalization world, if you will, where emerging markets perhaps play a much larger roll. And, as I said, and mentioned earlier, Brazil s exposure and relatively bigger exposure to emerging markets, can be an advantage. But it s very important to integrate these two sides of Brazil into one, and into one where we have fiscal rules that investors remain comfortable with the adjustment, in a balanced mix of monetary and fiscal policy, as well as institutional and institutional framework for the oil wealth and the raw material wealth. So, the bottom line from this point that I am trying to make is that Brazil is in a very, very special posi- Theodore M. Helms and Claudia Castro tion in the region. But I think the question mark is still open of whether this is a good story for the next five years or a good story for the next twentyfive years. We all hope it is the latter. But, with its continental size, the domestic market that it has, a very large domestic market, and diversity of trade counterparts, Brazil is actually more exposed to the emerging market world, if you will, then to the developed market world. And it should take advantage of that, it is taking advantage of that there s been a lot of innovation in world-class companies. And there s a modern Brazil, the drive to modernize has happened. The crisis came and Brazil was in a good position, being a closed economy, relatively closed economy, and a non-us centric economy in that sense. Finally, last but not least, the whole issue of the infrastructure needs. I think what investors don t want to see is that private investors haven t come to the table. There hasn t been very transparent procurement, and all of a sudden you are in dire needs all of the events happening and at the national level you need to finance infrastructure, and the temptation is that they are met by last-minute discretionary authorizations, as we have seen, quite frankly, in the past. So, I think these are the two messages I would like to leave you with. We re comfortable investing in Brazil. We do have a core position, as fixed-income investors in Brazil. However, we do worry about this longer-term picture and, in the very short timeframe, the idea of the growth and inflation tradeoffs and how fiscal and monetary policy can interact better to make that less costly in terms of GDP growth. Thank you very much. WWW. BRAZILCHAM. COM 47

48 H.E. GUIDO MANTEGA LUNCHEON KEYNOTE SPEAKER MINISTER, MINISTRY OF FINANCE Good afternoon to all. It is a great pleasure for me to be here at the 2011 Brazil Summit. I would like to thank the President of the Chamber John Landers, who invited me here at this moment to speak about the perspectives for the Brazilian economy for I am returning from Washington where we had a G20 meeting, with the Finance Ministers from the G20 and also the International Monetary Fund Governor s meeting. We did an evaluation of the world economy, and our conclusion was that the world economy is improving. The improvement of the world economy is very uneven. The advanced countries are improving at a very slow rate, wherein growth rates are still low, and unemployment remains the great challenge. Very high unemployment, be it in the European Union 9.9% unemployment or, in the United States, a little below 9%. And now there is an additional problem, which is the increase in inflation. But, be that as it may, the economy is improving. Even though, now and again, we face new challenges. That s economics for you. Nowadays, the challenges are: The Mideast crisis, the price of oil, and the issue of commodities inflation. On the other hand, the emerging economies are improving at a faster rate. In fact, there is great growth in the dynamic emerging countries, and job generation, and inflation is higher. So, we have an inflation problem to be dealt with in the emerging countries. I would actually even say that the emerging countries have already come out of the 2008 crisis. But the advanced countries still have not. They still have serious problems to be resolved. Like, for example, the problem of the public deficit. These are problems of long duration. It s very difficult, for example, that the United States can deal with its public deficit problem in the short range. So, choices have to be made between a speedier recovery of the deficit, and the issue of economic growth. It is a difficult choice. But the good news is that Brazil belongs to the emerging economies group that is having excellent results from an economic standpoint, generating many jobs. You can see the world economy scenario in this slide. That is the GDP performance over the last four years, in other words, from 2007 to To not focus exclusively on 2010, which was perhaps an atypical year, I did an average over four years, to give us a better view of the trends. And what we see in this slide is that the countries which are exhibiting growth of at least 2% in other words, low growth are those in red. And here we have the countries from the European Union, plus Japan, and North America. (The three countries from North America: Canada, the United States, and Mexico). All with rates below 1%. So, it is very low growth over a four year average. Then we have the medium growth countries. Those that have a GDP of 2% 4% are in green. Russia was at this level because it was hit by the crisis. [Also] some countries in Africa, South Africa, specifically. 48 WWW. BRAZILCHAM. COM

49 And what we see is that Brazil is grouped with the Asian countries, which are those that have exhibited greater growth, above 4%. And Africa and Latin America have greater growth rates. So, you can see, over a four year span, Brazil has an average of 4.6% growth. This means that, before the crisis, Brazil was already stabilizing with a growth rate above 4%. Brazil will continue to count on this stimulus from the domestic market. Furthermore, the Brazilian economy will continue to have an elevated rate of investment. The BRAZIL: SUSTAINABLE GROWTH So, this is a positive; keeping in mind that in 2009 we had a negative growth rate. In other words, excluding 2009, Brazil had growth rates above 5%, thus, consolidating a stronger growth position. Next, we see the outlook for These are growth predictions for You can see that Asian countries continue to lead in growth. They should attain higher rates. Brazil continues among the countries with rates above 4%. The projections for Brazil s GDP growth rate in 2011 vary greatly. Here we are showing The Economist s projection, if I m not mistaken, which is 4.3% growth rate for [We see] an improvement for the United States, Canada and Mexico, with medium rates, below 4%, and hovering around 3%. The IMF did a revision of the rates for the US in 2011, and they are predicting 2.8% and not 3.3%. So, the United States is on a very slow recovery path. But, what this slide shows us, is that the emerging countries will lead the way for global growth in the coming years it seems inevitable to me. This was already happening in the previous decade, even before the crisis began. The advanced countries have shown low dynamism, and I believe they will have trouble getting out of this position, especially when you consider that they have debt issues, and now inflation issues, which will make things harder for them. I d like to say to you that Brazil will continue on a sustainable growth path over the coming years. First of all, because Brazil built a strong domestic market. And in the situation we find ourselves in, faced with these scenarios of the world economy, those countries that have the best chance to continue on a growth trajectory are those that have a strong domestic market. As you know, in Brazil today we have the so-called new middle-class, which continues to expand and has an elevated buying power. Therefore, government is committed to this, it encourages it, and the private corporations have an interest in continuing to increase investments in the country. And furthermore, the growth is sustainable because we are making adjustments to what I would call the post-crisis period. The crisis was in 2009 and 2010, and in the post crisis, the Brazilian economy is making a series of adjustments that I will detail up ahead. But in general, we are talking about a reduction in the growth rate, which was very high last year, 7.5%; inflation control, which is of fundamental importance; and the improvement in the fiscal bottom line. It worsened a little during the crisis, and now we have once again reached pre-crisis levels, as far as the fiscal bottom line is concerned. In other words, it is a type of growth which shouldn t generate macroeconomic imbalances. So, it should continue moving forward. Looking at the demand side, the blue line shows the demand growth compared to the previous year. Domestic demand. In blue we see 2010, with a growth of 10.3% compared to the previous year. It s an extraordinary growth even though it is true that in the previous year there had been a decrease. We are adjusting this demand to reach levels of approximately 6%. So, it is already decreasing, for some time now it has been decreasing. And it should stabilize at around 6%, so as WWW. BRAZILCHAM. COM 49

50 to allow for a GDP of around 4.5%, which is our projection for Brazil this year. So, there is a slowdown happening, and that lower part is the demand met by imports. Brazil s contribution, for example, to the recovery of the US economy. Importing US products, having a trade deficit so that is represented by the lower part of the graph. So, demand will continue [to be] strong. It is important to emphasize that this demand is fundamentally made up by salary income. There was a great increase in payroll in Brazil, because employment has increased at a very high rate in Brazil. It is one of the countries where employment has most grown. This is an issue that has not been resolved in the advanced countries, and Brazil was able to generate many jobs. So, this figure for payroll is employees income, which drives demand. Of course, there is credit also. Part of it is credit, another part is the public s income. However, I d say that it is mainly an increase in payroll which is stimulating a strong demand in the country. And this is good because it is not primarily via family s taking on debt. This results in a stronger growth. But investments are an important part of Brazil s growth, which makes that growth more dynamic. Last year, Brazil had a strong growth in investments. It was 21.9%. That s gross fixed capital formation. This means that there was a fast recovery from the crisis. We know that in crises, investment tends to be deeply affected, it normally recedes. However, with the stimulus measures we took, it recovered quickly and returned to a high level. Of course, in 2011, it will not be possible to maintain an increase of 21% over the previous year. But we are hoping for a growth of an approximately 10% increase of investments in 2011 over 2010, following this trajectory. There are several reasons why investment should remain high in 2011 and in the coming years. The continuation of the PAC (Growth Acceleration Program), which is where the government places stimulus packages, incentives to increase public private partnerships. You can see the PAC numbers there, , in billions of dollars. Here is PAC-1 up to 2011, after 2010, it is over 580 billion. And PAC-2, which will go into effect from 2011 to 2014, which also has considerable investments in the areas considered priorities. Brazil has to continue to invest in infrastructure. It has to continue to invest in logistics, transportation and energy, in improvements of the urban transportation infrastructure. All of this has to be done, is being done, and it will be kept up at a strong pace. Therefore, we have demand and investments as the two parameters that stimulate economic growth. Here is a slide, I don t know if you can see it in the back. But it s one more interesting fact. It compares the relationship of investments on GDP and the annual investment rates. In the vertical [column] we have investment rates over GDP. And we can see that China is the undisputed leader; investments in China represent 48% of GDP. Brazil ended the year at about 18%. However, on the horizontal line, we can see how investments grew in 2010 with relation to And we can see that Brazil is even ahead of China. China had an 11% growth compared to the previous year. Brazil grew over 20%; it s there next to Turkey. Therefore, that strong increase in investments is not insignificant. And growth with investment means quality growth. It means that Brazil s productive infrastructure is modernizing. It is increasing productivity, and in fact it can withstand the problem we face today, which is a labor shortage. Brazil, I think, is one of the few countries in the world which has to worry about this type of problem: Labor shortage. When we say this here in the United States it appears impolite because here there is a lack of jobs, right? And the situation is not improving. When I hear my G20 colleagues speak about the unemployment problems I am actually embarrassed to say that in Brazil we have actually almost attained full employment. Of course, this represents a challenge to us. The challenge of increasing the supply of qualified workers. To that effect, by the end of this month, we will be introducing a major worker qualification program. Of course, in Brazil there exists a natural recycling of labor. There are always pockets of inefficiency in the labor market. For example, in Brazil many people still have several maids, who 50 WWW. BRAZILCHAM. COM

51 could be working in the service sector or in industry. So, we are seeing a recycling, a rationalizing of labor. And of course, the government is going to invest heavily in education and training, so as to meet the challenges so that there are no labor shortage problems. Another important response is to increase productivity and mechanization. Mechanize several sectors of the economy, which can free up the supply of labor. That is an important solution. For example, in agriculture, this can bring greater efficiency, and in other sectors too. Either way, Brazil is facing an important challenge: Finding a way to increase the supply of labor so we can continue on our growth trajectory. Brazilian companies are doing well. [These] are the 100 largest Brazilian corporations. I just wanted to highlight the profit of the corporations. Net profit for the corporations increased 34% in relation to This means that Brazilian companies are capitalized. They are making profits and can continue to invest. They have the capacity to continue to invest. The Brazilian financial sector is also very strong. This here is an interesting number because it shows the assets of the five largest banks, the evolution of the assets of the five largest banks in the BRIC countries. There, in red, is China. It s an evolution from 2005 to We can see that the countries whose assets most increased for those five largest banks [are] China and Brazil. And I d like to highlight that the assets of the five largest banks in Brazil grew more than the assets of the five largest banks in China. So, there you can see Brazil from 2005 to 2010 there was an increase of over 300% in assets. Whereas in China it was 155%. Therefore, the assets of banks in Brazil are growing at a faster rate than those in China. We all know that in China, when you look at the five largest banks, that represents almost 80% of the assets of banks in Brazil. So, Brazilian banks are doing very well. They should be pleased. This means that they should be able to continue to make loans and [continue] doing well in Brazil. you a notion of the evolution. For example, see how it has evolved from the beginning of the previous decade, That is a daily volume. In 12 months accumulated volume over 12 months we went from something like 149 billion to 1.6 trillion. So, the market has expanded greatly. This has also helped companies to expand for them to capitalize, etc. But I d like to give special attention to this topic: The adjustments that are being made to the Brazilian economy as of So, until , the Brazilian government was committed to bolstering the economy, helping the economy recover from the 2008 crisis. And to that end we used many monetary and fiscal policy tools. You are familiar with them, there is no need for me to repeat them. As of 2011, we pulled back all of these stimulus measures. Actually, not as of We began to pull back these measures as of the beginning of We pulled back, built up the taxes. Reinstating compulsory measures, etc. So, I d say that in the beginning of 2011, all of the stimulus measures that had been put in place were already withdrawn. And we still implemented some extraordinary measures. We reduced the state s demand in a big way. We implemented a budget cut in the amount of R$50 billion, which represents more than 1% of the Brazilian GDP. With that, we sent a message that the demand driven by the state can be decreased, it is no longer necessary, allowing private demand to stimulate the economy and play its role. And we also required a greater degree of efficiency in state spending. By decreasing the appropriations to the ministries, you force the ministries to carry out their projects with fewer resources. SOUND FISCAL SITUATION COMPARED TO OTHER COUNTRIES Here you see the capital markets. The capital markets have grown greatly in Brazil. Here are the movements of the stock exchange. This gives WWW. BRAZILCHAM. COM 51

52 Eduarda La Rocque and H.E.Minister Guido Mantega Furthermore, we kept the minimum wage increase at R $545. We did not allow greater than R $545, thus keeping up our end of an agreement that had been made in the past. And that R $545, in actuality, does not represent a real minimum wage increase, but only a nominal increase, to compensate for the inflation from the previous year. So, we took several measures, in the sense of strengthening the country s fiscal condition, reducing the demand, so as to decrease the growth rate bring the growth rate down to a lower level. And also to help with confronting the inflationary problem, which was particularly big in the beginning of So, with these measures that we implemented, we will be in a position to meet our pre-established fiscal goals. In other words, Brazil has had a primary surplus for some time now, above 3% since 99. So, it s been over ten years now that we have maintained that primary balance. There was a decrease in 2009, because of the crisis. Even then, there was a positive primary balance. And now in 2011, we are returning to a primary balance of about 3%. This cut that we are implementing, this reduction in expenses, will allow for a very strong primary in And the result of this in the nominal fiscal account, you can see the red part of the graph. So that in 2011, we project a nominal deficit of 1.7 of GDP. Therefore, we are on the path to eliminating that nominal deficit. You can see with the curves we have there how the fiscal bottom line of the Brazilian economy has been improving. Until recently we had nominal deficits of around 7%, on average. If we go back 8 years, to 2002, we have an average of 7% nominal deficit that s high. Over the last eight years we ve had an average of 3%. And in 2011, we continue with that trajectory of fiscal improvements, on a path towards eliminating the fiscal deficit. Thus, Brazil is one of the countries with the best fiscal picture. This is just to give you an idea of the performance in We are already into the third month of 2011, we already have the official results for January and February. You can see here the change in levels. The orange curve is the important one here. It shows that the public sector has improved its primary results. It was very good in January, February, and it will be very good in March. Therefore, we will, thus, easily attain our fiscal goals. You can see the jump in levels there, mainly with regards to the federal government, more so even than the states and municipalities. So, there should be no doubts concerning Brazil s fiscal strength. That strength is due, among other things, to the fact that the social security deficit has been decreasing It attained levels of 1.8 of GDP. That is the Brazilian government s biggest expense. Therefore, our deficit is decreasing. The second largest expense is personnel the union s payroll. It is at 4.4% of GDP. It had been as high as 4.8% to 5%. Therefore, the second highest expense is also well under control. When we do an international comparison, we see that Brazil is in a privileged position. Here we can see the countries with deficits below 2%. That s what s in blue. Those are the countries from two to four, in green. And the ones in red those with deficits over 4%. Their color on the graph is red, they are not in the red that s not what I meant to say. But, those are the countries with deficits 52 WWW. BRAZILCHAM. COM

53 above 4%, who will have more difficulty managing that situation in the future. That shows that Brazil is a member of an exclusive club of countries with deficits below 2% for 2011, which places us in a privileged position. But nowadays, the world is confronting an old problem, which is the problem of inflation. I would say that inflation is a global [phenomenon] higher in the emerging countries, because the emerging countries are growing faster and because food prices and agricultural prices weigh heavier on inflation in the emerging countries. But there is also an inflationary surge in the advanced countries, on a smaller scale. But it is a relevant surge, nonetheless, which should be paid careful attention to. In this slide, we can see that Brazil is at a medium level of inflation. In other words, inflation for 2011, projected for Brazil, the latest projection for the Banco Central, is 5.6. We work with inflation targets. We have two percentage points above 4.5% that can be used. So, in spite of the fact that there is still a strong inflationary pressure in Brazil, I don t think that we will go over the threshold of 2% above 4.5%. The causes for these inflationary increases, everyone knows: The sharp increase in commodities prices as you can see, over the last twelve months, all commodity indexes increased 40.6%. An extraordinary increase. Food items, 42%, and industrial products, 38%. So, in fact there was a significant worldwide inflationary pressure over the last twelve months. One of the important factors is the price of oil. Oil is at around US $120 per barrel, and this causes pressure on a worldwide level. And Brazil has certain advantages when we look at this slide. Brazil is a great commodities producer. It has a certain self-sufficiency, as far as oil is concerned. It only imports some by-products. So the Mideast crisis, if it doesn t spread, should be overcome without major problems. Be that as it may, Brazil has taken measures to assure a more moderate growth and to help control inflation. When I speak about a more moderate growth, I m not speaking about that kind of fiscal adjustment that was done in the past, wherein we would cut investments, cut public expenditure, increase the interest rate in a considerable manner, and thus derail the growth of the Brazili an economy. That is not what we are doing. We are merely creating conditions for more moderate growth. Changing the country s growth rate to a different level, and thus preventing inflation which is fundamentally a commodities inflation, which Brazil does not control, which are defined in international markets. But we are trying to prevent this commodities inflation from spreading to other sectors of the Brazilian economy. The more heated economies, which are those from the emerging countries, have to beware not to allow a commodities inflation from spreading to the service industry, or other industries that have a heightened demand. This is why we have taken measures to decrease this demand in a general way. This administration has taken various measures to face this inflationary problem. In the first place, we continue to stimulate the agricultural supply. After all, Brazil is a great producer of agricultural supplies, perhaps the most productive in the world. And often, the increase in food prices are not exactly commodities. We have an increase in wheat prices, corn prices, etc. However, at times, we also have the increase in the price of beans, of rice which are not exactly commodities. But they greatly influence Brazilian price indexes. But the administration can, and has, implemented stimulus measures for agricultural production. Creating minimum prices. Facilitating crop financing. And in this way, we seek to increase the supply of the growers. Often it is a little difficult to do this because when certain commodities go up greatly in price, they are highly profitable for the farmer. Farmers are seeing exceptional profitability. Planting everything from cotton, sugar, coffee all of these commodities are seeing elevated prices. So, often what happens is, farmers abandon less profitable crops, such as, for example, beans, which is not a commodity, it is for local consumption. And then WWW. BRAZILCHAM. COM 53

54 there is a bean shortage because of the products that are being grown in order to supply the international market. So, we have attempted to combat this, thus increasing the agricultural supply. As a matter of fact, agricultural supply in Brazil in recent years has increased greatly. We have increased the financed value of agricultural crops. With every passing year, we are breaking new records compared to previous harvests. The previous harvest was 146 million tons. This year s should be 156 or 158 million tons, and the agricultural sector is doing very well in Brazil. Farmers are paying their bills, they are paying off old bills. They are activating production. So it s a sector that is doing very well. Furthermore, the Central Bank has been taking important containment measures as far as the credit increase is concerned. At the end of last year, there was an increase in the compulsory, which had become less tight during the crisis. It went back to previous levels. Everyone knows that Brazil has a very high compulsory, especially for demand deposits. Furthermore, the Central Bank, as of this year, has once again increased interest rates. And what s important is that at the end of last year, the Central Bank took the so-called macroprudential measures. In other words, it increased the capital requirements for more long range credits. So, banks were discouraged from taking on long range financing. To free up long range financing, the bank has to deposit more capital. A greater capital margin, and that, obviously, comes at a cost. So, either they increase interest rates or it decreases long range financing. So, this measure was put into practice as of November, and it is having the desired effect. It s good to remember that many of these measures don t have an immediate effect. The effects are deferred over time. For example, when you increase the interest rate, we know that the effects of that increase will be felt after six months, seven months, eight months. Some measures have a more immediate response. For example, this prudential measure was taken in November, and we noticed, as of March, a decrease in automobile financing it s one of the sectors that has been experiencing the highest levels of financing. And auto sales had already fallen by March, due to that measure. Therefore, [it took] three or four months for those measures to take effect. I mention this because often we take a measure, especially with relation to currencies, and the next day the reporters are asking: Has the measure had the intended consequences? The measure hasn t taken effect because it hasn t decreased the exchange rate. I d say: Calm down. If you take a measure yesterday, it will take a few days for the measure to have an effect. Especially in the area of credit restrictions, which involves several measures taken at the same time and whose results are felt over time and whose consequences you only see over time. So, we cannot, let s say, rush and take excessive measures in the short run, because suddenly you bring the economy down and you don t know why, and you didn t wait the necessary time for the measures to take effect. Measures, for example, to cut public spending are measures that will exercise their effect over time, because these are annual government expenses. So, the government is cutting 50 billion, but the cut is done in January, February, March. So, it s not that you immediately cut 50 billion. You will see this in the decrease in spending over the entire year. That is why the surplus accumulates during the course of the year. Recently, last week, we took one more important measure, which was to increase the tax on financial operations of credit to the consumer. We increased, by 1.5%, this financial cost on all credit operations done by consumers. So, this will also make credit more expensive. It will increase the installments to be paid in financing operations, and therefore there should also be a decrease in the financing volume due to this. Therefore, I would say that we are taking several measures so as to control inflation, not allowing inflation to spread and, at the same time, lowering the level of credit and the level of demand of the Brazilian economy. So, I would say, today the Brazilian economy is growing 4% 4.5%. When we get the first quarter figures, we will see this result: The economy growing at 4% 4-something percent, which is a perfectly sustainable level for the Brazilian economy. 54 WWW. BRAZILCHAM. COM

55 And with these anti-inflationary measures that we are taking, be it on the monetary front or on the fiscal front, once again, in 2011, we should meet our inflation goal, even in a year of certain stresses because of these worldwide highs in commodity prices. We will have an inflation performance somewhat close to last year s. Last year, we had an IPCA of 5.9%. You can see it does not come close to the upper threshold, which is the dotted orange line, and which we have complied with in the recent past the inflation targets that had been set. But, anyway, Brazil is in an advantageous position. Petrobras works with price averages during the year. It does not float the price of gasoline exactly like the fluctuation of the barrel of oil, but it goes through periods when the Brazilian prices are higher than the international, and in this way it gains, and in periods when the price of gasoline in Brazil is below the international price, it gives back what it accumulated in the previous period. But BRAZILIAN REAL APPRECIATION IN RELATION TO SELECTED CURRENCIES The Central Bank has already signaled that its objective is to meet the midrange of that goal in It established a longer period for establishing that goal. This is justifiable because we are witnessing a supply shock. When you have a supply shock, the inflation targeting system allows for that flexibility, considering that we need to allow the situation to adjust itself within the context of the global economy. I believe that commodity prices will not continue to climb in the world market. I believe that they increased greatly, 40% on average is a very high level, and I believe that from here on in, they should keep at the same level or even fall, with relation to these prices. Some products are already falling, because there exists a good elasticity in the supply of agricultural products. For example, if you maintain very elevated prices for cotton, wheat, etc., then you stimulate greater supply. The markets respond, or at least some markets respond, greatly to the price stimulus. That is not the case with oil. Oil depends more on the political question the political situation in the Middle East and it s harder to make a prediction about the evolution of the price of oil in the future. either way, it operates with less price volatility. We see here that the inflation indexes are beginning to show some positive signs. The rainy season this year was greater than in previous years, which affected certain products and affected inflation. For example, in the case of ethanol, we had more rain, therefore the prices of ethanol increased, even though the off season is ending now, and as of next month we will have more supply than demand, so the prices should begin to fall. The IGP-10 showed positive signs, and I hope that it will continue on that trajectory. In one or two months, we should have an adjustment of inflation to a lower level. I believe that the second semester should be better than the first semester in terms of inflation. Once these seasonal elements are overcome, rainfall issues, etc., we should have better results in the second semester compared to this semester. WWW. BRAZILCHAM. COM 55

56 To conclude, I would like to make a few comments about the currency market in Brazil, and the issue of the appreciation of the Brazilian currency. There you can see the results: The closing exchange rate, and the heavy volume of financial activity in the first quarter of We had financial results of US $35 billion only in that first quarter, which was greater than all of the financial activity for the previous year. Not activity, the activity is greater than that. The balance. The difference between inflows and outflows results in a balance of US $35 billion in the start of this year. Therefore, it was not easy to deal with this real avalanche of external resources that flowed into the Brazilian economy. The Central Bank purchased eight. There were also operations in the futures market. There were also reverse swaps. We are working with the IOF in order to reduce the arbitrage, or to decrease the result of the arbitrage and carry trade. But, even so, there was a strong pressure exerted on the real. I d like to point out that this problem is greater with relation to the dollar. Because, in truth of fact, it s not that the real has appreciated so much. It s that the dollar has depreciated a lot. So, these are two sides of the same coin. But, I think, more than anything, it was [because] the dollar is experiencing one of its weakest phases. You can see that when comparisons are done with other currencies. Here we looked at a longer period, from 2005 to We can see that the currency that had most appreciated was the euro. Then it depreciated. And then this second part, as of 2009, the euro is in blue, the dollar is in red. And the dollar is prevailing over the euro. So from 2005 until now, [there is] something like 87% of depreciation with relation to the real. If we look at a more recent period, this is lessened. We can see that from January of 2009 until now, we have had an appreciation of the real with relation to the dollar in the amount of 47%, but 14% with relation to the euro. With relation to the yen, 32%. In other words, that was our most serious problem with relation to the dollar. Because the dollar is specifically in a devaluation phase, which is due to monetary policy done here in the United States. I believe that quantitative easing does have a significant effect as far as the depreciation of the dollar is concerned. If we look now over the last year, from May of 2010 to March of 2011, the last ten months, we can see, for example, that the real with relation to the euro even depreciated somewhat. With regards to the yen, it is almost a tie. And thus our problem with regards to the dollar. Of course, this situation will change when the United States monetary policy changes. In July, the quantitative easing will end. And we will be waiting to see what the news is from here concerning the United States monetary policy. I d like to say, that in spite of this appreciation of the real, which we have seen here, the measures that the Brazilian government has taken have been effective in diminishing the appreciation of the real. Some say: They are not effective because the real is appreciating. Had we not taken the measures we are taking, the real would have appreciated a lot more, causing serious problems for the Brazilian economy, mainly for the productive sector. According to analysts, the real could already be at 1.4 or perhaps even lower. Therefore, at a minimum, we have been able to delay the appreciation or to allow for a more moderate appreciation, a soft landing, causing fewer shocks to the Brazilian economy. Because when you have an abrupt appreciation, and very strong [appreciation], then it causes shocks to the economy. It causes problems. So, we have taken measures that have been effective. Mainly, buying a lot of reserves nowadays, Brazil s reserves are over US $320 billion but also charging IOF s for certain operations, so as to try to reduce the interest rate differentials between interests outside of Brazil capture interest rates and application interest rates in Brazil which have been very high. So, it is important to make clear that Brazil continues to work, on the one hand, to combat inflation and is taking the necessary measures to combat inflation. And, on the other hand, [Brazil is] taking measures that will diminish the appreciation of the real, and making clear that the real continues to be a floating currency. We have a floating exchange regime. And it is good to always make clear that, just as it fluctuates to one 56 WWW. BRAZILCHAM. COM

57 side, it can fluctuate to the other. And if everyone is betting on one side, tomorrow they might get a surprise and lose money because it might float to the other side. So, it is good to keep that in mind. It is not incompatible to try to combat the appreciation of the real and inflation at the same time. As a matter of fact, there exist measures that help in both directions. For example, in the past weeks, if I m not mistaken, we took a measure to try to reduce the taking of credit by Brazilian banks, and Brazilian companies for periods of less than two years. So, those loans obtained for less than two years ended up paying an IOF of 6 percent, to discourage more short range operations. Over two years, there is no taxation for that. That measure was taken, in part, because credit was increasing in the Brazilian economy. So, we are discouraging the entry of dollars into the economy and, at the same time, diminishing the supply of credit, because part of that credit obtained abroad was increasing the supply of credit in the Brazilian economy. So, it attained both objectives at the same time. I wanted to conclude in this way, saying that the Brazilian economy is on track for sustainable growth. We have already made several adjustments in the economy. So, it has already reached a new growth level. Demand was diminished, credit is growing less. However, we continue growing and stimulating investment. Brazilian companies and the foreign companies that are in Brazil are obtaining good profits, they are doing well. We are going to continue this investment cycle over the coming years, confronting problems which always emerge, be it inflation, or appreciation, or other political problems that emerge in the international scenario. Thank you very much. WWW. BRAZILCHAM. COM 57

58 SPONSORS 58 WWW. BRAZILCHAM. COM

59 SPONSORS BRAZIL SUMMIT2011 SPONSORS WWW. BRAZILCHAM. COM 59

60 SPONSORS I N A S S O C I AT I O N W I T H BRAZIL-U.S. BUSINESS COUNCIL The Brazil-U.S. Business Council is a private sector organization focused on promoting the free flow of trade and investment between Brazil and the United States. The U.S. Section of the council represents major U.S. companies invested in Brazil. It operates under the administrative aegis of the U.S. Chamber of Commerce, maintaining independent policy formulation and membership. The Brazil Section of the council is managed by the Brazilian National Confederation of Industry (CNI), composed of the 27 Brazilian state-level federations of industry. Working in conjunction with the American Chamber of Commerce for Brazil (AmCham Brazil), this powerful structure enables the council to forge consensus between the two private sectors and communicate with both governments with a unique bilateral voice. The unifying purpose of the council is to protect, maintain, and advance trade and investment between the United States and Brazil through free trade, free markets, and free enterprise. OBJECTIVES To serve as an advocate in the United States and Brazil for council members interests in advancing trade and investment. To promote substantive interaction between council members and leading policymakers in Brazil and the United States. To deliver timely information to members and facilitate member input into policy formulation and program development. To advance the policy priorities of the Brazil Council member companies through memberdriven task forces and joint programs with other government and private sector stakeholders The agenda of the Brazil-U.S. Business Council is carried out through the work of its task forces, which are: Defense & Security; Energy & Environment; Innovation; Tax and Investment; and Trade Facilitation. The Trade Facilitation task force operates with three working groups, which include Customs Modernization, Infrastructure, and Regulatory and Standards Issues. For more information on the Council s recent initiatives and its Program of Work, please visit www. brazilcouncil.org. 60 WWW. BRAZILCHAM. COM

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62 SPONSORS P L AT I N U M S P O N S O R BANCO BRADESCO S.A. Banco Bradesco S.A. is one of the leading banks in the financial sector in Brazil, with one of the best operating efficiency ratios. The bank was founded in 1943 and has grown and developed in tandem with the economic trends and cycles of the country. With a transparent management model committed to good governance practices, Banco Bradesco has a dividend policy which offers an attractive return to its shareholders. The Bradesco Group of Insurance and Pension companies is the leader in the insurance, pension, and premium bond market of Latin America. Bradesco is present in one hundred percent of Brazil s 5,564 municipalities and has a wide attendance network and a complete attendance system through the Internet, telephone and self-service machine channels. This allows it to offer top quality services to its fifty million clients. Bradesco has a total of 70,000 points including branches, postal bank units, correspondent banks, posts and bank attendance centers in companies, and ATM machines in the Bradesco Day and Night Network. Private. Large and medium-sized corporations receive support from the Bradesco Corporate and Businesses area. Bradesco is also an active player on the international market, with branches in New York, Grand Cayman, and Nassau and subsidiaries in Buenos Aires, Luxembourg, and Tokyo. It also has an extensive network of International Correspondent banks. Bradesco has strong operations in the area of social and environmental responsibility through the Bradesco Foundation. This body is involved in the education of children, young people, and adults. Every year it provides free education to more than 110,000 pupils in forty schools located in all Brazilian states and the Federal District. Bradesco also takes part in a diversified cycle of social and environmental responsibility activities which combine culture, the environment, sports, education, information, and human rights. Client attendance is carried out in segmented areas of specialization. The retail segment offers products and services through the branch network which meet the demands of middle income clients. The postal bank and correspondent banking services give millions of Brazilians access to the banking system, many for the first time, where they can open accounts and make withdrawals, deposits, and payments, amongst other operations. High net worth individual clients are attended to in a personalized way through Bradesco Prime. Those with large fortunes can rely on consultancy, advisory, and the provision of services from Bradesco 62 WWW. BRAZILCHAM. COM

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64 SPONSORS P L AT I N U M S P O N S O R BANCO DO BRASIL Banco do Brasil is one of the major financial conglomerates in Latin America. In honor of its two hundred years of history, Banco do Brasil seeks to maintain the tradition and innovation that make it the most memorable bank to Brazilians, reinforcing its sustainable positioning and aligning financial return with social and environmental responsibility. In 2009, Banco do Brasil consolidated the acquisition of financial institutions to its corporate strategy, expanding its distribution network in São Paulo state. The bank also expanded its mortgage loan portfolio by 1805% in It remains the leader in payroll loans and agribusiness credit, and is the main financial agent of the Pronaf (Family Farming Program) and BNDES. Banco do Brasil was the first bank to operate in Brazil and its shares were the first to be negotiated on the Brazilian Stock Exchange. The bank actively took part in the technological evolution that assisted all financial segments around the world. With a massive investment in technology, onehundred fourteen thousand skilled employees, and a constant search for efficiency, Banco do Brasil continues to expand its activities and leadership, increasing its business generation by exploring its franchise potential, which determines the success of the strategies adopted. entire board to continue managing the company in a transparent, efficient, and profitable manner. Operating in the United States for forty-one years, Banco do Brasil has been carrying on in the foreign trade segment and structured finance operations. In June 2005, the bank announced the launching of its brokerage company, Banco do Brasil Securities New York, which was established to enhance the access of institutional investors to securities and commodities in both the Brazilian and U.S. markets. Its foreign presence reveals that Banco do Brasil s credibility goes beyond the national frontiers and makes the bank a very attractive investment option in the international capital market for foreign investors. On April 13, 2010, the Board of Governors of the Federal Reserve System determined that Banco do Brasil shall be treated as a Financial Holding Company from this date on. This status was granted after careful analysis of important factors required by the U.S. banking legislation, including the level of capitalization of Banco do Brasil and the quality of its management. This determination allows Banco do Brasil, when of its interest, directly or through its subsidiaries, to undertake banking activities in U.S. territory under the same conditions attached to local banks. It is worth highlighting that Banco do Brasil is highly committed to the best corporate governance practices, entering into Bovespa s special listing segment Novo Mercado in As a result, it has adopted stricter corporate governance practices, such as committing itself to reach 25% of free float by the middle of 2011 (which is currently at 21.8% from 6.8% back in 2004). The entrance into Novo Mercado represents the commitment of the major shareholder and of Banco do Brasil s 64 WWW. BRAZILCHAM. COM

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66 SPONSORS P L AT I N U M S P O N S O R TAM AIRLINES Established in 1976 with the vision of providing distinct, quality service at competitive prices, TAM Airlines is now the largest airline company of Brazil. Its operation in the U.S. includes daily flights, with cargo air transportation, from New York, Miami and Orlando, operated with Airbus and Boeing aircrafts, offering First, Business and Economy class services. TAM Airlines currently serves 17 international destinations in the US, Europe, and South America. In Brazil alone, TAM Airlines flies to 42 destinations and by using regional partners they reach 79 destinations. 66 WWW. BRAZILCHAM. COM

67 The Business Class experience begins before takeoff. Our TAM Business Class passengers have access to VIP Lounges, reclining chairs for a more restful sleep, complimentary transfer*, international menus and individual independent monitors. With every trip our clients earn points in the TAM Fidelidade Program, allowing them to exchange points for award travel to more than 1000 destinations worldwide in flights operated by TAM Airlines or any Star Alliance member airline. All these benefits are a way to turn your trip into an unforgettable experience. Visit tamairlines.com and passiontoflyandserve.com. Call FLY TAM ( ) or consult a travel agent. *Check availability.

68 SPONSORS G O L D S P O N S O R DELTA AIR LINES, INC. Delta Air Lines serves more than 160 million customers each year. With an industry-leading global network, Delta and the Delta Connection carriers offer service to 347 destinations in 64 countries on six continents. Headquartered in Atlanta, Delta employs 80,000 employees worldwide and operates a mainline fleet of more than 700 aircraft in airport facilities and global products, services, and technology to enhance the customer experience in the air and on the ground. Customers can check in for flights, print boarding passes, check bags, and review flight status at delta.com. In Latin America and the Caribbean, Delta serves 54 destinations in 32 countries with more than 1,000 weekly flights, including more than 60 weekly flights between Brazil and the United States. Delta also offers codeshare service and frequent flyer program reciprocity with GOL in Brazil and with SkyTeam partner Aeromexico in Mexico. Delta participates in the industry s leading trans-atlantic joint venture with Air France-KLM and Alitalia. Including its worldwide alliance partners, Delta offers customers more than 13,000 daily flights, with hubs in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Paris-Charles de Gaulle, Salt Lake City, and Tokyo- Narita. The airline s service includes the SkyMiles frequent flier program, the world s largest airline loyalty program; the award-winning BusinessElite service; and more than 50 Delta Sky Clubs in airports worldwide. Delta is investing more than $2 billion through 68 WWW. BRAZILCHAM. COM

69 BUILDING A BETTER AIRLINE, NOT JUST A BIGGER ONE. With airline mergers constantly in the news (ours included), it s easy to forget that size alone isn t enough to lead this industry. No one who flies is waiting for a bigger airline; they re waiting for one that s committed to making flying better. To that end, we ve taken a look at every part of the experience from buying a ticket to getting your bags and dedicated ourselves to constantly improving it. That s an ambitious goal, especially at a time when air travel is under pressure from all sides, but the challenges of this industry have always been its fuel; that was true at Kitty Hawk, and it s true today. So while we re proud to offer over 5,500 flights a day, we won t rest until each one of them is as convenient, comfortable, and hassle-free as possible. delta.com

70 SPONSORS G O L D S P O N S O R VEIRANO ADVOGADOS Veirano Advogados is a full-service law firm engaged in a challenging and highly sophisticated national and international practice. Founded in 1972, the firm has over thirty-six years of practice in business law. With two-hundred fifteen attorneys, Veirano Advogados ranks today among the top law firms in Brazil, with offices in Rio de Janeiro, São Paulo, Porto Alegre, Brasília, and Ribeirão Preto. Management Committee of Veirano Advogados to advise on the development of the firm s business; the Board has contributed immensely to the firm s market strategy and to the identification of major business opportunities. Acting in a broad range of legal matters related to business activities, Veirano Advogados goal is to deliver tailor-made solutions to each client in a timely and cost-effective basis. Lawyers at Veirano Advogados are very experienced in handling complex legal cases and transactions, providing innovative and commercially sound solutions that add value to clients business while ensuring proper risk assessment and allocation. The firm s approach consists of identifying and assembling the right team of attorneys to handle each project. Legal services are managed by a supervising partner who identifies and coordinates the services of other professionals with the appropriate expertise to fulfill the different types of assignments. Veirano Advogados has seen sustainable growth throughout its thirty-six years of existence, and is continuously striving to be at the forefront of the legal profession. A few years ago, in a groundbreaking initiative among law firms, Veirano Advogados set up an Advisory Board consisting of six leading executives from a variety of backgrounds and industries. The members of the Advisory Board cannot be clients of the firm or lawyers, which ensures a fresh outlook and independent advice. The Advisory Board periodically meets with the 70 WWW. BRAZILCHAM. COM

71 ATTORNEYS-AT-LAW Administrativo Aduaneiro Aeronáutico Antitruste e Concorrência Ambiental Arbitragem e Mediação Bancário e Financeiro Comércio Exterior Consumidor Contencioso Contratos Energia Elétrica Entretenimento Financiamento de Projetos Fusões e Aquisições Governança Imigração Empresarial Imobiliário Infraestrutura Mercado de Capitais Mineração Naval Petróleo e Gás Private Equity Propriedade Intelectual Recuperação de Créditos e de Empresas Seguro e Resseguro Societário Tecnologia da Informação Telecomunicações Trabalhista e Previdenciário Tributário Administrative Antitrust and Competition Arbitration and Mediation Aviation Banking and Finance Capital Markets Compliance Consumer Law Contracts Corporate Corporate Immigration Credit Recovery & Corporate Reorganization Energy Entertainment Environmental Export / Import and Customs Information Technology Infrastructure Insurance & Reinsurance Intellectual Property International Trade Labor and Social Security Litigation Mergers & Acquisitions Mining Oil & Gas Private Equity Project Finance Real Estate Shipping Tax Telecommunications Áreas de Prática Practice Areas institucional@veirano.com.br RIO DE JANEIRO SÃO PAULO PORTO ALEGRE RIBEIRÃO PRETO VEIRANO & PIQUET CARNEIRO ADVOGADOS BRASÍLIA

72 SPONSORS S I LV E R S P O N S O R BANCO VOTORANTIM S.A. Incorporated in 1988 as a broker-dealer, Banco Votorantim became a full-service bank in As a subsidiary of Votorantim Finanças, a division of the Votorantim Group, the bank subsequently developed a strong institutional client base which allowed it to become the fifth largest privately held Brazilian bank focusing on fee-based business and high aggregate value transactions for corporations operating in Brazil. Headquartered in São Paulo, the bank has multiple branches throughout Brazil s key cities, a full branch in Nassau Bahamas, a representative office in London and a brokerdealer in New York. On September 2009, Banco do Brasil acquired 49.99% of common stock and 50.01% of preferred stock in Banco Votorantim. Each party now holds 50% of the bank s total share capital. The agreement sealed an alliance between Banco Votorantim and Banco do Brasil, combining one of Brazil s largest wholesale institutions with Brazil s largest financial institution. The agreement represents advances in new business opportunities and enhanced capabilities to operate in strategic areas where both institutions can grow more rapidly and robustly. Banco Votorantim Corporate Bank is the institutional relationship core of the bank and a key source of client development for the various areas of the bank, including trade finance, BNDES, lending, and other specific needs. Banco Votorantim Investment Bank is well positioned to explore the boom being seen in the Brazilian market. In 2009, the investment bank was recognized as: # 2 in distribution of local fixed income securities with a market share of 17.2% # 4 in local fixed income origination with a volume of R$ 2.7Bn # 9 in M&A with a volume of R$ 16.6Bn BV Financeira is the consumer finance division of Banco Votorantim. It is well positioned as the third largest overall automobile financing player, with an estimated market share of 14% with 3.9 million clients. It has a large distribution network of over 20,000 third party auto resellers developed through a scalable, low cost network. Votorantim Asset Management ( VAM ), founded in 1999, is focused on managing corporate and institutional capital and product development for private banking clients at Banco Votorantim. VAM is currently the twelfth asset manager in Brazil, with R$19.7Bn of AUM. In April 2010, Valor Invest, in participation with Standard & Poor s, recognized VAM among the top equity portfolio managers in Brazil. Votorantim Corretora, established in 1995, is the sales and trading intermediary of secondary equity on the BOVESPA, along with futures and options on the BM&F (Brazil s commodity and futures exchange), among other secondary products and IPO distribution. 72 WWW. BRAZILCHAM. COM

73 SPONSORS S I LV E R S P O N S O R PINHEIRO NETO ADVOGADOS Founded in 1942, Pinheiro Neto Advogados is one of the largest law firms in Latin America and one of the most well-established in Brazil. Its tradition of excellence is evident throughout its nearly eight hundred member legal and administrative staff. The firm maintains offices in the cities of São Paulo, Rio de Janeiro, and Brasília and also has an extensive network of correspondents throughout the country. With its roots in tradition and its constant concern for the highest ethical standards, Pinheiro Neto Advogados continuously strives to be at the forefront, be it in legal problem solving or meeting community interests. The firm is the first Brazilian law firm to be certified as carbon neutral, further evidencing its commitment to future generations. Pinheiro Neto Advogados main objective has always been the search for excellence in serving its clients. The firm develops creative and effective solutions for a large variety of legal needs, ranging from the most simple and ordinary to the most complex and sophisticated issues. Its commitment extends beyond a simple client relationship: Pinheiro Neto Advogados operates with its clients as its partners, anticipating not only their problems, but also their opportunities. Its most valuable assets are the talents of its lawyers and its longstanding client relationships. Pinheiro Neto Advogados participates in a great variety of socially-oriented projects. In addition to contributing to several charity organizations, the firm is actively engaged in programs that foster the technical and professional training of low-income youths in partnership with other entities. Since 1970, Pinheiro Neto Advogados has been Brazil s representative at Club de Abogados, an organization that brings together premier law firms in Europe, Latin America, and Japan for the purpose of offering their clients the assistance they need within an increasingly global practice. Pinheiro Neto Advogados also has an excellent relationship with law firms in Europe, the United States, and Asia, which enables it to exchange professional practices and train its lawyers at the best law firms in the world. Pinheiro Neto Advogados legal practice is divided into four practice areas: corporate, litigation, tax, and labor. The lawyers in each of these areas are, in turn, divided into teams of specialists dedicated to meeting each client s special needs. The firm s conduct has always been guided by an absolute commitment to ethical principles, by both quality in human relations and the duty to contribute to the social development of the community. WWW. BRAZILCHAM. COM 73

74 SPONSORS E V E N T S P O N S O R AGÊNCIA ESTADO Agência Estado is the largest Brazilian provider of news and information for the financial and commercial markets. The most influential news and media agency in the country since the late 1970 s, AE has invested heavily in information technologies and human resources to develop a world-class service in Brazil. The company s general policy is to assure the best and most complete Information Solution services for the Brazilian business community. In the late 1980 s, AE pioneered the automation of communications systems to gather and broadcast customized business information, geared toward several Brazilian productive sectors. AE now goes head to head with many international companies in the information business. Over the years, Agência Estado has been distinguished with the most important awards in the Brazilian news industry. 74 WWW. BRAZILCHAM. COM

75 SPONSORS E V E N T P A R T N E R THE FINANCIAL TIMES The Financial Times, one of the world s leading business news organizations, is recognized internationally for its authority, integrity, and accuracy. Providing extensive news, commentaries, and analyses, the newspaper is printed at twenty-four print sites across the globe and has a daily paid circulation of 449,264 and a readership of 1.3 million worldwide. FT.com is the definitive home for business intelligence on the web, providing an essential source of news, commentaries, data, and analyses for the global business community. FT.com attracts 11.4 million unique users, generating 83.2 million page views, and now has over 1.3 million registered users. WWW. BRAZILCHAM. COM 75

76 SPONSORS M E D I A P A R T N E R IFR IFR is the world s leading source of capital markets intelligence, and has been for nearly 40 years. Published weekly, it provides senior investment banking decision-makers with authoritative and unbiased commentary and analysis. With by far the largest editorial team of any capital markets publication, IFR provides its readers with the critical information they need to judge market sentiment, structure and market forthcoming transactions, and make better decisions. Recently revitalized to better address the needs of the investment banking community, IFRe.com takes the unrivalled content of the magazine and combines it with the functionality of the web to create a powerful workflow tool. IFRe.com now features intra-day news, providing all the key developments in global capital markets throughout the day. Furthermore, a newly-acquired, best-in-class search platform allows you to access an 18-year archive of news and data more quickly and more intuitively than ever. WHY CHOOSE IFR? IFR brings you fully-rounded coverage of all the new issues that matter. IFR s exceptional editorial pedigree and unrivalled industry contacts ensure the very highest quality in our reporting. Published 50 weeks per year, each issue is delivered to your desk every Monday morning guaranteed. Regular Special Reports cover the most topical issues, and a series of Roundtables throughout the year provide thought-provoking discussion on the key issues driving today s capital markets. 76 WWW. BRAZILCHAM. COM

77 SPONSORS M E D I A P A R T N E R LATIN BUSINESS CHRONICLE Latin Business Chronicle is the definitive weekly online journal covering Latin America s business, politics, and technology. It offers a unique combination of special reports, news, analysis, and commentary. Latin Business Chronicle s coverage is both pan-regional and country-specific. The publication covers industry sectors as well as political trends affecting business. Latin Business Chronicle also publishes an array of widely-quoted indexes, including Latin Business Index, Latin American Globalization Index, Latin Security Index, and Latin Technology Index (all four are the first of their kind and key tools to measure how each economy is doing compared to the rest of the region). In addition, the publication names a Leader of the Year, a government leader who has gained prominence for pro-business policies. Corporate executives also use Latin Business Chronicle to find exclusive rankings of the region s Top 100 Mergers & Acquisitions as well as panregional GDP and GDP per capita data. It also provides updated statistics on inflation, FDI and GDP for nineteen individual economies, as well as statistics on the region s trade with the US, Europe, Canada, and China. In addition, Latin Business Chronicle offers proprietary research showing how each country in Latin America fares in international rankings on capital access, competitiveness, corruption, economic freedom, human development, political freedom, tariffs, taxes, technology, and industry sectors ranging from advertising to tourism. The Latin Business Chronicle website, which has more than 1.5 million hits a month from more than 21,000 unique visitors, has been quoted by such media as Financial Times, The Washington Post, USA Today, The Economist Intelligence Unit, Dow Jones, and The Miami Herald, and such institutions as the World Economic Forum, Council on Foreign Relations, The World Bank, The Inter-American Development Bank, and more. Latin Business Chronicle is led by Joachim Bamrud, a former Editor-in-Chief of Latin Trade magazine and an award-winning journalist with twenty-three years experience covering Latin America for US, European, and Latin American media, including Reuters, UPI, Global Finance, The Miami Herald, Christian Science Monitor, and Detroit News. WWW. BRAZILCHAM. COM 77

78 SPONSORS M E D I A P A R T N E R LATIN AMERICA MONITOR Latin America Monitor is published monthly by Business Monitor International. The publication provides political risk assessment as well as macroeconomic analyses and forecasts for corporations, banks, government entities, business libraries, and research centers focused on Latin American and Caribbean markets. To sign up for a free trial of the newsletter, please contact Leila Scott, Marketing Services Manager (Tel: +44 (0) / lscott@businessmonitor.com). For further information on the wealth of information Business Monitor International offers, please visit 78 WWW. BRAZILCHAM. COM

79 SPONSORS M E D I A P A R T N E R LATIN TRADE MAGAZINE Latin Trade is Latin America s leading international business magazine. For fourteen years, its award-winning editorial team has provided more than 350,000 readers with a global perspective on corporate developments in Latin America and the Caribbean. Latin Trade is the only pan-regional business magazine published in Spanish, Portuguese, and English. Complete market coverage, editorial excellence, and an established presence of fourteen years make Latin Trade the best choice. WWW. BRAZILCHAM. COM 79

80 SPONSORS M E D I A P A R T N E R PRIVATEBANKING.COM Founded in 2002 and based in Toronto, Canada, Privatebanking.com is a global company and leader in internet marketing serving customers across the financial industry. The experts at Privatebanking.com are focused on delivering customers with unparalleled reach and visibility that enables organizations to effectively maximize benefits from their advertisement budget by building brand and generating high levels of traffic and quality leads. The platform offers its users complimentary access to an unrivalled extensive multi-level database of financial service providers across the globe. Privatebanking.com s modern and intuitive graphic user interface was designed to match customers and users standards as well as facilitate navigation, increase convenience, and provide a positive experience to a qualified and engaged audience. In addition, Privatebanking.com s Bankers Network is an online community and marketplace that caters to the needs of high net worth individuals, bankers, and financial service professionals. The aim of the platform is to foster business development, career building, and opportunities in all areas related to the global private banking, investment, and wealth management industries. 80 WWW. BRAZILCHAM. COM

81 SPONSORS M E D I A P A R T N E R PROJECT FINANCE INTERNATIONAL PFI is the leading source of global project finance intelligence. Published every two weeks, PFI reports on the entire lifecycles of deals, from the initial rumors through to post-completion analysis, and allows you to identify every opportunity in your market while keeping a close eye on your competitors activity too. A subscription to PFI also includes access to PFI s Alerts. Delivered to your inbox twice a day to reflect intra-day developments, each alert features a round-up of the top stories in global finance divided into regions for your convenience plus a search archive, deals, and pipeline database. ABOUT PFIE.COM PFIe.com combines all the news, data, and analysis of the printed publication with the speed and accessibility of the web. Recently revitalized to better meet the demands of the industry, this essential service now gives you: Intra-day market updates - All the key developments in international project finance, brought to you quicker than ever. Don t wait until tomorrow for today s news. Improved search functionality - Our newlyacquired, best-in-class search platform means quicker, more intuitive searching allowing you to access PFIe.com s 17-year news and data even more effectively. Clearer, sleeker appearance - Logically-structured, pfie.com makes focusing on your area of specialism simple. WWW. BRAZILCHAM. COM 81

82 SPONSORS M E D I A P A R T N E R REVISTA CAPITAL ABERTO Launched in 2003, Capital Aberto is the first Brazilian non-institutional publication focused on capital markets. It offers special stories, interviews, research and analysis, always with the commitment to keep professionals who work with listed companies and the capital markets updated. With an average circulation of 8,100 audited by IVC Capital Aberto is distributed to an exclusive mailing list and sold at selected newsstands and bookstores all over Brazil. Its content is dedicated and targeted to all the participants in capital markets including managers of listed companies, stockholders, institutional investors, research analysts, consultants, lawyers, auditors, Board of Directors / Audit Committee members, professionals of securities markets / regulatory bodies, academicians, university students, and teachers. 82 WWW. BRAZILCHAM. COM

83 BRAZIL SUMMIT2011 REGISTRANTS

84 BRAZIL SUMMIT 2011 Mauricio Abadi Safra National Bank of New York Cristina Aby-Azar Dow Jones - The Wall Street Journal Americas Cyrous Adami Global United Technology Stephanie Aldrink Norman Bobrow and Company, Inc. Marcos Signorini Prado Almeida Global Compliance Ramiro Alves da Silva Ministry of Finance of Brazil Sheena Amin ISI Emerging Markets Mark Ampuero Sumitomo Mitsui Banking Corporation Gloria Brown Anderson The New York Times Adriana Andrade Sidley Austin LLP Alyce Andrews Morgan Stanley Matti C. Anttila Cabana Cachaça LP Adiel Avelar Hertz Corporation J. Roberto David de Azevedo Brazilian-American Chamber of Commerce Manoel Baião Neolink International LLC Emily Baker Epoch Investments Partners, Inc. Celso V. Barison Citrus Products, Inc. Patrick Barros Safra National Bank of New York Samantha Barthelemy Columbia University Kathleen Barthmaeier W.P. Carey Tulio Batista Banco do Brasil Pieter Bierkens Commonwealth Bank of Australia Steven Bipes Brazil-US Business Council Dimitri Bittencourt MacArthur Capital Group René Boettcher BNY Mellon Cândida F. Borges Brazilian Government Trade Bureau Alice Botis Fidessa Tom Boyle Lazard Caio F. Braga UPS Capital Corporation Valmor A. Bratz JB Investments Matt Bristow Bloomberg News Matt Bruck The Royal Institution of Chartered Surveyors - RICS Anna Bruno Paramount Planning Group Carla Buffulin Oppenheimer Funds, Inc. Luiz Antonio Bull Safra National Bank of New York Arthur E. Byrnes Deltec Asset Management LLC Christine Cachot Christine Cachot Cassio A. Calil JPMorgan Alejandro E. Camacho Clifford Chance US LLP Nuno Camara Fortress Investment Group David C. Camerini Fox Horan & Camerini LLP William Campbell Gibson, Dunn & Crutcher LLP Dario Campos, Ph.D. Brazilian Consulate General in New York Felipe Lisboa Capella Sullivan & Cromwell LLP Otavio Carneiro Veirano Advogados Ana Paula Gambogi Carvalho Santos Neto Advogados Karine Castro Columbia University Claudia Ribeiro de Castro Oppenheimer Funds, Inc. 84 WWW. BRAZILCHAM. COM

85 BRAZIL SUMMIT 2011 Flavia Cattan-Naslausky The Royal Bank of Scotland Yoon Chang Lily Pond Capital Management Luiz Marcelo P. Chaves Globo International (N.Y.) Ltd. Linda A. Christian Franciscan Sisters of the Poor Foundation Alexandre C. Coelho Daiwa Capital Markets America Inc. Marcel G. Coelho Becker & Poliakoff, LLP Wesley Coll Coll Tales Rafaelo Colombo Safra National Bank of New York Walter Comassetto TAM Airlines Crispin Conroy Australian Trade Commission James Cooke JACI International Kevin Corrigan EIG Global Energy Partners Aaron Cowen Soros Fund Management Marina Cristiani Citco Corporate Services Inc. Nelson Dantas Safra National Bank of New York Christopher Davis Laurion Capital Management Whitney Debevoise Arnold & Porter LLP Robert Derbabian Marcum LLP Antonio Di Maggio Banca Intensa New York Elizabeth Dolge Elizabeth Dolge Edward J. Dougherty Allen & Overy LLP Dvir Duman Oryan s Group Inc. Bobby Edemka Jennison Lee M. Elman Elman Investors Inc. Jean Ergas GC Group Capital, LLC Álvaro Fagundes Folha de São Paulo Jason Fargo Energy Intelligence Ellene A. Felder Transformative Global Carolina Kawassaki Fenner Pinheiro Neto Advogados Andre Fernandes Banco Bradesco S.A. Sônia Filgueiras CDN Comunicação Corporativa Albert Fishlow, Ph.D. Center for Brazilian Studies, Columbia University Stuart K. Fleischmann Shearman & Sterling LLP Agustino Fontevecchia Forbes Magazine Sam Fouad Ernst & Young Christian Frank ING Investment Management Ronald Frohne Noerr LLP Toyoaki Fujita Japan Finance Corporation (JBIC) Shinichiro Fukui Bradesco Securities, Inc. Alessandro Gajano Banco do Brasil Marcello Ganem Oceana Investimentos Mary Gershwin US-Brazil Connect Alan Gersten Thomson-Reuters Mitra Ghamsari Laurion Capital Management Christian Gloger Shearman & Sterling LLP Fernanda Godoy O Globo Marcos Diaz Gonzalez AECOM Mark Gordon Wachtell Lipton WWW. BRAZILCHAM. COM 85

86 BRAZIL SUMMIT 2011 David Gorman Australian Trade Commission Eduardo Graça Terra Networks SA Mark W. Gross Knox & Co. David M. Gruppo Bank of Tokyo Mitsubishi UFJ, Ltd. Stephen Guthartz Reed Exhibitions Marcello Hallake Thompson & Knight LLP Jefferson Antoniolo Hammes Banco do Brasil Brendan Harley Standard Chartered Bank Anthony S. Harrington Albright Stonebridge Group LLC Gregory Harrington Arnold & Porter LLP Brian D. Harris Ford Motor Company Theodore M. Helms Petróleo Brasileiro S.A - PETROBRAS Joel Herold Cravath, Swaine & Moore Stephanie L. Hogue PricewaterhouseCoopers, LLP Kathleen Holtzman Fitch Ratings Graciela Ibanez Debtwire Ricardo Ibarra Business Monitor International Alexandre Iervolino Black River Asset Management Cristina Indio TV Globo Mari Ishii Bank of Tokyo Mitsubishi UFJ, Ltd. Javier Ismodes Genworth Financial Thiago Jabor Pinheiro Neto Advogados David E. Jakubowski Rockefeller Group - Business Centers Marun Jazbik Filho Itochu International, Inc. Leonardo Jereissati Barclay s Capital Miguel Jerônimo Brazilian Tourism Office (EMBRATUR) Robert J. Kabel B & D Consulting Arthur J. Kalita ING Investment Management Hope Kaye Financial Times Jonathan P. Kendall TSS Brazil Investments & Consulting John Keohane Mass Mutual Financial Group Kathryn Kiplinger Scotia Bank Dawn Kissi Dawn Kissi Cleide Klock Deutsche Welle Monika Kochhar Banco Votorantim Securities Inc. Andrew Koerner Tarter Krinsky & Drogin LLP Karyn Koiffman Kirkland & Ellis LLP Carolina Giesbrecht Forte Korbage Peixoto e Cury Advogados Nitin Kumar Hutchin Hill Portfolio Management Julio Cesar F. Lage Morgan Stanley Smith Barney Dennis D. Lamont Latham & Watkins LLP John D. Landers Delta National Bank and Trust Company Ernest R. Larenas Banesto Ricardo R.A. Larroudé Apollo Management, L.P. Jin Lee Bloomberg News Edmund Lee Chartis International Luciana Levy Banco Votorantim Securities, Inc. Arthur Lim Bunge Limited 86 WWW. BRAZILCHAM. COM

87 BRAZIL SUMMIT 2011 Albert Lima Columbia University Ricardo de Figueiredo Lima UniverCidade - Centro Universitário da Cidade Carlos Alberto Moreira Lima Jr. Pinheiro Neto Advogados Patricia Lobaccaro Brazil Foundation Robert Loef Noerr LLP Pedro Loffredi Safra National Bank of New York Fabiana Helena Lopes de Macedo Veirano Advogados Luciana Magalhães Dow Jones Newswires Joseph Mangiacotti CB Richard Ellis Minister Guido Mantega Ministry of Finance of Brazil Marco Marchese Black River Asset Management Maria Marques Jones Day Michael McAdams Advanced Biofields Association Erin McCarthy Dow Jones Newswires Michael McDonough Bloomberg L. P. Peter McNally Kingdon Capital Management Magali Medeiros Magali Medeiros Eduardo Medeiros Galeão Partners Kellie Meiman McLarty Associates Fernando Alves Meira Pinheiro Neto Advogados Henrique de Campos Meirelles Henrique de Campos Meirelles Ernesto Meyer BNP Paribas Joseph Michels One Equity Partners Bryan Miller Fidessa Sergio Millerman SM Consultant Philip Mindlin Wachtell Lipton John Moncure Financial Times Ricardo de Moraes Monteiro Ministry of Finance of Brazil Valery Moore Franciscan Sisters of the Poor Foundation Leslie Moore Platts Rumi Morales CME Group Simoni Morato Safra National Bank of New York Siobhan Morden The Royal Bank of Scotland John Morrison Newman & Morrison LLP Harriet Mouchly-Weiss Kreab Gavin Anderson Paul Murphy Financial Times Maria Negrete-Gruson Artisan Partners Otto Eduardo Niño Markit Brian A. Nogy Bank of Tokyo Mitsubishi UFJ, Ltd. Chiharu Ohsugi Bank of Tokyo Mitsubishi UFJ, Ltd. Hsu O Keefe Pace University Margarita Oliva Allen & Overy LLP Paulo Sousa Oliveira BRAiN Brazil Investments and Business Brian D. O Neill Lazard Masakuni Oshirabe The Nikkei Jerry Owen Intrix Corporation LLC Ricardo Augusto V. Pacheco Banco Itaú S.A. Lucas Palocci Banco Bradesco S.A. WWW. BRAZILCHAM. COM 87

88 BRAZIL SUMMIT 2011 Carolina Paschoal Kirkland & Ellis LLP Roberto M. Paula Banco Bradesco S.A. Kristie Pellecchia BNP Paribas Daniel Pellegriti Intesa Sanpaolo S.P.A. Paulo S. Pereira Far Hills Group, LLC Marcelo Pereira Plural Capital Sergio Pessoa BRASSCOM - Brazilian Assoc. of IT and Comm. Companies Felipe Pianetti JP Morgan Securities Inc. Lucio Pimenta Lucio Pimenta Eric Pollish OCBC Bank Michael P. Ralsky Navistar Izabel Ramos Petróleo Brasileiro S.A - PETROBRAS Andy Reul Bunge Limited George Rexing Safra National Bank of New York Alexandre Sodero Rezende Oceana Investimentos Rafael Pellegrini Ribeiro Curtis, Mallet-Prevost, Colt & Mosle LLP Juan Luis Rivera Moneda USA Luiz R. Rocha Banco Votorantim Securities Inc. Eduarda de La Rocque Government of the State of Rio de Janeiro Paul M. Rodel Debevoise & Plimpton LLP Beatriz V. von Bentzeen Rodrigues Caixa Econômica Federal João H. Rodrigues Myriad Travel Marketing Nicholas Rodriguez Jones Day Vidal Rodriguez Caterpillar Inc. Paul Rogers Lazard Asset Management Maria Rueda Philip Morris International Christopher Sabatini Americas Society / Council of the Americas Marcelo Salomon Barclay s Capital Wagner Santos Agência Estado Oswaldo Parré dos Santos Banco do Brasil José Gilberto Scandiucci Ministry of Finance of Brazil Patricia Scharlau Machado, Meyer, Sendacz & Opice - Advogados Alex Schiavo Translation Services Lisa M. Schineller Standard & Poor s Vicki Schmelzer Market News International Keren Blankfeld Schultz Forbes Magazine Roberto W. Secemski Daiwa Asset Management (America) Ltd. Gerard Seeber Australian Trade Commission Susan Segal Americas Society / Council of the Americas Rahwa Senay Lazard Thomas A. Shannon US Consulate/ Embassy Shelly Shetty Fitch Ratings Monika Shrestha Lazard Asset Management Nabil Shurafa Mount Lucas Management Diana Rau Siegal Norman Bobrow and Company, Inc. Kevin Silva ING Investment Management Patricia Silva JACI International Fabio Soares Silva Caixa Econômica Federal 88 WWW. BRAZILCHAM. COM

89 BRAZIL SUMMIT 2011 Amir da Silva Banco Bradesco S.A. Justin Simcock Lusino Inc. Hunter C. Smith Bunge Limited David F. Snyder American Insurance Association Clifford M. Sobel Ambassdor Clifford Sobel Luciana Soledade Felsberg, Pedretti, Mannrich e Aidar Advogados Andrew Sollinger Financial Times William Sorabella Kirkland & Ellis LLP Ronald Sorenson W. H. Reaves & Company Carlos Souto Veirano Advogados Bernardo Souza Silva Bernardo Souza Silva Stanley Stairs Stairs Dillenbeck Finley Priscilla Stephan Sweetpath Wellness Gustavo Moraes Stolagli Veirano Advogados Sergio Gusmao Suchodolski Continental Grain Company Luciana Takano Consulate General of Brazil in New York Hideki Tamamaki Bank of Tokyo Mitsubishi UFJ, Ltd. Joaquin Tamayo Norman Griffiths Institute Edward Tan Dow Jones Newswires João Carlos Telles Banco do Brasil Sergio Telles TV Globo Pedro Murilo Ortega Terra Consulate General of Brazil in New York Elissa Tomasetti Financial Times Claudia Torrens Associated Press Thomas Trebat Center for Brazilian Studies, Columbia University Lucia Tristão Amigas da Cultura John F. Tsui Peninsula House, LLC Tim Tu Standard Chartered Bank Alfreda Turner Delta Air Lines, Inc. Sergio Urias Kirkland & Ellis LLP Min. Wladimir Valler Filho Consulate General of Brazil in New York Jan Kees van Gaalen Baker Hughes Inc. Karin Vazquez Columbia University Hernan Vecchio Bunge Limited Ricardo C. Veirano Veirano Advogados Ronaldo Camargo Veirano Veirano Advogados Isabel Versiani Thomson-Reuters Eduardo Vidal Hughes Hubbard & Reed LLP Gonzalo Videla Chubb & Son, Inc. Camila Viegas-Lee BBC Brasil Mauro Vieira Brazilian Embassy Monica Vieira Americas Society / Council of the Americas Paulo Vieira da Cunha Tandem Global Partners Brunela Vieira de Vincenzi Noerr LLP Mathias von Bernuth Shearman & Sterling LLP Mara Weitzman HSBC Securities (USA) Inc. John H. Welch Macquarie Bank Ltd. - Representative Office Frederick Werner AECOM WWW. BRAZILCHAM. COM 89

90 BRAZIL SUMMIT 2011 Blair Whiteford Rockefeller Group - Business Centers Jorge Wilmer UniCredit Bank Murray Woloshin JPMorgan Robert Wood The Economist Group Peter Wrampe Exxergy Inc. Andrew Wright Kirkland & Ellis LLP Luciana Antonello Xavier Agência Estado Koichi Yabuki Bank of Tokyo Mitsubishi UFJ, Ltd. Hideaki Yamashita Bank of Tokyo Mitsubishi UFJ, Ltd. Rocha Yula SBT Cíntia Zingoni BACC TRAVEL Jonathan Zonis Clifford Chance US LLP 90 WWW. BRAZILCHAM. COM

91 B R A Z I L SUMMIT LCHAM.COM 91