The Economic Consequences of the Real Economic Department
I/2002 III/2008 IV/2008 IV/2009 I/2010 IV/2013 I/2014 II/2016 The great recession: A Four Act Drama. GDP (YoY accumulated) Source: IBGE 8,00% 6,00% 4,00% 2,00% 0,00% -2,00% I III I III I III I III I III I III I III I III I III I III I III I III I III I III I III I III I III I III I 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016-4,00% -6,00% 2
The Ortodox View A portrait of the conscience.
The Ortodox View. Two main hipotesis: 1. Brazil growth during 2002 and 2008 was due an external commodity shock. 2. The main brazilian problem is increasing government spending that delivered fiscal imbalance. 4
The Ortodox View: commodity boom and gloom. Commodity & Oil 500 450 400 350 300 01/2002 06/2008 CRB = 184% Oil = 525,4% Source: Bloomberg $160,00 $140,00 $120,00 $100,00 250 $80,00 200 150 100 50 $60,00 $40,00 $20,00 0 $- CRB (USD) Oil (First active Contract) 5
The Ortodox View: commodity boom and gloom. 6
The Ortodox View: commodity boom and gloom. 7
The Ortodox View: commodity boom and gloom. Components contribution to GDP - Brazil (estimated) Source: IBGE, Gradual Investimentos Households Government Spending Gross Investment Exports Imports -20,00% -10,00% 0,00% 10,00% 20,00% 30,00% 40,00% 50,00% 8
The Ortodox View: commodity boom and gloom. 9
I/2002 III/2008 The Ortodox View: commodity boom and gloom. 10
The Ortodox View: spending fast? 11
The Ortodox View: spending fast? 12
The Ortodox View: spending fast? 13
The Ortodox View: spending fast? 14
The Economic Consequences of the Real Unconsciouness speaks.
The Economic Consequences of the Real. Two simple equations... Marginal Efficiency of Capital (mec) Zero Cupon Bond Yield (yield) mec = Qn (1 r) n Yield = F PV 1/n 1 Where: Q = prospective return r = risk free interest rate n = number of periods Where: F = Face Value PV = Present Value n = number of periods 16
The Economic Consequences of the Real. Real Interest Rate (ex-post) (YoY) Source: Bloomberg, Gradual Investimentos 14 12 10 8 6 4 2 0-2 -4 * as oct/2016-6 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* Brazil 12,31 10,11 6,79 7,85 4,44 4,84 4,5 1,41 4,09 5,34 3,58 6,13 Chile 0,84 2,69-1,83 1,16 1,88 0,28 0,81 3,51 1,56-1,6-0,65 0,7 Mexico 4,92 2,95 3,74 1,78 0,93 0,1 0,68 0,96-0,47-1,08 0,52 1,69 Colombia 1,15 3,02 3,81 1,83 1,5-0,17 1,02 1,81 1,31 0,84-0,89 1,27 Indonesia -4,37 3,15 1,41-1,81 3,72-0,46 2,21 1,45-0,58-0,61 2,61 3,19 China 3,98 3,32 0,97 4,11 3,41 1,21 2,46 3,5 3,5 4,1 3,05 2,25 17
The Economic Consequences of the Real. 18
The Economic Consequences of the Real. 19
jul/40 ago/42 set/44 out/46 nov/48 dez/50 jan/53 fev/55 mar/57 abr/59 mai/61 jun/63 jul/65 ago/67 set/69 out/71 nov/73 dez/75 jan/78 fev/80 mar/82 abr/84 mai/86 jun/88 jul/90 ago/92 set/94 out/96 nov/98 dez/00 jan/03 fev/05 mar/07 abr/09 mai/11 jun/13 jul/15 The Economic Consequences of the Real. Real minimum wage (in BRL) Source: IPEA Data, Gradual Investimentos R$ 1.600,00 R$ 1.400,00 R$ 1.200,00 Vargas suicide Military coup 1964 R$ 1.000,00 Dilma Impeachment R$ 800,00 R$ 600,00 R$ 400,00 Plano Real R$ 200,00 R$ - 20
The Economic Consequences of the Real. Currencies (index 100 = 01/2004) Source: Bloomberg, Gradual Investimentos 190 170 150 130 110 90 70 50 jan-04 jan-05 jan-06 jan-07 jan-08 jan-09 jan-10 jan-11 jan-12 jan-13 jan-14 jan-15 jan-16 JPY EUR MXN CHF SEK BRL 21
jul/40 jul/42 jul/44 jul/46 jul/48 jul/50 jul/52 jul/54 jul/56 jul/58 jul/60 jul/62 jul/64 jul/66 jul/68 jul/70 jul/72 jul/74 jul/76 jul/78 jul/80 jul/82 jul/84 jul/86 jul/88 jul/90 jul/92 jul/94 jul/96 jul/98 jul/00 jul/02 jul/04 jul/06 jul/08 jul/10 jul/12 jul/14 The Economic Consequences of the Real. Minimun wage purchasing power parity (USD) Source: IPEA Data, Gradual Investimentos $450,00 $400,00 $350,00 $300,00 $250,00 $200,00 $150,00 $100,00 $50,00 $- 22
The Economic Consequences of the Real. 23
The Economic Consequences of the Real. TAX RELIEF IN 2015 = BRL 400 BILLION 24
The Economic Consequences of the Real. Domestic Workers as percentage of Household Expenditure Survey 4% Source: IBGE, BLS, Eurostats, INE (Chile), CSO (Ireland) 3% 3% 3% 2,30% According to the ILO's 2013 report, Brazil has around 7.2 million domestic employees or 13% of the total. Brazil is the country with the largest number of domestic employees in absolute terms. 2% 2% 1,40% 1,10% 1% 0,90% 0,80% 0,70% 1% 0,50% 0,50% 0,30% 0,30% 0,25% 0,20% 0% 0% 0% 25
The Economic Consequences of the Real. Investment Fund Industry Net Worth (constant price) (BRL million) Source: ANBIMA R$1.800.000,00 R$1.600.000,00 R$1.400.000,00 R$1.200.000,00 R$1.000.000,00 R$800.000,00 R$600.000,00 R$400.000,00 R$200.000,00 R$- 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Fixed Income Stocks Multi-Asset Currency Pension ETF FIDC Private Equity (FIP) Real State (FII) OFF-SHORE 26
The Economic Consequences of the Real. Private Equity (FIP) net worth (BRL million) Source: ANBIMA R$200.000,00 R$180.000,00 R$160.000,00 R$140.000,00 R$120.000,00 620% increase R$100.000,00 R$80.000,00 R$60.000,00 R$40.000,00 R$20.000,00 R$- 2008 2009 2010 2011 2012 2013 2014 2015 27
The Economic Consequences of the Real. Investment Fund Industry Net Worth (constant price) (BRL million) in 2015 Source: ANBIMA R$1.600.000,00 R$1.400.000,00 R$1.200.000,00 R$1.000.000,00 R$800.000,00 R$600.000,00 R$400.000,00 R$200.000,00 R$- Fixed Income Multi-Asset Pension Private Equity (FIP) Stocks FIDC Real State (FII) OFF-SHORE Currency ETF 28
The Economic Consequences of the Real. The schedule of the marginal efficiency of capital is of fundamental importance because it is mainly through this factor (much more than through the rate of interest) that the expectation of the future influences the present. The mistake of regarding the marginal efficiency of capital primarily in terms of the current yield of capital equipment, which would be correct only in the static state where there is no changing future to influence the present, has had the result of breaking the theoretical link between to-day and to-morrow. Even the rate of interest is, virtually, a current phenomenon; and if we reduce the marginal efficiency of capital to the same status, we cut ourselves off from taking any direct account of the influence of the future in our analysis of the existing equilibrium. Chapter 11, The Marginal Efficiency of Capital. John Maynard Keynes General Theory of Employment, Interest and Money 29
The Economic Consequences of the Real Fiscal situation and forecast.
The Economic Consequences of the Real. 31
The Economic Consequences of the Real. 32
The Economic Consequences of the Real. 33
The Economic Consequences of the Real Monetary war: is the world less safe?
The Economic Consequences of the Real. 35
The Economic Consequences of the Real. 36
The Economic Consequences of the Real. 37
Contatos Departamento Econômico André Perfeito, economista-chefe aperfeito@ Camila de Caso ccaso@ Ouvidoria/SAC: 0800 655 1466
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