BRICs: actual growth and cooperation perspectives International Advisory Council 3 rd Metting August 15, 2011 Luciano Coutinho President
Emerging countries remain ahead in worldwide growth Annual Growth of GDP (%) 8.8 6.1 7.4 6.6 6.4 2.7 2.8 3.0 2.2 2.6 0.2 Global Oil Demand Millions of Barrels p/d -3.4 2007 2008 2009 2010 2011* 2012* 44.9 40.1 45.7 45.6 42.2 43.8 2009 2010 2011* Source: IMF. *forecasts 2
and will account for the largest part of world GDP in the coming years Participation of World GDP (%) 56.3 55.1 53.8 52.3 43.7 44.9 46.2 47.7 2007 2008 2009 2010 Advanced Economies Emerging and developing economies Source: IMF 3
Emerging and developing economies received 52% of foreign direct investments in 2010 Evolution of FDI Inflows in the World US$ billion and change % Region 2009 2010 Change % World 1,185.03 1,243.67 4.95 Developed Economies 602.84 601.91 (0.15) Developing Economies 582.20 641.77 10.23 Africa 60.17 55.04 (8.52) Latin America and Caribbean 141.00 159.17 12.89 Western Asia 65.99 58.19 (11.82) Southern, Eastern and Southeastern Asia 241.53 299.65 24.06 Southeastern Europe and CIS* 71.62 68.20 (4.78) Oceania 1.89 1.51 (19.93) Source: UNCTAD * Commonwealth of Independent States (former members of the Soviet Republic) 4
Within the emerging countries, the BRICs stand apart Between 2008 and 2009, the BRICs accounted for 2/3 of global demand; GDP Growth of BRICs in 2010 (%) 7.5 4.0 10.4 10.3 Source: IMF 5
The BRICs have posted expressive participation in the flow of investments Evolution of FDI Inflows in the developing economies US$ billion, change (%) and share (%) Region 2009 2010 Change % Share (%) Developing Economies 582.20 641.77 10.23 100% Brazil 25.95 48.44 86.67 7.55 China 95.00 105.74 11.30 16.48 India 35.65 24.64 (30.88) 3.84 Russia 36.50 41.19 12.86 6.42 BRICs 193.10 220.01 13.94 34.28 17.7% of Foreign Direct Investment (FDI) in the world goes to BRIC countries Source: UNCTAD 6
The BRICs have posted expressive participation in world trade In 2010, the BRICs: imported 14.03% of the world total; and accounted for 15.72% of world exports. Evolution of the BRIC's participation in the world merchandise trade 18 16 14 12 10 8 6 4 Source: WTO 5.95 5.34 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Exports Imports 10.30 8.62 2010 15.72 14.03 7
Relations between the BRICs requires strengthening Economic and commercial cooperation: Technological exchange; Cooperation agreements between development banks to jointly finance infrastructure projects; Bilateral trade agreements; and Foreign direct investments. 8
The strength of the BRICs should be used to achieve common goals The agenda is in tune: Construction of a new world order based on multilateralism and the decentralization of power; Reform of the International Financial System, especially the World Bank and the IMF; Stronger representativeness in international organs : the UN, the WTO, etc; Creation of a new International Monetary System. 9
Challenges the BRICs face To overcome: the vast differences among the countries; the US priority in bilateral relations; and the aversion of developed countries to more participation of the emerging countries in the global decision-making process. 10
The Brazilian Economy 11
Brazil begins a new development cycle The Brazilian economy will continue to grow strong over the coming years, which will bring about great investment opportunities; The domestic market will make the growth in demand feasible: basic household consumption, housing and durable goods; Investment will be driven by five main sectors: Oil & Gas, Electric Energy, Logistics, Residential Construction and Agribusiness; Main challenges: i) to increase the aggregate GDP/investment rate, and ii) to make the competitive advance of the manufacturing industry feasible. 12
Brazil resumes growth at expressive rates, above the world average Brazil: GDP Growth Rates ( % ) Average: 3.6% PAC 1 PAC 2 6.1 5.7 5.5 5.5 Average: 1.7% 5.1 5.0 4.3 4.5 4.0 3.2 2.7 7.5 Average: 5.6% 0.0 0.3 1.3 1.1 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* 2012* 2013* 2014* -0.2 Source: Ministry of Finance 13
Domestic market is an engine for Brazilian growth Breakdown of GDP Growth (% p.a.) Internal Demand Net Foreign Demand Aggregate Demand 7.5 7.4 5.0 5.7 6.1 5.3 5.1 2.7 0.2 3.2 4.0 2.7 1.7 10.3 7.5 5.9 4.5 1.1 0.1 2.5-0.5 0.7 0.5-1.4-1.4-2.2-0.2-0.3-2.8-1.4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011* Source: IBGE Elaborated by: Ministry of Finance *Estimates: Ministry of Finance. 14
...thanks to reduced unemployment, Unemployment Rate (%) 10.4 2006 2007 9.7 2009 2008 2010 8.1 7.9 7.0 6.2 2011 Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Source: IBGE. 15
... the expanding payroll, Monthly payroll Average for last 12 months (US$ bn) 21 20.41 20 19 18 17 17.64 30,71 16 27,42 15 14.34 15.46 14 13 2005 06 2005 10 2006 02 2006 06 2006 10 2007 02 2007 06 2007 10 2008 02 2008 06 2008 10 2009 02 2009 06 2009 10 2010 02 2010 06 2010 10 2011 02 Source: IBGE. US$/R$ = 1.75 16
... growth in credit, Credit: Index (basis Jan.07=100) 450 400 414.2 350 300 Housing Individuals 250 239.9 200 150 100 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Source: Central Bank. 17
... and improved distribution of income. Over the last decade, there has been a relevant drop in social inequalities Accumulated variation between 2001 and 2009 20% wealthiest 20% poorest 49.52% 55.59% 8.88% 8.12% Income Years of Schooling (employed) Source: Inequality in Income over the Decade, FGV/CPS, 2011 18
The government is committed to stability Macro-prudential measures and cuts in public spending; Increase in Selic interest rate. Market expectations FOCUS IPCA (median) Nominal Result (% GDP) 6.30 6.31 6.28 20-Jul 29-Jul 5.20 5.30 5.27 05-Aug -2-1.9 4.50 4.51 4.51-2.6-2.6-2.6 2011 2012 2013-3.8-3.2-3.5-3.2 2003 2004 2005 2006 2007 2008 2009 2010 2011* Source: BCB 19
Investment maintains a strong upward path of growth Forecast for Rate of Investment 2010-2014 (% of GDP) 26% 24% 22% 20% 18.7 % 19.2 % 18.4 % 18% Fore c a st 2 2.8 % 2 1.5 % 2 0.3 % 16% 14% 12% 14.7 % 15.3 % 17.3 % 16.8 % 10% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: IBGE and APE/BNDES. 20
Investment perspectives: positive expectations Infrastructure projects are important stimulus instruments and guarantee public as well as private investment so as to achieve inclusive and integrated development. Sectors US$ billion Growth 2006-2009 2011-2014 % % year Industry 221 351 58.7 9.7 Oil & Gas 117 216 84.3 13.0 Mining 34 35 3.3 0.7 Steel 16 19 16.8 3.2 Petrochemical 13 23 81.2 12.6 Vehicles 14 19 31.4 5.6 Electronics 11 17 46.0 7.9 Pulp & Paper 10 16 51.6 8.7 Textile and Apparel 5 7 39.1 6.8 Infrastructure 141 217 53.8 9.0 Electric Power 59 79 34.0 6.0 Telecoms 35 41 15.0 2.8 Sanitation 15 23 56.9 9.4 Railroads 11 34 202.1 24.7 Roads 17 29 71.4 11.4 Ports 3 10 225.1 26.6 Buildings 202 347 72.0 11.5 TOTAL 564 915 62.2 10.2 Source: BNDES US$/R$ = 1.75 Oil & Gas and the Domestic Market lead investments in Industry Electric Power leads investments in Infrastructure Investments in sanitation and logistics will grow at expressive rates 21
Brazil s long-term challenges To resume and qualify long-term planning (energy, logistics, environment, IT infrastructure,...); To promote and stimulate domestic savings in order to provide long-term funds for investment (banks and capitals market); To increase opportunities for social mobility (job expansion, development/improvement in education) and reduction of inequalities in income distribution, both personal and regional; To develop capacity for innovation and competitiveness in the manufacturing industry, and promote global presence of Brazilian companies (vs. significant challenges stemming from exchange rate appreciation); To promote innovation and development, aiming at social and environmental sustainability. 22
23