BRAZIL MEANS BUSINESS

Transcription

1 BRAZIL MEANS BUSINESS In spite of the world financial crisis, Brazil remains an appealing business destination. Presentation by: Danny DeVito Senior Commercial Officer São Paulo, Brazil

2 HEALTHY ECONOMY: Macroeconomic Analysis Achieved investment grade status (S&P Rating Services April 2008) Strong economy (relative to crisis) Falling inflation rates Appreciating currency Falling interest rates Tighter trade credit but still some credit available

3 BRAZIL USA

4 REGIONAL DISPARITIES GDP share - % of total GDP North 4,92 Northeast 13,68 Center-West 7,28 Southeast 55,09 South 19,03 Source: International Monetary Fund

5 PRESIDENT LUIS INÁCIO LULA DA SILVA Took office on January 1 st, Labor Party- PT. First mandate - with 61.27% in Second mandate - with 60,83% in Elections October 2010.

6 INFLATION RATE 8.5% 7.8% 4.5% 6.0% 5.5% 3.5% 4.1% 4.5% 1.8% Banco Central est. 3.5 EXCHANGE RATE est.

7 INFLATION RATE 2,477% 8.5% 7.8% 4.5% 6.0% 5.5% 3.5% 4.1% 4.5% 1.8% Banco Central est. Source: Agência Estado

8 Prime rate in Brazil has reached the lowest historic level (in %) Oct-97 Sep-98 Mar-99 Jul-01 Jun-02 Jan-03 May-05 Jul-06 Jul-07 Abr-08 Jul-08 Apr

9 INTEREST RATES The SELIC rate is currently % (per year). Mortgage loans range from 8% to 12% per year for up to 25 year loans plus inflation. Businesses generally pay from 2% to 4.5% (per month), depending on creditworthiness. Checking account rates are about 140 % year. Credit Card rates are 233 % per year. Source: Central Bank Brazil

10 CONSUMER CREDIT as a % of GDP Consumer credit has continued this upward trend, reaching 41.5% of GDP in January 2009.

11 Families consumption evolution billions of USD Dolar rate : 2.1 Source: Exame Magazine April 2009

12 Forecast by Social Classes Total of Retail Sales: 857 billions of US dollars In Billions of USD Forecast A % A % B % B2 C1 C % % + 18* Monthly income In USD D 50 The same as last year A1 6, E % A2 3, B1 2, B2 1, C C D E Dolar rate : 2.1 Source: Exame Magazine April 2009

13 Forecast by sector / product Total of Retail Sales : 857 billion dollars Value 09 forecast Cars, motorcycles and parts % Pharmaceuticals products % Electronics % Hypermarket and Supermarket Textiles, clothing, footwear and accessories % 27-1 % Fuels and Lubricants % Other sectors 313 N/A Total 857 Dolar rate : 2.1 Dolar rate : 2.1 Source: Exame Magazine April 2009

14 Projections by region Consumption Billions of USD for retail sales percentage forecast for 2009 North % Northeast % Center-West % South % Southeast % Dolar rate : 2.1 Source: Exame Magazine April 2009

15 Priorities by Class (recent national survey) Class A1 and A2 Class B and C Class D and E Travel Dom and Int l Upgrade Home Food Premium trade marks Construction Material Pharmaceuticals products Imported cars Electronics Clothing Real State for Investment Food Rental Safety Household Appliances Household Appliances Source: Exame Magazine April 2009

16 THE Favela TODAY Cars Microwaves VCRs Washing Machine Telephones Stereo Sound Blenders Televisions Refrigerators 14% 22% 48% 48% 58% 79% 89% 98% 96% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: Copo pela Metade; Author Ricardo Neves Ibope 2003 page 224

17 Brazil and the crisis and the non-consumer market

18 Exports (billions) Deceleration After 10 years of growth, 2009 will have the first reduction in Brazilian exports. Still, sales will more than triple from the beginning of the decade

19 Brazil Reaction to Crisis Government measures: Tax cuts such as IPI (federal tax on domestic and imported manufactured products Interest rate reduction 10.25% per year Incentives for civil construction Infrastructure development Bailouts for some large companies

20 New measures from the government Construction material IPI taxes Before: 5 to 10% New: 0% Compensation for states and cities States: special credit line of $ 2 billion at 11.25% Cities: Federal government will refund losses up to $ 350 million

21 New measures from the government Household appliances IPI taxes Refrigerator From 15% To 5% Washing Machine From 20 % To 10% Stove From 5% To 0% Examples of impact on prices - R$ R$ 55 - R$ 19 R$ R$ R$ 999 R$ 944 RS 699 R$ 680

22 Job creation, car production and commerce increase Delinquencies also increase What is getting better (compared to last month) Industrial production Feb 1.8% Mar 0.7% Daily average of cars produced Mar 15.9% Daily average of ag machinery production Mar 10.3% Commerce activity Mar 12.2% Positions creation formal jobs Mar What is getting worse or stable (compared to last month) Breach of contracts (pessoa fisica) Mar 22.6% Credit very tight

23 Retail Sales Down and Up Sep-08 Oct Nov Dec Jan-09 Feb

24 Car Sales Down and Up Sectors such as steel, plastic and paints recover part of their activity pulled by car sales after tax cuts Car production increased 34.2% between February and March Car Production, in thousand Car Sales, in thousand Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 08 09

25 Industrial Production Down and Up IBGE research indicates growth of 0.7% in March Variation in the industrial production (comparison month against previous month in %) By category, in 1 st trimester 2009 compared to same period of 2008, in % General industry: Consumer goods: -8.0 Capital goods: Durables: Intermediate goods: Semi and non-durable: -3.0

26 CUSTO BRAZIL: THE TAX SYSTEM Import II Export IE FEDERAL Industrialized Products IPI Credit Operations IOF Rural Property ITR Fortune STATE Heritage and Donation ITCMS Circulation of Goods and Services ICMS Property of Vehicles IPVA MUNICIPAL Urban Property IPTU Transmission of Property ITBI Services of any Nature ISS (*) Pending of regulation

27 Hypothetical Cost Buildup for an Imported Machine in US Dollars FOB price of Product 100,000 Freight 2,400 Insurance (1%) 1,000 CIF Price of Product 103,400 Import Duty Rate: 19% -- applied to CIF 19,646 IPI: 5% -- applied to CIF + import duty 6,152 ICMS: 18% -- applied to CIF + import duty + IPI 23,256 Merchant Marine Tax: 25% of ocean freight cost 600 Warehouse: 0.65% of CIF; or min. US$ 170, max US$ Terminal Handling Charges: average US$ 100 per container 100 Contribution to Custom Broker's union 2.2% CIF; or min of US$ 71, max US$ Custom Brokerage Fee: average 0.65% of CIF or min US$ 170, max US$ SISCOMEX Fee 30 Typical Cargo Transportation charge 35 Typical Bank Costs: 2% of FOB 2,000 FINAL COST 156,064

28 IPOD INDEX ipod prices around the world Here is the CommSec ipod Index, based on January 2007 prices for 2GB ipod Nanos. 1 Brazil $ India $ Sweden $ Denmark $ United Kingdom $ United States $ Japan $147.63

29 Leading Brazilian Imports Jet Engines, Parts Aircraft Parts Computers Computer Parts Electronic Integrated Circuits Aircraft Cellular and landline phones, parts Medical Instruments for surgeons, dentists, vets Printing Machinery, including ink jet printers Medicine and pharmaceuticals Source: WorldCity analysis of U.S. Census Bureau data

30 OIL & GAS REFINERIES According to Petrobras strategic plan, they will open 5 new refineries by 2015 (costs are approximations): Premium 1 (Refinaria Abreu e Lima) State of Pernambuco - 250,000 barrels/day - $ 4 billion Premium 2 State of Ceará - 300,000 barrels/day - $ 11 billion Premium 3 - State of Maranhão 600,000 barrels/day - $ 20 billion (temporary name) Comperj State of Rio de Janeiro - $ 8.4 billion Potiguar State of Rio Grande do Norte - $ 100 million (very small refining unit)

31 OIL & GAS (cont.) The ExIm Bank recently visited the largest private Brazilian oil company, OGX, that will be ordering $20 billion worth of oil and gas equipment over the next few years. The combined investment by oil companies other than Petrobras and OGX is expected to exceed $20 billion through Máquinas Piratininga (MP), located in the Suape Industrial Complex in Pernambuco, is actively seeking industrial and commercial partnerships with American companies. MP can be a hub for US oil and gas suppliers, offering to: - facilitate imports with customs clearance, - assemble products, - manufacture large parts - distribute the licensed machine or equipment.

32 POWER GENERATION The government owned Power Research Company (Empresa de Pesquisa Energética, EPE) is calling for $65 billion in power generation investment. Proinfa: The National Energy Regulatory Agency (ANEEL) and the GoB program to encourage alternative energy have made wind power an attractive option, especially in the northeast of Brazil. Opportunities in blades, assembly line equipment, controls.

33 Prospects for Wind Power Generation POWER GENERATION - renewables

34 Thank you! Points of Contact: Brasilia: Rebecca Armand, Principal Commercial Officer Phone: / Fax: Belo Horizonte belo.horizonte.office.box@mail.doc.gov Phone: / Fax: São Paulo : Miguel Hernández, Commercial Officer sean.kelley@mail.doc.gov sao.paulo.office.box@mail.doc.gov Phone: / Fax: Recife : Adierson Azevedo, Commercial Specialist adierson.azevedo@mail.doc.gov Phone: / Fax: Rio de Janeiro : Camille Richardson, Principal Commercial Officer camille.richardson@mail.doc.gov rio.de.janeiro.office.box@mail.doc.gov Phone: / Fax