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Assessing the Impact of the
Global Economic Crisis
Carlos Hamilton Araújo São Paulo, Brazil, June 13, 2013
2
Outline
1. Main channels
– Commodity prices
– Trade flows
– Capital flows
2. Global Impact
– Economic activity
– Inflation
– The fiscal issue
3. Brazilian Perspective
– Impact of the crisis
– Macroeconomic developments
– Prospects
3
– Commodity prices
– Trade flows
– Capital flows
1. Main Channels of Transmission
4 Source: CPB - Netherland Bureau for Economic Policy Analysis
Commodities Main Channels
100
130
160
190
220
250 Jan
-04
Jul-
04
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Manufacturing Price Index Commodities Prices (Ex energy)
price
in
de
x e
vo
lutio
n
5 Sources: Thomson Datastream, CPB
Trade Main Channels
80
90
100
110
120
130
2008 2009 2010 2011 2012
Export & import volumes
X - Adv economies X - Emerging economies
M - Adv economies M - Emerging economies
2007=
100
6
Capital Flows
Source: IIF
Main Channels
0
200
400
600
800
1000
1200
1400
2004 2005 2006 2007 2008 2009 2010 2011 2012e
US
$ b
illio
n
Private flows to EME, net
7
2. Global Impact
– Economic activity
– Inflation
– The fiscal issue
8
4,6
2,3
7,6
5,3
2,9
0,5
5,6
3,3
0
1
2
3
4
5
6
7
8
9
World Advanced Economies
Emerging & Developing Economies
Latam & Caribe
GDP annual change (average) PPP weights
2004-08 2008-12
Impacts
Average GDP Growth Has Been Lower
Sources: Thomson Datastream, IMF WEO
%
9
4,8
8,4
5,4 5,4
3,4
7,7
3,2
5,5
3,9 4,0
1,7
6,5
0
1
2
3
4
5
6
7
8
9
Brazil Argentina Chile Colombia Mexico Peru
GDP annual change (average)
2004-08 2008-12
Sources: Thomson Datastream, IBGE, INDEC, INE, DANE, INEGI, INEI
Latam Overview Impacts
%
10 Sources: Thomson Datastream, IMF (WEO)
Impacts
4,1
2,3
6,6 6,4
4,0
1,8
6,5 6,5
0
2
4
6
8
World Advanced Economies
Emerging & Developing Countries
Latam
2004-08 2008-12
World CPI: About the Same %
CPI average annual change
11 Sources: Thomson Datastream, IMF (WEO)
In Latam, Different Trends in CPI Inflation Impacts
5,4
8,8
4,7
5,6
4,6
3,3
5,7
9,2
2,9
3,8
4,5
3,3
0
2
4
6
8
10
Brazil Argentina Chile Colombia Mexico Peru
2004-08 2008-12
CPI average annual change
%
12 Sources: CPB (Netherland Bureau for Economic Policy Analysis), FAO
Commodity Prices Affect CPI and Trade Impacts
100
120
140
160
180
200
Manufacturing Prices Commodities Prices (Ex-energy)
Food Price Index (FAO)
2004-08 2008-12
+26%
+11%
+37%
ind
ex
price index average
13 Source: IMF Fiscal Monitor, April 2013
Gross Debt: Higher in Advanced Economies Impacts
81,5
110,7
33,6 34,8
0
20
40
60
80
100
120
2008 2012*
Advanced Economies Emerging Economies *2012: projection
% G
DP
General Government Gross Debt, 2008-12*
14
EME Financed Part of Debt Growth in Advanced Economies Impacts
2.491
3.691
4.855
7.245
0
1000
2000
3000
4000
5000
6000
7000
8000
2008 2012
Advanced Economies Emerging Economies
Sources: Thomson Datastream, IMF COFER
Foreign Reserves
US
$ b
illio
n
15
Why have EME been Resilient to External Shocks?
• International reserve accumulation;
• Floating exchange rates;
• Allowance of countercyclical Fiscal policy;
• Tougher regulation and bank supervision; and
• Progress in the institutional framework.
Impacts
16
3. Brazilian Economy
– Impact of the crisis
– Macroeconomic developments
– Prospects
17
Brazil: IC-Br (US$) & Terms of Trade Brazilian Economy
Sources: BCB, Funcex
70
90
110
130
150
170
190 M
ay-0
4
Sep
-04
Jan
-05
May-0
5
Sep
-05
Jan
-06
May-0
6
Se
p-0
6
Jan
-07
May-0
7
Sep
-07
Jan
-08
May-0
8
Sep
-08
Jan
-09
May-0
9
Sep
-09
Jan
-10
May-1
0
Sep
-10
Jan
-11
May-1
1
Sep
-11
Jan
-12
May-1
2
Se
p-1
2
Jan
-13
May-1
3
IC-Br (US$) Terms of trade*
2006=
100
*up to Mar 13
18
Capital Inflow to Brazil Brazilian Economy
Source: BCB
0
30
60
90
120
150
180 abr
04
ou
t 0
4
abr
05
out 05
abr
06
out 06
abr
07
out 07
abr
08
out 08
abr
09
out 09
abr
10
out 10
abr
11
out 11
ab
r 1
2
out 12
abr
13
US
$ b
illio
n
FDI, Portfolio and Other Foreign Investments (12 months, net) FDI (12 months)
19
Brazil: Trade Volumes Brazilian Economy
Sources: BCB, Funcex
98,7 100,4 106,7
155,7
30
50
70
90
110
130
150
170
2004-08 2008-12
2006 =
100
Exports Imports
20
Brazil: Destination of Exports has Changed
25,6%
15,9%
9,1% 6,8%
9,1%
3,7%
29,8%
Sources: BCB, Funcex
20,6%
11,2%
7,6%
17,3%
14,3%
3,4%
25,6%
European Union USA Argentina
China Emerging Asia (- China) Other advanced economies
Other developing countries
Brazilian Economy
2007 2012
21
Brazil: Lower Growth and Higher Inflation Brazilian Economy
Source: IBGE
4,8
3,2
5,4 5,7
0
1
2
3
4
5
6
2004-08 2008-12
%
Real GDP growth IPCA change
22
Brazilian Economy
• Macroeconomic Framework
- Inflation targeting
- Fiscal responsibility
- Exchange rate flexibility
• Complemented by
- International reserves
- Prudential policy and bank supervision
Brazilian Economy: Tool Kit
23 Sources: IBGE, BCB
Inflation – IT Period %
yoy
Brazilian Economy
0
2
4
6
8
10 m
ai 04
nov 0
4
mai 05
nov 0
5
mai 06
nov 0
6
mai 07
nov 0
7
ma
i 0
8
nov 0
8
mai 09
nov 0
9
mai 10
no
v 1
0
mai 11
nov 1
1
mai 12
nov 1
2
ma
i 1
3
24
Fiscal: Downward Trend in Net Debt
Source: BCB
% o
f G
DP
Brazilian Economy
% o
f G
DP
50,6
48,4 47,3
45,5
38,5
42,1
39,1
36,4 35,2
1,5
2,0
2,5
3,0
3,5
4,0
20
25
30
35
40
45
50
55 2
00
4
20
05
20
06
20
07
20
08
20
09
20
10
2011
20
12
Net public debt (LHS) Primary surplus (RHS)
25 Source: BCB
FX and International Reserves U
SD
bn
Brazilian Economy
BR
L/U
S$
1,4
1,6
1,8
2,0
2,2
2,4
2,6
2,8
0
50
100
150
200
250
300
350
400 dez 0
4
jun
05
dez 0
5
jun
06
de
z 0
6
jun
07
dez 0
7
jun
08
dez 0
8
jun
09
dez 0
9
jun
10
dez 1
0
jun 1
1
dez 1
1
jun
12
dez 1
2
international reserves (LHS) exchange rate (RHS)
up to May 13
26 Source: BCB
Capital Adequacy Ratio Brazilian Economy
13,8
14,8
16,6
19,0 18,5
17,4 17,8 17,3
17,7
18,9
16,9 16,3 16,4
0
5
10
15
20 2
00
0
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
2011
20
12
Brazilian banks capital ratio Basel minimum capital ratio regulatory minimum capital ratio
%
leverage ratio: 9.9
Sources: IBGE, BCB *Market Expectations (Focus – June 7, 2013)
Brazil: Growth Prospects Perspectives
5,2
-0,3
7,5
2,7
0,9
2,5
3,2 3,2 3,5 3,5
-1
0
1
2
3
4
5
6
7
8
2008 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017*
%
Brazil: Inflation Prospects Perspectives
Sources: IBGE, BCB *Market Expectations (Focus – June 7, 2013)
5,9
4,3
5,9
6,5
5,8 5,8 5,8 5,5
5,2 5,2
0
1
2
3
4
5
6
7
2008 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017*
%
Brazil: Primary Surplus Prospects Perspectives
Source: BCB *Market Expectations (Focus – June 7, 2013)
3,4
2,0
2,7
3,1
2,4
1,8
1,6
2,0 2,0 2,0
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
2008 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017*
% o
f G
DP
Perspectives: FDI Perspectives
Source: BCB *Market Expectations (Focus – June 7, 2013)
45,1
25,9
48,5
66,7 65,3
60,0 60,0 60,0 60,4 58,0
0
10
20
30
40
50
60
70
80
2008 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017*
US
$ b
illio
n
31
• With regard to inflation:
- The Central Bank has been and will continue
to be fully committed with its assignment of
maintaining price stability. So inflation has
been and will continue to be under control.
• With regard to growth:
- The agenda of concessions of ports, airports,
railway and highways; as well as oil exploration
permissions will contribute to boost investment
and growth in the medium term.
Perspectives
Final Word
Assessing the Impact of the
Global Economic Crisis
Carlos Hamilton Araújo São Paulo, Brazil, June 13, 2013
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