HenriqueMeirellesFinanceMinister

Ministry of Finance

November2016

Brazil:OntheRoadtoRecoveryNewPolicyFramework

2

Ministry of Finance

EconomicStabilizaCon

3

3

Ministry of Finance

ConsCtuConalAmendment241(ExpenditureCap)

Source:MinistryofFinance

16,8%

16,2%

18,1%

16,7%

18,3%

19,6%

23,2%

19,8%

15,7%15,0%

16,0%

17,0%

18,0%

19,0%

20,0%

21,0%

22,0%

23,0%

24,0%

CentralGovernmentPrimaryexpenditure(%GDP)

Occurred

ProjecFons-RecentTrend

ProjecFons-ExpenditureCap

4

4

Ministry of Finance

PensionandSocialSecurityReform

Source:MinistryofFinance

9,6%

7,6%

7,0% 7,2%

4%

5%

6%

7%

8%

9%

10%

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

ProjecFons-CurrentSituaFon

ProjecFons-Reform

Occurred

5

5

Ministry of Finance

GrossGeneralGovernmentDebtWillReturntoaSustainableTrajectory

Thegovernmentdebtisexpectedtopeakin2020.

Source:MinistryofFinance.ConsideringannualGDPrealgrowthrateof2.5%from2018on.

72,5

75,8

77,2 77,778,4 78,3

77,2

75,8

73,9

71,6

77,7

78,9 79,378,7

77,8

76,4

74,6

77,977,3

75,7

73,8

71,4

68,6

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

GrossGeneralDebt(%doGDP)

GGGD(PLOA2017)

GGGD(upper)

GGGD(lower)

6

6

Ministry of Finance

InflaConisReturningtotheTarget

Source:CentralBank(FocusSurvey9/23/2016),IBGE

3,1

4,5

5,9

4,3

5,96,5

5,8 5,96,4

10,7

7,25

5,14,5 4,5

0,0

2,0

4,0

6,0

8,0

10,0

12,0

InflaConTrajectory(%peryear)

InflaFonTarget Performed MarketExpectaFons

7

7

Ministry of Finance

TheCurrentAccountDeficitisnoLongeraConcern

TheCurrentAccountDeficithasadjustedandFDIinflowshavebeenconsistent.

Source:CentralBank

-23,7

-8,1

-30,6 -26,3

-75,8 -77,0 -74,2 -74,8

-104,2

-58,9

-15,9-24,2

-29,0

23,216,6 10,1

18,1 15,5 19,444,6

50,7

31,5

88,5101,2

86,6

69,2

96,9

75,165,0 65,0 65,0

CurrentAccountandFDIEvoluCon(USDbillion)

CurrentAccount FDI

8

Ministry of Finance

OnaRecoveryPath

9

9

Ministry of Finance

PosiCveConfidenceShock

New poliCcal and economic policy proposals made by this administraCon havegeneratedimprovedconfidence,leadingtoeconomicrecovery.

Assetpricesrecovery

Confidencerecovery

Creditrecovery

ConsumpConandInvestmentrecovery

Labormarketrecovery

PotenCalGrowthrecovery

10

10

Ministry of Finance

Jan2016=100Source:BloombergandNaFonalTreasury Source:FGV

AssetPricesandConfidence

95

100

105

110

115

120

125

ConfidenceIndexes(jan-16=100)

Industry

Consumer

Services

Trade

100

120

140

160

StockMarketandDomesCcBonds(jan16=100)

Stockexchangeindex

DomesFcBonds(NTN-B2035)*

11

11

Ministry of Finance

CreditCondiCons

Interest rates have fallen, to a great extent, in response to reducCon in riskpercepConandtoimprovementininflaConexpectaCons.

Source:Bloomberg Source:Bloomberg

20-Jan16,81

14-Nov12,42

11,0

12,0

13,0

14,0

15,0

16,0

17,0

18,0

Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16

Interestrate5years(%) 18-Jan

506

15-Nov299

200,0

250,0

300,0

350,0

400,0

450,0

500,0

550,0

Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16

CDS5years(bps)

12

12

Ministry of Finance

ProjecCons

1.4

3.1

1.1

5.8

3.24.0

6.1

5.1

-0.1

7.5

3.9

1.9

3.0

0.1

-3.8-3.0

1.62.5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

GDP(YoY%)

ReturntoGrowth

Theeconomyisataturningpoint.PosiCvegrowth isexpectedbytheendof2016andtendstoaccelerate incomingyears.

Source:IBGEandMinistryofFinance

13

Ministry of Finance

OpportuniCesAhead

14

14

Ministry of Finance

Opportunity:DomesCcSecuriCesMarkets

Theshareofnon-residentsindomesCcsecuriCesissClllow.

Source:Selic,IMFworkingpaperWP/14/39(SerkanArslanalp,TakahiriTsuda)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Brazil SouthAfrica Mexico Russia Turkey Turkey2

Non-Residents’ShareInDomesCcGovernmentSecuriCesMarkets(%)

Brazil

15

15

Ministry of Finance

Opportunity:Equity

Despitetherecession,Brazilranks8thmostimportantFDIdesCnaConandthefirstinLaCnAmerica.Withthereturnofgrowth,thereisroomforexpansion.

Source:Unctad(WorldInvestmentReport2016)

379,9

174,9135,6

100,572,6 68,8 65,3 64,6 51,6 48,6 44,2 42,9 39,5 31,7 31,0 30,3 24,6 22,3 20,3

TopFDIDesCnaConsin2015(USDbillion)

16

Ministry of Finance

17

17

Ministry of Finance

•  Norte-Sul•  Ferrogrão•  FIOL

•  BR-354/365/GO/MG•  BR-101/116/290/386/RS

•  PortoAlegre•  Fortaleza•  Florianópolis•  Salvador

•  FuelTerminal–Santarém•  WheatTerminal–Riode

Janeiro

•  SãoSimão•  VoltaGrande•  Miranda•  Pery•  Agrotrafo

•  Goiás•  Roraima•  Acre•  Alagoas•  Piauí•  Rondônia

•  Miriri•  Palmeirópolis•  Candiota•  BomJardim

Opportunity:Infrastructure

The newly launched Investment Partnership Program (PPI) brings a pordolio ofprojectsunderanewregulatoryframework.

Source:PresidencyoftheRepublic

18

18

Ministry of Finance

Opportunity:OilandGasSector

TheOilandGassectorpresentsopportuniCesinabusinessfriendlierenvironment.

Source:MinistryofFinance

19

Ministry of Finance

FinalRemarks

20

20

Ministry of Finance

Brazil:ReadytoGrow

•  The Government has been taking the necessary measures to consolidateeconomicstability.Asaresult,thefundamentalsoftheeconomyhaveimprovedsignificantlyoverthelastmonths.

•  ThegovernmentiscommieedtoreducingtheroleoftheStateintheeconomy.

•  StructuralreformswillenhanceproducCvityandcompeCCveness.

•  Regulatoryagencieswillbestrengthenedaswellasgovernanceofstate-ownedcompanies.

•  TheGovernmentiscommieedtopromoteamarketfriendlierenvironment.

•  Brazil ispavingtheroadtoanewgrowthcycleandthereareopportuniCesforinvestment.

FinanceMinisterHenriqueMeirelles

21

MinistryofFinance