brazil - economic outlook
DESCRIPTION
Brazil - Economic Outlook. OECD , Paris December 2008. Brazil Recent Performance. Sustainable growth rates with inflation under control. GDP: Annual Real Variation (%). * BNDES (forecast). Source: IBGE. Proper management of the public debt. - PowerPoint PPT PresentationTRANSCRIPT
Brazil - Economic OutlookBrazil - Economic Outlook
OECD, Paris December 2008OECD, Paris December 2008
2
Brazil
Recent Performance
Brazil
Recent Performance
3
Sustainable growth rates with inflation under controlSustainable growth rates with inflation under control
Source: IBGE.
5.55.4
3.22.8 2.5
5.7
3.8
0,01,02,03,04,05,06,0
Average1984-93
Average1994-03
2004 2005 2006 2007 2008*
Avrg 04-07: 4.5GDP: Annual Real Variation (%)GDP: Annual Real Variation (%)
* BNDES (forecast).
INCREASE IN FAMILY CONSUPMTION AND FCGF
6,7
16,2
10,2
14,1
-11,0-10,6
3,1
-15
-10
-5
0
5
10
15
20
I.98
III.9
8
I.99
III.9
9
I.00
III.0
0
I.01
III.0
1
I.02
III.0
2
I.03
III.0
3
I.04
III.0
4
I.05
III.0
5
I.06
III.0
6
I.07
III.0
7
I.08
Family Consumption
Fixed Capital Gross Formation
(Variation in % of quart. vis-à-vis the same quart. of the previous year)
Source: IBGE
INDUSTRIAL PRODUCTION AND CAPITAL GOODS Growth Rate
-2,0
6,6
1,62,7
0,0
8,3
3,1 2,8
6,0 6,7
-9,1
13,1 13,5
-5,8
2,2
19,7
3,65,7
19,5 19,5
-0,7-1,6
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*
general industry
capital goods
Source: IBGE* accum. in 12 months until Jun
6.5
3.0
4.04.5
3.5
5.0
3.0
4.0
3.0
4.0
2.53.0
3.54.0
3.03.5
6.0
3.0
0
2
4
6
8
10
12
14
Inflation accum. in 12 months*
Ceiling of Target
* Up to J une 2008. South Africa, Island, Israel, Norway, P oland, Czech Republic and Sweden up to May 2008
Source: O Globo and Macrodados
4
Proper management of the public debtProper management of the public debt
Declining net debt
A net foreign creditorNet External Debt – US$ billion
International Reserves: US$ 206.65 billion (26 Nov´08)
Source: Banco Central
190,3
162,7 165,0151,0
135,7
101,1
74,8
-11,9 -13,4
-50
0
50
100
150
200
250
2000 2001 2002 2003 2004 2005 2006 2007 2008*
Forecast. Up until Sept/ 2008
Public Sector Net Debt - GDP %
-11,4
8,44,5
15,5
11,07,6
-6,7
38,3
56,0
47,2
46,5 40,8
-20
-10
0
10
20
30
40
50
60
may/94
no
v/94
may/95
no
v/95
may/96
no
v/96
may/97
no
v/97
may/98
no
v/98
may/99
no
v/99
may/00
no
v/00
may/01
no
v/01
may/02
no
v/02
may/03
no
v/03
may/04
no
v/04
may/05
no
v/05
may/06
no
v/06
may/07
no
v/07
may/08
External TotalSource: Banco Central
5
Low leverage in banking credit
Total Credit (% of GDP) - Brazil
22,024,0 24,5
28,130,7
34,7
40,2
20
25
30
35
40
45
2002 2003 2004 2005 2006 2007 oct/08
Credit / GDP has been growing in recent years….
….but it is still far below developed countries.
Sources: Central Banks, IMF and World Bank.
249%
156%141%
125%
63%37%
65% 73%
20%46%
13% 2% 9%17%37%
2%0%
50%
100%
150%
200%
250%
300%
US
A
UK
So
uth
Afr
ica
Sp
ain
Ch
ile
Ind
ia
Bra
zil
Me
xico
Total Mortgage
Total Credit and Mortgage (% of GDP)
6
Major impacts of the international crisis in Brazil
Major impacts of the international crisis in Brazil
7
International crisis impact and Government´s responseInternational crisis impact and Government´s response
Pressure on the interbank market
Liquidity constraint faced by small and medium-sized banks
Reserve requirements over local banking deposits have changed
Currency depreciation
Shortage of short-term export trade lines (ACCs)
Temporary liquidity swap facilities with FED (US$ 30 billion)
Currency swap auctions
Short term export trade finance
Increase in local credit costs
Decrease in industrial output
Expectations: reduced 2009 GDP prospects
Decrease in commodity prices
Short term / Long-term finance provided by public banks
Mantainance of long-term investments (PAC)
Liquidity in Foreign Currency Market Liquidity in local credit market
IMPACTS RESPONSES
Since Sep´08, as a consequence of the global crisis, local liquidity has fallen. Immediate measures have been taken.
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Some highlights on immediate responses...Some highlights on immediate responses...
Short term / Long-term finance provided by public banks– New BNDES lines for working capital (R$ 6 billions)– Agribusiness: Treasury announced renegotiation (BB is the main agent) and
increased the amount directed to agriculture.– Housing and construction: additional support mainly from Caixa
ACTIONS TAKEN OVER LIQUIDITY ISSUES
NO SYSTEMIC SOLVENCY ISSUES IN BRAZIL
Short term export trade finance– Central Bank is investing a small part of its international reserves in credit lines to
local banks (onlending to exports)– BNDES announced a credit line of R$ 5 billions to trade finance
Reserve requirements over local banking deposits– Decreased– Loan portfolios and interbank deposits bought from smaller banks can be used
instead of local Treasuries
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Despite the severity of international crisis, Brazil have the tools to overcome this critical stage and keep economic growth:
Some comments on permanent actionsSome comments on permanent actions
Brazilian public sector significantly deleveraged in foreign currency terms
Room to reduce reserve requirements over local banking deposits
Room to reduce interest rate
PAC (Growth Acceleration Program)
Strategic role of public banks
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PAC: assuring investment on infra-structure
PAC Investments in Infrastructure: 2007 - 2010
US billion % of Share.ENERGY: 141.0 54.5
Oil and Natural Gas 91.9 35.5 Electric Power Generation 33.8 13.1 Renewable Fuels 8.9 3.5 Electric Power Transmission 6.4 2.5
SOCIAL & URBAN: 87.7 33.9 Housing 54.6 21.1 Sanitation 20.5 7.9 Water Resources 6.5 2.5“Light for Everyone” Programm 4.5 1.7 Subways 1.6 0.6
LOGISTIC: 29.9 11.6
TOTAL 258.6 100.0*R$/US$ = 1.94
BNDES in PAC: 198 projectsAssociated investments – US$ 73 billion
BNDES financing - US$ 36 billion
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Public Banks: important source of domestic creditPublic Banks: important source of domestic credit
Source: Central Bank
Total Credit (R$ 1,067 billion)
Top 3 Public 38%
Others 20%
Top 3 Foreign
14%Top 3
Private 28%
Data of June 2008.
Top 3 Public = BB, BNDES & Caixa
Top 3 Private = Bradesco, Itaú & Unibanco
Top 3 Foreign = ABN Amro, HSBC &
Santander
OBS: There are two ongoing merger processes: ABN Amro / Santander and Itaú / Unibanco.
Relevant sources of BNDES and CAIXA´s funding come from GOVERNMENT-ESTABLISHED FUNDS:
BNDES: FAT (sources must be driven to create jobs)
Caixa: FGTS (sources must be driven to sanitation & building construction)
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Final RemarksFinal Remarks
13
Future prospectsFuture prospects
Infrastructure investment will lead growth of GDP
Key drivers:
- Solid public sector
- A healthy and capitalized banking system
- Relevant role of public banks
- Large number of high return/low risk projects in infrastructure (PAC)
- A resilient and lean corporate sector
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Maria Isabel AboimMaria Isabel AboimDeputy CFODeputy CFO
Brazilian Development Bank - BNDESBrazilian Development Bank - BNDES
BRAZIL: BRAZIL:
ECONOMIC OUTLOOKECONOMIC OUTLOOK
BRAZIL: BRAZIL:
ECONOMIC OUTLOOKECONOMIC OUTLOOK
OECD, PARISDecember 2008