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Sustainable BrazilEconomic growth and consumption potential

SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIALA

Introduction 3

A look ahead on the highway to the year 2030 4

Under the banner of sustainability 10

Map of consumption opportunities 20

Table of contents

This is the second in a series of five* publications that analyze the horizons of the Brazilian economy for the next decades, with a special focus on its most strategic sectors, examined both from the perspective of their importance to domestic revenue generation and the business opportunities that they represent over time. The approach to the issues takes into account Brazil’s potential for interaction with the world market, with scenarios being outlined up to the year 2030. The issues addressed are the following:

Housing market potential; Economic growth and consumption potential; Energy market challenges; Prospects for Brazilian agribusiness; Horizons for industrial competitiveness.

In this study, we present the main results of the scenario model developed by, the Getulio Vargas Foundation (FGV-Fundação Getulio Vargas), one of the foremost and renowned academic institutions in Brazil, in order to allow for a discussion based on an outlook for the world economy. The survey covers a total of 100 countries, analyzed not only from the standpoint of their economic aspects, but also in regard to their demographic dynamics, quality of life and human and natural resources.

An enhanced view of the behavior of the main determining factors for the global scenario is based on the requirement for valid projections for Brazilian growth. This model is a tool that can supply information that goes far beyond general economic data, such as population growth and the GDP. With the model, it is possible

to estimate, for example, the configuration of income brackets and their consumption needs over time – basic planning information for companies that operate or intend to operate in the country.

This work, a joint effort between Ernst & Young Terco and the Getulio Vargas Foundation, also seeks to qualify Brazil’s development concepts over the next few decades. More important than wondering whether the country will grow a lot or a little, is the question of whether it will grow well, i.e. take full advantage of its possibilities, in a sustainable manner, in terms of market and business expansion.

Growing well does not only mean breaking with past cycles of ups and downs, but also making significant progress in the areas of human development and the energy-environmental equation. The intensity with which such progress will occur obviously involves a degree of uncertainty that is inherent in future projections, and, therefore, analyses of factors that may favor or delay progress are presented.

The statistical modeling developed for this study reveals a fortunate discovery. Brazil has already made progress on the narrow path of balanced growth, and it is not unrealistic to foresee its progressively qualified participation in the global context. More than just a desire, this is the consequence of achievements realized since the 1990s. The optimism with regard to Brazil, therefore, transcends the limits of the art of rhetoric and is based on solid fundamentals.

Introduction

*This publication has been produced in 2008. Since then, the Sustainable Brazil series has six publications. The latest survey, titled “Sustainable Brazil - Social and Economic Impacts of the 2014 World Cup”, was launched in 2010.

SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL

A look ahead on the highway to the year 2030

What to expect from a scenarioWhen presenting a global scenario for the next two decades, it is necessary to clarify the analytical perspective and the purpose it serves. Economic forecasts are known for their fragility, particularly on a time horizon subject to a series of unforeseeable factors, not only in the strictly economic field, but also in regard to behavior, technology, politics, geopolitics, etc.

Just 20 years ago, the concept of the internet sounded almost like science fiction – but who could imagine living without it nowadays? What entrepreneur, at that time, had a clear view of the great business opportunities that would arise from the union of computers and entertainment? And what about the widespread use of mobile telephones in Brazil? Who would have predicted that?

At the end of the 1980s, the idea of “the end of history” created a fair amount of discussion. According to the defenders of that theory, history “would end” because the dynamics of conflicts between the various competing players in world society had come

to an end and, in the near future, there would simply be no wars or even any major disputes. What pessimist, seeing things through grey-colored glasses, would have dared forecast that the 21st century would start under a heavy cloud of global terrorism?

This leads to one fundamental question. For a period of time in which so many transformations can occur, what is the use of building a scenario or – in a study comprised of several premises and hypotheses – a series of scenarios?

The first consideration to be made is precisely that building such a scenario provides us with elements to outline the future regardless of those factors that we cannot foresee. Thus, based on reasonable premises, it can be said with a certain degree of certainty that things will be a certain way in a certain year. That reliability is provided by the explanatory capacity of the statistical model adopted and by the validity of its presumptions.

In other words, based on a historical series of interdependent variables and compilation of premises, we can foresee how important elements of reality will behave “if” no great and

4

ASustainable development presumes, by definition, the rational use of resources, to the detriment of less costly yet more polluting production forms and technologies.

unexpected change occurs. Statistical modeling is designed as a projection factory. Additionally, it considers critical factors that interfere with such projections and, therefore, provides an implicit understanding of risks and potentials.

For example: GDP growth is dependent upon demographic tendencies, investment behavior premises, economic performance records and prospects for enhanced productivity. At the same time, any rise in income is restricted by what society understands as the acceptable use of natural resources – an idea illustrated by the refusal to allow unselective deforestation for expansion of agricultural and livestock frontiers. The scenario model simulates how the interaction of these factors will determine the development of wages, profits, investment, consumption and income distribution.

In this work, the records of 100 countries over the last 57 years have been considered. Even if the past performance of an economy does not necessarily reflect its future performance, its statistical track record, for instance, does not allow us to project income growth much higher or lower

than its historical average unless there is a very good reason to do so. Additionally, the observation of other countries’ histories, of relevant facts that marked the evolution of their economies, allows us to establish premises that guide the outlining of a future scenario for a given country or for a set of countries.

A fundamental aspect of this issue is that the model outlines the route that a given country will take over a longer time span. In this respect, more important than saying what the GDP of the country will be in 2030, is to understand why the economy will take one direction and not another. Scenarios constitute a valuable planning tool precisely due to their capacity for indicating tendencies.

Double SustainabilityThe differentiation between growth and development is a generally accepted reference to qualify the economic production of a society. Decades ago, development was seen as growth that is reflected in proportional progress regarding the quality of life of a population, which implies a good level of income distribution and social

advancement opportunities. More recently, the non-predatory use of natural resources has been included in the set of factors that characterize development. Then the concept of sustainability arose.

It is an ambiguous term. Sustainable development presumes, per definition, the rational use of resources, to the detriment of less costly yet more polluting forms of production and technologies. In this respect, a country’s growth potential is restricted. China, for example, could not enjoy the industrial production figures it has achieved if it had a restrictive gas emissions policy. At the same time, the concept expresses growth that sustains itself over time, i.e. a smooth highway, able to guarantee a certain steady pace of increasing well-being over the years, in the context of a balanced society that manages to be moderate in its consumption of natural resources.

The reference scenario presumes a world in which there will always be more pressure for sustainable policies within the ambiguity described above. For Brazil, this sustainability context requires that no policies be adopted that could provide more growth,


but cause economic imbalance and regressions in the environmental area.

Thus, it is not realistic to think that Brazil will once again achieve the figures verified during the era of the “economic miracle”. In the beginning of the 1970s, the additional productivity earnings were significantly higher and, at the same time, industrial and agricultural frontiers expanded without restrictions. Today, in order for the economy to grow 7% per year, as occurred during the “miracle”, 38% of the GDP would have to be re-invested – and the current level is 21%.

As the Brazilian pension structure does not place a priority on the creation of long-term savings, such marked additional investment would only be possible by increasing government spending to unprecedented levels or through an unlikely volume of foreign investment. It should be stressed that such an increase in public expenses would lead to a very unbalanced treasury, which would cause, in addition to inflationary pressures, a high degree of economic uncertainty.

Economic growth of 7% per year would lead to a corresponding increase in electricity consumption, but there would not be sufficient capacity to meet such demand. In the job market, the demand for labor would bring about real salary increases of 6% per year, a much higher rate than the rise in productivity, causing

inflation to take off. Exceeding the speed limit would result in disturbing sustainable growth in Brazil for years, and, in the end, there would be much greater losses than gains.

The above example attempts to show an extreme situation. However, in general, measures that ignore the fundamentals of efficient and balanced economic administration are laden with the consequences of deviations on the highway to development. The reference scenario adopted here presumes that Brazil has reached a certain level of maturity and will not have serious problems in this regard.

Without excesses, GDP will grow 150% The sustainability scenario for the Brazilian economy shows the tendency to obtain significant long-term results, regardless of structural reforms that could increase its growth exponentially. Improving the tax system and undertaking pension reform, for example, would increase income generation capacity, but even without such factors Brazil displays a high potential for improving its position in the global context, due both to its income level and the expansion of its consumer market.

The performance and improvement of economic fundamentals over recent years show that it is possible to achieve an average growth rate of 4% per year between 2007 and

2030. This would consider a 4.3% average per year for the next ten years and 3.8% from 2017 on. Thus, in that period, Brazilian GDP will grow from US$ 963 billion to US$ 2.4 trillion, an increase of more than 150%.

The conditions for such a result are feasible:

an average investment rate of 22.7%;

an expansion of the work force at 0.95% per year, equivalent to the world standard, but higher than the rate of developed countries, i.e. 0.1% per year;

better education of the work force, rising from 7.8 years of formal schooling in 2007 to 11.3 years in 2030;

average productivity increases of 0.93% per year – a figure close to the increases in developed countries (1.05% per year), but lower than China’s pace (1.37% per year), for example.

A promising marketThe reference scenario for the Brazilian economy projects a significant increase in consumption, a consequence of important improvements in the following indicators:

per capita income increase of 3.1% per year, higher than the rate over the last 17 years (1.3%

6

15,585.52

12,755.94

5,265.46

2,818.44

2,507.001,924.66

1,854.33

1,813.34

1,528.25

1,340.84

1,141.27

1,136.22

1,072.47

1,047.66

989.68

974.73

966.16

734.93

729.95

721.12

in US$ billion*

United States

China

India

Japan

Germany

Great Britain

France

Brazil

Italy

Russia

Mexico

Spain

Canada

South Korea

Indonesia

Turkey

Australia

Argentina

Philippines

Thailand

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

2007

9,125.00

3,862.19

2,530.19

2,357.55

1,489.64

1,365.09

1,098.04

1,066.551,019.76

823.28

820.21

723.65

626.76

618.77

602.14

458.89

400.60

373.76

373.15

353.94

United States

China

India

Japan

Brazil

Great Britain

Mexico

Germany

France

Italy

Indonesia

Russia

South Korea

Spain

Canada

Turkey

Philippines

Pakistan

South Africa

Australia

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

in US$ billion*

2030

highest salaries; today, the nation ranks 11th;

consumption growth of 3.8% per year, making Brazil the fifth biggest consumer market in the world;

per year), but close to the average rates of recent years;

payroll growth of 3.5% per year, which would put Brazil in eighth place in 2030 among the economies paying the

The 20 biggest consumer markets

Source: Getulio Vargas Foundation(*) 2005 US$ adjusted for Purchase Power Parity

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The income distribution and growth over the projection period will allow for the gradual social advancement of low-income families. It should be noted that upward mobility is a consequence of universal education, new employment opportunities,


Total 2007 1,410.6Total 2030 3,304.3Variation per year 3.8%

(%) per year

Consumer market per line of product in R$ billion

4.0% 3.6% 2.9% 4.4% 3.4% 3.8% 3.9%

2007

2030

379.2

942.5

296.7

676.0

195.5

378.7

140.2

376.8

116.2

249.1

119.1

283.4

163.7

397.8

Total income

22.1%

22.8%

18.2%

11.7%

5.0%

1.3%

18.8% 6.5%

15.0%

23.0%

22.7%

17.6%

10.6%

4.7%AAAmore than R$ 32,000

AAfrom R$ 16,000

to R$ 32,000

Afrom R$ 8,000 to R$ 16,000

Bfrom R$ 4,000

to R$ 8,000

Cfrom R$ 2,000

to R$ 4,000

Dfrom R$ 1,000

to R$ 2,000

Eup to R$ 1,000

Families

55.3%

24.5%

12.9%

5.2%

1.7%

0.4%

0.0%

30.5%

28.9%

22.9%

11.6%

4.5%

1.4%

0.3%AAAmore than R$ 32,000

AAfrom R$ 16,000

to R$ 32,000

Afrom R$ 8,000 to R$ 16,000

Bfrom R$ 4,000

to R$ 8,000

Cfrom R$ 2,000

to R$ 4,000

Dfrom R$ 1,000

to R$ 2,000

Eup to R$ 1,000

2007

2030

Housing Services FoodHealth,

education

Non-durable consumer

goods

Durable consumer

goods

Other products

and services

Income distributionMonthly income brackets

Source: Getulio Vargas Foundation

8

increases in workforce productivity and maturation of age-bracket and family structures.

The base of the income pyramid will slim down considerably. Families with monthly incomes of up to R$ 1,000, which represented 55.3% of the population in 2007, will be 30.5% in 2030 – a good part of them will have migrated to the income range between R$ 1,000 and R$ 2,000. But the range that will grow most in number of families is the immediately higher one, between R$ 2,000 and R$ 4,000. In 2007, 12.9% of Brazilian households had monthly incomes in that range and in 2030 this percentage will rise to 22.9%.

There will also be a higher proportion of families in higher income brackets, which means a widening at the top of the pyramid. During that process, there will be a major increase in the total volume in the income brackets above R$ 4,000 – from 36.2% in 2007 to 55.6% in 2030. This movement will consolidate over the next 22 years and will lead relatively quickly to an increase in Brazilian families’ sophistication in terms of demand.

Opportunities in sightThe process of consumer market qualification brings about a new range of opportunities in business segments. The areas of education and health, for example, will have an annual growth rate of 4.4% up to the year 2030. In general, the

growth of the middle class will cause a corresponding expansion in services.

Over the next 22 years, there will also be a strong increase in housing expenses involving construction, renovation and additional property expenses. This market, with a turnover of R$ 379.2 billion a year today, will reach R$ 942.5 billion in 2030, mainly due to the increased demand of the middle and upper classes.

Lower income brackets, for their part, are going to cause a large part of the 2.9% growth in the food market. The same social segment will also pace growth in non-durable goods, which will double by 2030.

The reference scenario allows for a detailed mapping of demand per income class in several activity lines, as will be shown in greater detail on the Map of Consumption Opportunities (starting on page 18). In the next chapter of this overview, we present the general conditions for sustainable development for the world and Brazil.

9


Under the banner of sustainability

global interdependence are rare, and it would be comfortable to assume a continuous deepening of interrelations at the global level. However, it was deemed preferable to adopt a line of analysis that does not necessarily forecast accentuated expansion, but rather consolidation at a high level of interdependence. Such a perspective is guided by the understanding that it is a process subject to flip-flops.

From a strictly economic point of view, globalization is nothing more than a movement toward specialization that divides work beyond national borders. There is something very positive in this outlook, to the benefit of both productivity and comparative advantages. The economic history of the world after World War II, especially since the 1990s, shows that trade flow movements have grown at a significantly higher rate than the world’s GDP increase – 6.3% per year against 2.8% per year, respectively. Such a difference is even more accentuated when considering capital flows expanding at a much higher speed (12.7% per year). Cross-border progression of financial markets has increased the allocable efficiency of world

Globalization and UncertaintiesFor the preparation of the reference scenario, a conservative

premise was adopted with regard to globalization, making it a determining element in the analysis of economic relations both globally and locally. Nowadays, markets that have no kind of

Source: Getulio Vargas Foundation (*) 2000 prices - DFI: Direct Foreign Investment, acquisitions of equity stakes in companies amounting to more than 10% of capital stock. Portfolio: Investment in shares amounting to less than 10% of capital stock.

Worldwide merchandise, service and capital flows

19902005in US$ billion*

Merchandise and services

Capital (DFI and portfolio)

Expansion 6.3% 12.7%

3,459.3

8,602.4

683.7

4,102.8

10

A

event that it does not intensify, it will at least remain the way it is.

Such considerations facing the world economy are important for the reference scenario because:

trade expansion and free fund traffic are key factors determining economic growth on a worldwide level;

economic interdependence causes permeability of values, i.e. commercial and service traffic has an implicit cultural dimension that provides a consensus regarding what procedures are internationally correct;

globalization tends to favor countries in which a significant portion of economic power is dependent upon foreign trade, as is the case with Brazil and its most important partners, such as the United States and China.

Sources of Progress and Conflict The geopolitical and demographic dimensions are essential to qualify the globalization process and prospects for both sustainability

Globalization tends to favor countries in which a significant portion of economic power is dependent upon foreign trade, as is the case with Brazil and its most important partners.

savings accounts, which have been freed up to look for better opportunities in the market – consequently, free fund traffic has increased the productivity of capital on a worldwide level.

Although globalization is still going strong, there are factors that may be able to restrain it and even cause retrogression. It is important to consider that:

at the same time it rewards efficiency, globalization causes concentration of income and deeply affects local markets, causing resistance and permanent tensions, as exemplified by problems in negotiating global trade treaties;

conflicts, even on a regional level, can substantially affect important trade and capital flows;

the effects of a deep worldwide financial crisis cannot be assessed with any degree of certainty in the context of highly interconnected markets.

That said, it does not appear to be an exaggeration to suppose that the current stage of globalization is relatively stable and, even in the


and growth. Within the limits of this analysis, some important tendencies should be emphasized:

Asia and Oceania, largely leveraged through the economic performance of China, will markedly increase their worldwide importance, yielding average income growth of 4.8% per year, higher than that verified in South America (3.5%), in the United States (2.7%) and, above all, in Europe (1.7%). Growth in the Asian population will be less than the world average;

the United States, even with a comparatively lower GDP growth, will continue to be the biggest and one of the most propelling economies of the world, with high rates of productivity and capital remuneration;

the Middle East will preserve its characteristics as a strategic region and deserves special attention due to its oil reserves and high potential for conflicts between countries and religious or ethnic groups;

South America will gain relative importance due to its economic growth at rates above the world average, especially in Brazil, and the valuation of its energy reserves (oil, gas, biofuels and ethanol);

Subsaharan Africa will have the highest population growth rate on the planet (2.1%). In this context, even economic growth above the world average (3.8%

against 3.5%) will not be enough to achieve improvements in the quality of life indices in that region;

strong economic growth in developing countries with a heavy population density – such as Brazil, Mexico and India – will be an important element in diminishing migratory flows to more developed areas;

of the 100 economies analyzed, the number of countries with high Human Development Indices (HDI) will reach 59 in 2030, against 37 in 2005. Improvement in this key indicator reflects the rise in per capita income, higher educational levels and also improved life expectancy at a global level.

Qualified DevelopmentGlobal growth over the next 23 years will be strongly influenced by the performance of the United States and developing countries, primarily China, India and Brazil. Due to this fact, world GDP should undergo a stronger expansion during the period from 2007-2017, at a rate of 3.9% per year. In the later period, this growth will slow down because China will loose its impetus, falling from an average of 7.9% in the first period to 5.5% between 2017 and 2030. By the same token, India’s pace will slow down proportionally, from 4.4% to 2.6%. The economy of the United States, on the other hand, will accelerate from 2.5% to 2.8%.

12

Europe will post lower growth rates, of 2.1% and 1.4%, respectively. The best performers will be Great Britain (1.9% and 1.5%) and Spain (2.2% and 1.5%). Russia will suffer a slump in its pace of development (from 3.2% to 0.7%) as a consequence of gradually decreasing productivity and the significant reduction of its work force, caused by the ongoing process of population decline observed since the 1990s.

The general factors that affect growth are the same as those established by economic theory:

respect for property rights and an environment of trust for doing business;

market competition and global economic integration;

quality of institutions linked to the functioning of the economy;

application of efficient and stabilizing economic policies.

One new element that has been added to these general principles is the environmental question that is expressed by a growing demand for productive systems that consider sustainability even if this causes losses in terms of efficiency. In this context, the use of proportionally more expensive supplies – recycled paper, for example – is justified as it means that a company is adopting an environmentally responsible stance. The additional expenses that cause an immediate loss in efficiency by increasing costs are

justified by broader customer and partner relationship policies.

Implementation of more efficient and sustainable technologies, pursuant to historical capitalistic development, will initially be carried out in developed countries that invest heavily in research and development and are subject to more intense pressures for advances in this area. This process will only be repeated in developing countries, especially China, after a considerable delay.

Over the next two decades, increased pressure is foreseeable for environmentally correct procedures in a world that is witnessing a growing scarcity of water and arable lands. Standards of energy consumption will play a central role among the elements that will foster sustainability projects, as they strongly affect both the intensity of economic growth and the interaction of society with the environment.

13


Aging of the world’s population

1950 1970 1990 2010

Source: United Nations

20

32

44

56

68

80

26.9

47.9

Life expectancyAverage agein years

WORLD GROWTH MAP

2.7% 0.6%

NAFTA 53,840

4.0% 0.9%

Brazil 20,214

1.7% -0.2%

Europe 34,847

2.4% 1.4%

Middle East and Northern Africa 8,895

4.8% 0.8%

Asia and Oceania 17,314

3.8% 2.6%

Sub-Saharan Africa 2,984

2.9% 1.7%

Central America and Caribbean 5,438

3.5% 1.1%

South America16,764

United States 65,208 2.7% 0,5%Mexico 23,295 4.0% 1.0%

Country

Argentina 24,601 2.8% 0.9%Chile 23,368 3.5% 0.6%Venezuela 11,510 3.1% 1.4%

Country

Japan 42,113 0.8% -0.8%China 32,379 6.5% 0.1%Korea 44,572 2.7% -0.4%India 6,213 3.4% 1.5%Australia 52,188 2.9% 0.5%

Country

Great Britain 46,968 1.7% 0.1%France 41,844 1.6% 0.0%Portugal 26,353 1.1% -0.3%Spain 40,542 1.8% -0.1%Germany 39,642 1.0% -0.6%Russia 20,766 1.8% -0.9%

Country

Per capita GDP in 2030*

Economic growth between 2007 and 2003

Increase of the work force between 2007 and 2030

3.5% 0.9%

World18,892

2030

United States 23,896.02 366.46China 11,994.18 1,461.42Japan 5,662.94 118.48Germany 3,627.78 79.56Great Britain 3,416.00 66.21France 3,209.14 66.71Italy 2,531.08 57.63Brazil 2,398.35 233.56Mexico 2,068.97 128.09India 2,004.30 1,507.09Canada 1,916.46 39.15Spain 1,813.15 46.89

South Korea 1,600.74 48.51Australia 1,497.22 25.31Russia 1,271.19 124.42Turkey 922.43 92.56Netherlands 872.01 17.17

South Africa 612.83 53.33Indonesia 605.27 280.00Sweden 570.93 10.02World* 82,291.49 7,338.50

The 20 largest economies in the world in 2030

GDP (billions**)

Population (in millions of inhabitants)


(*) “World” figures refer to the sum of the GDPs of the 100 economies considered in this study.(**) In 2005 US$.

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

35.1

73.6

A

Aging of the world’s population

1950 1970 1990 2010

Source: United Nations

20

32

44

56

68

80

26.9

47.9

Life expectancyAverage agein years

WORLD GROWTH MAP

2.7% 0.6%

NAFTA 53,840

4.0% 0.9%

Brazil 20,214

1.7% -0.2%

Europe 34,847

2.4% 1.4%

Middle East and Northern Africa 8,895

4.8% 0.8%

Asia and Oceania 17,314

3.8% 2.6%

Sub-Saharan Africa 2,984

2.9% 1.7%

Central America and Caribbean 5,438

3.5% 1.1%

South America16,764

United States 65,208 2.7% 0,5%Mexico 23,295 4.0% 1.0%

Country

Argentina 24,601 2.8% 0.9%Chile 23,368 3.5% 0.6%Venezuela 11,510 3.1% 1.4%

Country

Japan 42,113 0.8% -0.8%China 32,379 6.5% 0.1%Korea 44,572 2.7% -0.4%India 6,213 3.4% 1.5%Australia 52,188 2.9% 0.5%

Country

Great Britain 46,968 1.7% 0.1%France 41,844 1.6% 0.0%Portugal 26,353 1.1% -0.3%Spain 40,542 1.8% -0.1%Germany 39,642 1.0% -0.6%Russia 20,766 1.8% -0.9%

Country

Per capita GDP in 2030*

Economic growth between 2007 and 2003

Increase of the work force between 2007 and 2030

3.5% 0.9%

World18,892

2030

United States 23,896.02 366.46China 11,994.18 1,461.42Japan 5,662.94 118.48Germany 3,627.78 79.56Great Britain 3,416.00 66.21France 3,209.14 66.71Italy 2,531.08 57.63Brazil 2,398.35 233.56Mexico 2,068.97 128.09India 2,004.30 1,507.09Canada 1,916.46 39.15Spain 1,813.15 46.89

South Korea 1,600.74 48.51Australia 1,497.22 25.31Russia 1,271.19 124.42Turkey 922.43 92.56Netherlands 872.01 17.17

South Africa 612.83 53.33Indonesia 605.27 280.00Sweden 570.93 10.02World* 82,291.49 7,338.50

The 20 largest economies in the world in 2030

GDP (billions**)

Population (in millions of inhabitants)


(*) “World” figures refer to the sum of the GDPs of the 100 economies considered in this study.(**) In 2005 US$.

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

35.1

73.6

Source: Getulio Vargas Foundation(*) 2005 US$, adjusted for Purchasing Power Parity.


A new energy mixThe reference scenario presumes that the international supply of energy will undergo substantial medium- and long-term transformations. The continuing rise in the price of oil will make it feasible to open up new production areas, extract liquid fuels from non-conventional oil sources and implement alternative energy sources. Developing countries will increase their share of world energy consumption, and the supply of energy should include major inputs from biofuels and nuclear energy.

However, a broad spectrum of factors should be taken into account as they create uncertainties with regard to the behavior of the energy market up to the year 2030. The scenario is based on two critical factors for the energy market: a) the proportion of international energy flows and b) the competitive introduction of alternative sources. Future supply and demand will result from hypotheses regarding the evolution and interconnection of such factors.

It should be considered that obtaining a competitive mix of energy sources allows for greater safety in terms of supply availability and contributes to sustainability of choices. At the same time, the extent of commercial flows and worldwide competition lead to a reduction in the cost of energy and more pressure to reduce greenhouse gases and introduce new technologies for generating energy.

A sustainable energy scenario is one that achieves a balance between a restrictive scenario - tightly closed to international exchange and limited in access to diversity in energy

sources - and an open scenario with a more aggressive position towards international competition, one that even accepts sophisticated alternatives with environmental commitment.

In the reference scenario, the proportions of available energy sources on both a global and Brazilian level will be reordered, considering sustainability of choices in terms of economic competitiveness, physical resource availability and environmental impacts. The evolution

of energy demand will be related to the makeup of supply that meets safety criteria, gradually reduces emissions and introduces energy efficiency measures.

Brazil’s projection as a player World economic projections indicate a significant increase in the importance of Brazil, the fruit of a record of constant growth and stability. Brazil will

Source: Getulio Vargas Foundation(*) Ordered by GDP in 2030. (**) “World” amounts refer to the sum of the GDPs of the 100 economies considered in this study. (***) 2005 US$ billion.

Return on capital of the 20 biggest economies in 2030

United StatesChinaJapanGermanyGreat BritainFranceItalyBrazilMexicoIndiaCanadaSpainSouth KoreaAustraliaRussiaTurkey

NetherlandsSouth AfricaIndonesiaSwedenWorld**

49,873.539,159.520,224.010,871.4

6,839.97,545.66,943.9

6,280.65,357.26,215.04,466.15,404.06,482.44,499.55,432.32,557.02,194.21,522.01,956.01,221.6

221,834.46

28.1%19.9%

16.0%19.1%

29.1%24.4%

20.7%24.2%23.6%22.5%24.7%

19.2%14.1%

18.6%14.3%

22.2%22.5%24.8%

20.9%26.4%

22.2%

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

Capital Stock***Country*

Return on Capital

16

post growth of 4% per year between 2007 and 2030, which will make it jump from 10th to 8th place in the ranking of the world’s biggest economies.

In regard to the evolution of developing countries, it needs to be emphasized that China will already have become the second biggest economy in 2017 and that, over the next two decades, Mexico and India will overtake Spain and Canada and be ranked right below Brazil.

The 3% per capita income growth of Brazil between 2007 and 2030 will be well above the world average of 1.7%, which will make this indicator double in 23 years. Payroll volume will reach US$ 880.3 billion in 2030, due to its growth at a rate of 3.5% per year, making it the eighth largest economy in the world. Payroll growth similar to that of Brazil’s will be verified in Mexico, and it is likely that such a pace will only be exceeded by the impetus of China, growing as it does without a commitment to sustainability.

The advantages of Brazil, Mexico and China are directly related to the productivity level of their work forces. They are part of the small group of countries that will keep up with the improved productivity in the developed countries. In this respect, the increased educational levels of Brazilian labor is relevant, given that by 2030 it will reach the current educational level of workers in developed countries, with an average of more than 11 years of studies completed. This indicator is similar to that of present-day South Korea but lower than that of the US, which currently stands

at 12.5 years. Educational levels will tend to converge globally, although even while considering this aspect Brazilian development will be noteworthy for its tremendous progress.

Changes in social and economic patterns will occur in the context of a decline in average world investment rates, arising from a high aging ratio of the population – this factor leads to a decline in the general savings level due to increasing pension and medical assistance expenses. This will occur in a more accentuated manner in Europe and in the NAFTA countries, which will significantly change the distribution of the capital stock invested in the world, with an increase in the share of developing countries.

Nowadays, the countries of the European Union and the United States hold 60% of the total capital invested in the world, understood as machines, equipment and buildings in general, including residential buildings. This percentage will be reduced to 49% in 2030, due to the quickening pace of capital accumulation in the developing countries. Brazil, for example, today holds 2% of the world’s net assets, but by 2030 that share will reach approximately 3%.

One bit of promising information for Brazil is that its return on capital investment will remain high compared to other developing countries. High levels of investment in China and India will narrow the business opportunity horizon in those countries by 2030, while Brazil and Mexico will offer better return possibilities.


The evolution of education in Brazil

Years of formal education

Economically active population

Total population

2005 2010 2015 2020 2025 2030

4.6

5.15.6

6.26.8

7.5

8.2

8.9

9.6

10.4

11.3

7.5

17


Premises for a better countryThe achievements of the economic policies since the 1990s have established the basis that will make it possible to achieve relatively high sustained growth for the next 22 years. However, there is a potential for even higher economic growth, an achievement which will be dependent upon the adoption of specific – and feasible – policies in the years ahead. They will have a strong influence on investment, productivity and consequent economic growth. In general, the factors that can improve Brazil’s performance are:

Labor and pension: two aspects that deserve attention. Firstly, tax relief for company payrolls, which besides reducing labor costs, with effects on productivity, will have a direct impact on the reduction of informal labor. Secondly, the adequate treatment of pension matters, since at present Brazil spends approximately 13% of its GDP on retirement and pension expenses, which is equivalent to the percentage of countries such as France and Austria. Growth in pension expenses in the years ahead will restrict the creation of savings and, therefore, investment.

Tax burden and reform: in general, this is not a case of decreasing tax collection in absolute terms, in view of the fact that, in order to invest once again in infrastructure and

education, governments will surely need more funds. Even so, tax collection should be increased at a slower pace, below that of total revenues, in such a manner that the tax burden gradually decreases, as opposed to what is presently being done. In this context, a more simplified tax structure would make the environment more appropriate for business, which is a determinant for investments.

Infrastructure: investing in infrastructure once again in Brazil can come about through the advancement of regulation over this sector and re-intensification of public investment. The modus operandi known as the Public- Private Partnerships (PPPs) opened a doorway for funds to enter the infrastructure sector and the more recent Growth Acceleration Program (locally PAC) indicates that higher volumes of funding will be available for infrastructure areas through to the next major election year (2010). However, several regulatory aspects – such as environmental concerns – and the difficulty of mobilizing public funds, tend to delay these investments.

Housing: investment in housing still represents a small portion of the GDP compared to the situation in other countries, in spite of recent progress in this sector. Brazil lacks a housing policy, most of all for its lower income population. Stronger recovery of real estate credit

depends in turn on the gradual reduction of interest rates, improvements in financing mechanisms and reduction in credit risks.

Deregulation and simplification: a swifter system of justice and elimination of red tape in all three branches of government would generally work in favor of economic growth by establishing a more favorable and safer environment for business.

Education: once universal education is established at the basic level, Brazil will be able to progress gradually in its attempt to meet bolder goals for intermediate high school education and overall educational quality. This would increase the efficiency level of the Brazilian economy and boost social mobility.

Technology: another factor that restricts the growth of Brazil is the low productivity that is directly associated with technological policies. R&D expenses are still at a beginner’s level in Brazil, and an increase in the public budget for basic and applied research would be a natural route to take. A complementary strategy consists of the creation of incentives for in-bound technology transfers by means of foreign investments.

Progress in the areas listed above would make an even more promising horizon for sustainable growth possible for Brazil in the next 22

18

years. It is estimated that a realistic set of changes would considerably increase investment in the areas of energy, transportation, sanitation and housing, with effects on the entire economy. The average investment rate would reach 24% of the GDP leading up to 2030, 1.3 percentage point above the rate considered in the reference scenario and 3 percentage point above the investment rate in 2007.

In addition, a more accentuated advance in education, increasing

Brazil in two scenarios

the average schooling projected for the work force from 11.3 to 12.5 years in 2030, would have direct effects on the efficiency of the Brazilian economy, diminishing the gap that exists today with regard to global technological borders.

More accentuated investment and productivity increases would raise growth projections. The average GDP growth rate between 2007 and 2030 would be hiked from 4.0% to 4.6% with

significant effects on the evolution of per capita income, which would grow at 3.8% per year, higher than that projected for the South Korean and Chilean economies. In this scenario, Brazil would overtake Uruguay in terms of human development and would get closer to the levels that will be reached by Chile, Argentina, and Mexico. The consumption growth rate would increase to 4% per year, bringing Brazil closer to Japan (the fourth largest consumption market in 2030) quicker.

Source: Getulio Vargas Foundation(*) Amounts in 2005 terms.

2007 to 2030 Reference scenario

Scenario with advances

Reference scenario

Scenario with advances

Indicators 1990-2007

2007

2030

Investment (as % of GDP) 19.0% 22.7% 24.0%

Productivity increase 0.1% 0.9% 1.1%

Economic growth (%) per year 2.8% 4.0% 4.6%

Expansion of the consumer market (%) per year 2.5% 3.8% 4.0%

Indicators

GDP in US$ billion* 962.9 2,398.4 2,718.2

GDP per capita in US$* 5,092 10,269 11,638

19


2007

R$ billion* %

2030

R$ billion* %

1.9%

3.3%

4.4%

5.2%

6.7%

8.9%

3.8%

200.4

286.7

326.6

281.3

192.5

101.1

21.9

1,410.5

14.2%

20.3%

23.2%

19.9%

13.6%

7.2%

1.6%

100.0%

Up to R$ 1,000

From R$ 1,000 to R$ 2,000

From R$ 2,000 to R$ 4,000

From R$ 4,000 to R$ 8,000

From R$ 8,000 to R$ 16,000

From R$ 16,000 to R$ 32,000

More than R$ 32,000

Total

Family income brackets

193.1

440.0

693.4

749.7

620.9

451.9

155.2

3,304.2

5.8%

13.3%

21.0%

22.7%

18.8%

13.7%

4.7%

100.0%

% per year

-0.2%

Map of consumption opportunities

The reference scenario, as has been shown throughout this study, is halfway between optimism and pessimism and always seeks to accept the most likely proposition as valid, chosen largely according to the historical record of each variable. This model indicates a deep change in the profile of Brazilian society as it undergoes a straightening of its social pyramid, with the growth of middle income brackets.

This means that companies that operate or intend to operate in the Brazilian market have to adjust to a transforming business environment. This dynamism is expressed by a 3.8% average growth rate for the consumer market up to 2030.

In absolute figures, this market will leap from total sales of R$ 1.41 trillion

in 2007 to R$ 3.30 trillion in 2030 – i.e. it will more than double in the next 22 year period.

Due to economic growth and social mobility, consumption growth rates are higher in income brackets with more purchasing power, in particular the ones with the strongest projected growth over the next 22 years. The share of consumption expenses of families with monthly incomes of more than R$ 8,000 in total consumption will increase from 22.4% in 2007 to 37.2% in 2030. The share of families with monthly incomes of up to R$ 2,000 in the total volume will diminish by 15% in the coming years due to migration to higher income brackets.

The maturation of the Brazilian consumer market will cause significant

Consumption per income bracket

Source: Getulio Vargas Foundation(*) 2007 prices.

changes in the consumption profile. The portion of family expenses for non-durable consumer goods, such as food, tobacco and beverages, fuel and transportation in general, will decrease. In contrast, expenses with living, health and education will grow by leaps and bounds.

Taking families with incomes between R$ 4,000 and R$ 8,000 as a reference, it can be noted that the evolution of the total income of this bracket will have a stronger effect on the consumption of personal hygiene and cleaning products and health services than on the demand for clothing and beverage products.

Visualizing changes in the consumption profile is easier when comparing the current configuration with the projections

20

A

Consumption per product line

for 2030, according to the “Map of Opportunities” (page 18). The differences in the two consumption periods, in each product line and social class, map the possibilities for new business in the Brazilian economy. In general, the following points need to be emphasized:

a new portion of the consumer market, in the amount of R$ 1.893 trillion, will arise by 2030. This amount will be added to the current R$ 1.41 trillion;

families with incomes between R$ 4,000 and R$ 16,000 will account for 47.5% of this additional slice, or R$ 896.8 billion more consumed;

26.7% of the consumption increase comes from increases in housing expenses and 12.4% from public utility services;

increased incomes and social mobility in Brazil will redefine the food market, with high shares for

industrialized (processed) foods and food consumed outside homes;

the market share for natural foods will be a very small part of the growth of the consumer market;

the car and fuel markets will contribute 6.1% to consumption growth, a smaller share than the one verified over the last ten years, 8.5%.

Changes in the profile of Brazilian society will be deep. The country will undergo a narrowing of its social pyramid, with growth of middle income brackets.

Natural foodsProcessed foodsBeveragesTobaccoClothingConstruction materialsEnergy, gas, sanitation and garbageFuelsHousingHousehold utilitiesVehiclesPersonal hygiene and cleaningHealthEducation and culture Lodging and restaurantsCommunicationsTransportFinancial servicesGeneral servicesAssociational and domestic servicesTotal

50.5269.9

30.328.0

138.0113.4397.8

63.5829.2143.1140.3

47.6221.3155.5180.1

6.5186.0131.3

24.8147.1

3,304.2

1.5%8.2%0.9%0.8%4.2%3.4%

12.0%1.9%

25.2%4.3%4.2%1.4%6.7%4.7%5.5%0.2%5.6%4.0%0.8%4.5%

100.0%

28.5134.4

16.815.869.955.9

163.830.2

323.461.357.716.081.758.580.1

3.290.548.8

9.864.2

1,410.5

2.0%9.5%1.2%1.1%5.0%4.0%

11.7%2.1%

22.9%4.3%4.1%1.1%5.8%4.1%5.7%0.2%6.4%3.5%0.7%4.6%

100.0%

2007

R$ billion* %

2030

R$ billion* %Product line % per year2.5%

3.1%2.6%

2.5%3.0%3.1%

3.9%3.3%

4.2%3.8%3.9%

4.8%4.4%

4.3%3.6%

3.1%3.2%

4.4%4.1%

3.7%3.8%

Source: Getulio Vargas Foundation(*) at 2007 prices.


expansion of the market until 2030


Map of opportunities:

-0.27

-1.29

-0.13

-0.13

-0.37

-0.26

-0.75

-0.33

-1.63

-0.41

-0.22

-0.16

-0.45

-0.09

-0.30

-0.03

-0.29

-0.12

-0.04

-0.05

-7.32

-1.2%

-1.0%

-0.9%

-1.0%

-0.5%

-0.4%

-0.3%

-1.0%

-0.3%

-0.5%

-0.3%

-0.5%

-0.3%

-0.1%

-0.3%

-0.9%

-0.3%

-0.1%

-0.3%

-0.1%

-0.4%

Up to R$ 1,000

4.06

20.09

2.16

2.45

8.44

6.18

17.98

4.92

33.27

8.03

4.17

3.05

9.57

3.29

7.80

0.51

9.36

3.10

1.13

3.71

153.27

18.5%

14.8%

16.0%

20.1%

12.4%

10.8%

7.7%

14.8%

6.6%

9.8%

5.1%

9.7%

6.9%

3.4%

7.8%

15.4%

9.8%

3.8%

7.6%

4.5%

8.1%

R$ 1,000 -R$ 2,000

6.86

37.21

3.97

3.78

18.58

14.72

35.56

9.04

81.65

18.95

15.48

7.17

26.14

15.32

20.11

0.99

23.63

11.71

2.80

13.14

366.81

31.2%

27.5%

29.3%

31.0%

27.3%

25.6%

15.2%

27.1%

16.1%

23.2%

18.7%

22.7%

18.7%

15.8%

20.1%

29.9%

24.7%

14.2%

18.7%

15.8%

19.4%

R$ 2,000 –R$ 4,000

5.64

34.36

3.51

3.39

18.58

15.18

47.92

8.41

105.20

21.49

24.54

8.43

36.00

30.83

26.98

0.76

28.49

19.88

3.93

24.88

468.40

25.7%

25.4%

25.9%

27.8%

27.3%

26.4%

20.5%

25.3%

20.8%

26.3%

29.7%

26.7%

25.8%

31.8%

27.0%

23.1%

29.8%

24.1%

26.2%

30.0%

24.7%

R$ 4,000 -R$ 8,000

3.63

25.11

2.42

1.90

13.31

14.57

44.96

6.15

121.51

15.80

20.61

6.70

31.06

24.96

24.44

0.45

22.18

23.60

3.36

21.70

428.42

16.5%

18.5%

17.9%

15.6%

19.6%

25.4%

19.2%

18.5%

24.0%

19.3%

24.9%

21.2%

22.2%

25.7%

24.4%

13.8%

23.2%

28.6%

22.4%

26.1%

22.6%

R$ 8,000 –R$ 16,000

1.91

16.27

1.31

0.75

7.84

6.50

56.91

4.08

110.06

12.42

13.93

4.62

32.02

17.04

16.81

0.58

9.67

18.82

2.84

16.40

350.78

8.7%

12.0%

9.6%

6.2%

11.5%

11.3%

24.3%

12.2%

21.8%

15.2%

16.9%

14.6%

22.9%

17.6%

16.8%

17.7%

10.1%

22.8%

18.9%

19.7%

18.5%

R$ 16,000 –R$ 32,000

0.15

3.76

0.31

0.04

1.68

0.58

31.41

1.04

55.73

5.45

4.08

1.78

5.30

5.61

4.14

0.03

2.44

5.56

0.98

3.27

133.34

0.7%

2.8%

2.3%

0.3%

2.5%

1.0%

13.4%

3.1%

11.0%

6.7%

4.9%

5.6%

3.8%

5.8%

4.1%

1.0%

2.6%

6.7%

6.5%

3.9%

7.0%

More thanR$ 32,000

22.0

135.5

13.6

12.2

68.1

57.5

234.0

33.3

505.8

81.7

82.6

31.6

139.6

97.0

100.0

3.3

95.5

82.5

15.0

83.1

1,893.9

1.2%

7.2%

0.7%

0.6%

3.6%

3.0%

12.4%

1.8%

26.7%

4.3%

4.4%

1.7%

7.4%

5.1%

5.3%

0.2%

5.0%

4.4%

0.8%

4.4%

100.0%

Total

The market share for natural foods will be a very small part of the growth of the consumption market.

26,7% of the consumption increase will come from increases in housing expenses and

12,4%, from public utility services

Natural foods

Processed foods

Beverages

Tobacco

Clothing

Construction materials

Energy, gas, sanitation, garbage

Fuels

Housing

Domestic utilities

Vehicles

Personal hygiene and cleaning

Health

Education and culture

Lodging and restaurants

Communications

Transportation

Financial services

General services

Associational and domestic services

Total

Product line

Increased incomes and social mobility in Brazil will redefine the food market, with higher contributions from processed foods and food outside homes

The vehicle and fuel market together will contribute

6.1%

of the consumption increase, a smaller share than the one verified in the last ten years, 8.5%

A new portion of the consumer market, in the amount of

R$ 1.893 trillion, will arise by 2030. This amount will be added to the current R$ 1.41 trillion

families in income brackets between R$ 4,000 and R$ 16,000 will account for 47,5% of this additional slice, or R$ 896.8 billion more consumed

R$*

Contribution**

$

%

$ % $ % $ % $ % $ % $ % $ %$ % ***

Source: Getulio Vargas Foundation(*) in R$billion at 2007 prices; (**) Contribution to the growth of each product line;(***) Contribution of each product line to the growth of total consumption.

expansion of the market until 2030


Map of opportunities:

-0.27

-1.29

-0.13

-0.13

-0.37

-0.26

-0.75

-0.33

-1.63

-0.41

-0.22

-0.16

-0.45

-0.09

-0.30

-0.03

-0.29

-0.12

-0.04

-0.05

-7.32

-1.2%

-1.0%

-0.9%

-1.0%

-0.5%

-0.4%

-0.3%

-1.0%

-0.3%

-0.5%

-0.3%

-0.5%

-0.3%

-0.1%

-0.3%

-0.9%

-0.3%

-0.1%

-0.3%

-0.1%

-0.4%

Up to R$ 1,000

4.06

20.09

2.16

2.45

8.44

6.18

17.98

4.92

33.27

8.03

4.17

3.05

9.57

3.29

7.80

0.51

9.36

3.10

1.13

3.71

153.27

18.5%

14.8%

16.0%

20.1%

12.4%

10.8%

7.7%

14.8%

6.6%

9.8%

5.1%

9.7%

6.9%

3.4%

7.8%

15.4%

9.8%

3.8%

7.6%

4.5%

8.1%

R$ 1,000 -R$ 2,000

6.86

37.21

3.97

3.78

18.58

14.72

35.56

9.04

81.65

18.95

15.48

7.17

26.14

15.32

20.11

0.99

23.63

11.71

2.80

13.14

366.81

31.2%

27.5%

29.3%

31.0%

27.3%

25.6%

15.2%

27.1%

16.1%

23.2%

18.7%

22.7%

18.7%

15.8%

20.1%

29.9%

24.7%

14.2%

18.7%

15.8%

19.4%

R$ 2,000 –R$ 4,000

5.64

34.36

3.51

3.39

18.58

15.18

47.92

8.41

105.20

21.49

24.54

8.43

36.00

30.83

26.98

0.76

28.49

19.88

3.93

24.88

468.40

25.7%

25.4%

25.9%

27.8%

27.3%

26.4%

20.5%

25.3%

20.8%

26.3%

29.7%

26.7%

25.8%

31.8%

27.0%

23.1%

29.8%

24.1%

26.2%

30.0%

24.7%

R$ 4,000 -R$ 8,000

3.63

25.11

2.42

1.90

13.31

14.57

44.96

6.15

121.51

15.80

20.61

6.70

31.06

24.96

24.44

0.45

22.18

23.60

3.36

21.70

428.42

16.5%

18.5%

17.9%

15.6%

19.6%

25.4%

19.2%

18.5%

24.0%

19.3%

24.9%

21.2%

22.2%

25.7%

24.4%

13.8%

23.2%

28.6%

22.4%

26.1%

22.6%

R$ 8,000 –R$ 16,000

1.91

16.27

1.31

0.75

7.84

6.50

56.91

4.08

110.06

12.42

13.93

4.62

32.02

17.04

16.81

0.58

9.67

18.82

2.84

16.40

350.78

8.7%

12.0%

9.6%

6.2%

11.5%

11.3%

24.3%

12.2%

21.8%

15.2%

16.9%

14.6%

22.9%

17.6%

16.8%

17.7%

10.1%

22.8%

18.9%

19.7%

18.5%

R$ 16,000 –R$ 32,000

0.15

3.76

0.31

0.04

1.68

0.58

31.41

1.04

55.73

5.45

4.08

1.78

5.30

5.61

4.14

0.03

2.44

5.56

0.98

3.27

133.34

0.7%

2.8%

2.3%

0.3%

2.5%

1.0%

13.4%

3.1%

11.0%

6.7%

4.9%

5.6%

3.8%

5.8%

4.1%

1.0%

2.6%

6.7%

6.5%

3.9%

7.0%

More thanR$ 32,000

22.0

135.5

13.6

12.2

68.1

57.5

234.0

33.3

505.8

81.7

82.6

31.6

139.6

97.0

100.0

3.3

95.5

82.5

15.0

83.1

1,893.9

1.2%

7.2%

0.7%

0.6%

3.6%

3.0%

12.4%

1.8%

26.7%

4.3%

4.4%

1.7%

7.4%

5.1%

5.3%

0.2%

5.0%

4.4%

0.8%

4.4%

100.0%

Total

The market share for natural foods will be a very small part of the growth of the consumption market.

26,7% of the consumption increase will come from increases in housing expenses and

12,4%, from public utility services

Natural foods

Processed foods

Beverages

Tobacco

Clothing

Construction materials

Energy, gas, sanitation, garbage

Fuels

Housing

Domestic utilities

Vehicles

Personal hygiene and cleaning

Health

Education and culture

Lodging and restaurants

Communications

Transportation

Financial services

General services

Associational and domestic services

Total

Product line

Increased incomes and social mobility in Brazil will redefine the food market, with higher contributions from processed foods and food outside homes

The vehicle and fuel market together will contribute

6.1%

of the consumption increase, a smaller share than the one verified in the last ten years, 8.5%

A new portion of the consumer market, in the amount of

R$ 1.893 trillion, will arise by 2030. This amount will be added to the current R$ 1.41 trillion

families in income brackets between R$ 4,000 and R$ 16,000 will account for 47,5% of this additional slice, or R$ 896.8 billion more consumed

R$*

Contribution**

$

%

$ % $ % $ % $ % $ % $ % $ %$ % ***

23


The evolution of income distribution and the demographic dynamics over the next 22 years will also bring about changes in the regional consumer market composition. Consumption expenses for the South and Southeast regions,

which today represent 16.4% and 53.3% of the national consumption respectively, will grow slower than the national average. As a consequence, there will be an increase in the shares of the other regions.

Consumption per region

2007

R$ billion* %

2030

R$ billion* %

4.3%

4.0%

3.7%

3.5%

3.8%

3.8%

81.7

231.5

751.5

231.7

114.3

1,410.7

5.8%

16.4%

53.3 %

16.4%

8.1%

100.0%

North

Northeast

Southeast

South

Central-West

Brazil

Regions

216.0

576.8

1,733.8

507.4

270.3

3,304.3

6.5%

17.5%

52.5%

15.4%

8.2%

100.0%

% per year

Source: Getulio Vargas Foundation(*) At 2007 prices.

It can be said that the expected income and consumption growth in the less developed regions on a global level up to the year 2030 should also apply to the Brazilian scenario, regionally speaking.

24

Project and editing management: Mitizy Olive Kupermann

Editorial coordination: Rejane Rodrigues (MTB 22.837)

Printing and design: Milena Tavares Teves

Infographs: Infografe

Revision: Beatriz Marchesini

Our offices

Getulio Vargas Foundation Team

Technical coordination and content development: FGV Projetos

Project director: César Cunha Campos

Supervisor: Ricardo Simonsen

Coordinator: Fernando Garcia (in charge of scenario model)

Technical staff: Edney Cielici Dias (editorial, research and editorial consulting), Ana Maria Castelo (real estate sector research), Otávio Mielnik (energy sector research), Robson Ribeiro Gonçalves (agribusiness research), Jorge de Oliveira Pires (industrial competitiveness research), Ana Lélia Magnabosco (research of indicators)

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