2011 - Delta - Brazil and Latin America
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2011 - Delta - Brazil and Latin America

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Overview of Brazil and selected Latin American countries. Comparison between economies.

Overview of Brazil and selected Latin American countries. Comparison between economies.

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2011 - Delta - Brazil and Latin America 2011 - Delta - Brazil and Latin America Presentation Transcript

  • CONFIDENTIALBrazil and Latin AmericaRecent Development and PerspectivesLuiz Nelson Porto AraujoSão Paulo, April 7th 2011This report is confidential. It may contain confidential, proprietary or legally privileged information. No confidentiality or privilege is waived or lost by any access to it. Youmust not, directly or indirectly, copy any part of this report without the written consent of Delta. 1
  • FundamentalsGlobal ScenarioLatin AmericaBrazil 2
  • FundamentalsGlobal ScenarioLatin AmericaBrazil 3
  • Economic development Income property rights and efficiency and rule of law dissemination of demand technology for foreign demand goods and for good services institutions Health of population and openness and transparency agricultural productivity capacity to trade Integration distance from markets Institutions natural resources and institutions GeographySource: Dani Rodrik e Arvind Subramanian (2003): The Primacy of Institutions; Delta analysis 4
  • Growth and competitiveness Growth Analysis TFP (innovation) • Three areas are usually • Acquiring global knowledge considered for enhancing • Creating knowledge through own efforts competitiveness and • Disseminating and using existing in- accelerating growth, and country knowledge which are also relevant for the analysis of Latin America Physical capital Human capital • First – macroeconomic Adjusted for Labor adjusted for environment to extend • capacity utilization • education • vintage of capital • skills reforms that will improve the • training investment climate • Investment climate • Second – higher productivity • Macroeconomic conditions • Rule of law will require a focused effort • Competition policy to expand TFP through • Governance innovation-based growth Capital • Security Labor market market • Third – "micro" reforms to foster growthSource: OECD: Delta analysis 5
  • Slow development and underdevelopment Population Institutions Corruption Internal conflicts• Growth of per capita • In some countries • In some contries • Some countries are income income be there are no corruption takes the involved in internal low or even negative, institutions that place of markets or civil wars, tribal even if GDP increase ensure long-term rule based decisions conflicts and significantly concerns religious clashes• Development trap • Populism and • Interest groups and • Uncertainty and poverty inefficiency inefficiency Capital formation Entrepreneurship Debt Endowments• Low savings result in • Lack • Some countries have • Countries are small capital stock; entrepreneurship accumulated a high characterized by production remais • Poor education foreign and domestic different low system debt endowments• Low technology • Low innovation and • High cost of capital • Technology and innovation risk taking and negative commercial balance of services advantagesSource: Delta analysis 6
  • Markets – main drivers Developed markets • size • income • price • access • regulation Underdeveloped markets • size • income • price • access • regulationSource: Delta analysis 7
  • Creative cities and regions • Criation of jobs and opportunites for local residents • Atraction and retention of investments and capitalization of competitive advantages • Efficient environmental management and optimization of growth opportunities • Sustainable fiscal management to attract and retain talents (quality of life and business)Source: Delta analysis 8
  • Cities – from Europe to Asia 10 Largest cities in 1900 (in Millions) 10 Largest cities in 2015 (in Millions) City, country Population City, country Population London, UK 56.5 Tokyo, Japan 26.4 New York, USA 4.2 Mumbai, India 26.1 Paris, France 3.3 Lagos, Nigeria 23.2 Berlin, Germany 2.7 Dhaka, Bangladesh 21.1 Chicago, USA 1.7 São Paulo, Brazil 20.4 Vienna, Austria 1.7 Karachi, Pakistan 19.2 Tokyo, Japan 1.5 Mexico City, Mexico 19.2 St. Petersburg, Russia 1.4 New York, USA 17.4 Manchester, UK 1.4 Jakarta, Indonesia 17.3 Philadelphia, USA 1.4 Calcutta, India 17.3 Americas Europe Asia AfricaSource: United Nations; Delta analysis 9
  • Income distributionPopulation Population6.7 billions 2007 2030 8.5 billions 5% upper class 13% 6.7 0.6 26% up to US$ 30.000 45% up to 1.8 middle class 3.1 US$ 30.000 53% up to US$ 6.000 3.6 low income 2.8 class 36% up to US$ 6.000 16% up to US$ 1.000 1.0 6% up to US$ 1.000 1.1 poverty/extreme poverty GDP PPP per capita 2007 75 countries that represent 97% of the world´s GDP and 90% of world populationSource: United Nations, UNCTAD; Delta analysis 10
  • FundamentalsGlobal ScenarioLatin AmericaBrazil 11
  • World crisis - contagion Begining Propagation Impact Implications • Higher than • From housing • Fall of stock • No two crises expected default market market are alike in the U.S. sub- • To derivatives • Portfolio • Flexibility for prime market realocation specific events • To balance • End of "great sheets of banks • Higher volatility • Guarantee of moderation" sistemic stability • To inter-bank • Fall in liquidity loans • Higher demand • To credit for liquid assets markets in generalSource: Delta analysis 12
  • World crisis – challenges Developed economies • banking crisis • employment • confidence BRICs • exports • growth and inflation • international governance Latin America • social inclusion • infrastructure • public governanceSource: Delta analysis 13
  • Economic powers – new and emerging The economics of agglomeration and developmentSource: NASA; Delta analysis 14
  • Economic powers – new and emerging (cont.) Area Rank Population Rank GDP PPP Rank thous km2 millions US$ billions Russian Federation 17.075,2 1 138,8 9 1.477,0 6 Canada 9.984,7 2 34 37 1.335,0 15 United States 9.826,6 3 313,2 3 14.720,0 1 China 9.597,0 4 1.336,7 1 9.872,0 2 Brazil 8.512,0 5 203,4 5 2.194,0 7 Australia 7.686,9 6 21,8 55 889,6 17 India 3.287,6 7 1.189,2 2 4.046,0 4 Argentina 2.766,9 8 41,8 32 596,0 23 Kasakhstan 2.717,3 9 15,5 64 197,7 53 Sudan 2.505,8 10 45,1 29 98,8 70 population estimated for July 2011 PPP – purchasing power paritySource: United Nations, International Monetary Fund, Economic Commission for Latin America; Delta analysis 15
  • Dancing with the emerging economies • By the year 2050, the E7, the world´s seven emerging economies – China, India, Russia, Brazil, Indonesia, Mexico and Size Turkey – will overtake the economies of the G7 – US, Japan, Germany, UK, France, Italy and Canada • This will create exciting business and investment opportunities Opportunities across multiple markets, including consumer, agricultural, industrial, banking and logistics • In this scenario Latin America still faces significant economic Challenges challenges: i) public governance, ii) social inclusion, iii) infrastructure and iv) cost of doing businessSource: World Bank, International Monetary Fund, Goldman & Sachs; Delta analysis 16
  • Global trends – risks and opportunities • The BRICs are receiving significant attention Demographics • Population aging • Growing domestic incomes, relative political Megacities stability, and open foreign investment environments • Political and regulatory risks will pose ongoing Societal values challenges to foreign firms • Each country will present a unique set of Technology and Knowledge opportunities and risksSource: Monitor(2010): A Vision into the Future; Delta analysis 17
  • FundamentalsGlobal ScenarioLatin AmericaBrazil 18
  • A land of contrastsSource: Delta analysis 19
  • Geography Mexico Area million km2 Venezuela Argentina 2,8 Colombia Bolivia 1,1 Ecuador Brazil 8,5 Chile 0,8 Peru Brazil Colombia 1,1 Ecuador 0,3 Bolivia Mexico 2,0 Paraguay Paraguay 0,4 Chile Uruguay Peru 1,3 Argentina Uruguay 0,2 Venezuela 0,9Source: World Bank; Delta analysis 20
  • Institutional environment Doing Politics Economics Social Competitivity business Argentina x x x x x x x x x x Bolivia x x x x x x x x x x Brazil x x x x x x x x x x Chile x x x x x x x x x x Colombia x x x x x x x x x x Ecuador x x x x x x x x x x Mexico x x x x x x x x x x Paraguay x x x x x x x x x x Peru x x x x x x x x x x Uruguay x x x x x x x x x x Venezuela x x x x x x x x x x x x very good x x good x x neutral x x bad x x very badSource: United Nations, International Monetary Fund, Economic Commission for Latin America, International Finance Corporation; Delta analysis 21
  • Population• Area, population and density vary significantly. Brazil is the largest and most populated country in LA Population Average annual growth Density Millions, 2011 (est.) %, 2005-2010 People/km2, 2011 Argentina 42 1,0 15 Bolivia 10 1,8 9 Brazil 203 1,3 24 Chile 17 1,0 21 Colombia 45 1,3 41 Ecuador 15 1,1 50 Mexico 114 1,1 57 Paraguay 6 1,8 15 Peru 29 1,2 22,3 Uruguay 3 0,3 15Venezuela 28 1,7 31,1Source: World Bank, United Nations; Delta analysis 22
  • Population (cont.) Population (millions) Population in 2050 (millions) 1950 1975 2007 Low Medium High World 2.535 4.076 6.671 7.792 9.191 10.756 More developed regions 814 1.048 1.223 1.065 1.245 1.451 Less developed regions 1.722 3.028 5.448 6.727 7.946 9.306 Least developed countries 200 358 804 1.496 1.742 2.002 Other less developed countries 1.521 2.670 4.644 5.231 6.204 7.304 Africa 224 416 965 1.718 1.998 2.302 Asia 1.411 2.394 4.030 4.444 5.266 6.189 Europe 548 676 731 566 664 777 Latin America and the Caribbean 168 325 572 641 769 914 Northern America 172 243 339 382 445 517 Oceania 13 21 34 42 49 56 % of Latin America and the 6,8 8,0 8,6 8,2 8,4 8,5 CaribbeanSource: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat (2007). World Population Prospects: The 2006 Revision; Delta analysis 23
  • Economics Economic agenda • Local governments GDP growth and Increase in public have tried to income distribution and private maintain a investment credible economic agenda, with a few exceptions. The challenges are tremendous and Agenda should not be underestimated • Sudden shifts in the current Low interest rates Low and stable agenda are not and public debt inflation expectedSource: Delta analysis 24
  • Economics (cont.) GDP (US$ bill) official exchange GDP (US$ bill) PPP – 2010 rate – 20102.500 2.500 2.194 2.0242.000 2.000 1.5601.500 1.500 1.0041.000 1.000 596 500 500 432 351 344 283 285 260 277 199 154 115 19 57 17 41 48 33 48 0 0 Uruguay Uruguay Bolivia Venezuela Bolivia Venezuela Chile Mexico Paraguay Peru Chile Mexico Paraguay Peru Argentina Argentina Colombia Colombia Brazil Equator Brazil EquatorSource: United Nations, International Monetary Fund, Economic Commission for Latin America; Delta analysis 25
  • Economics (cont.) GDP PPP Inflation GDP growth Poverty Reseves US$ billions % % % of pop US$ billions Argentina 596,0 22,0 7,5 30,0 53,9 Bolivia 48,0 7,2 3,8 30,3 9,7 Brazil 2.194,0 4,9 7,5 26,0 290,4 Chile 260,0 1,7 5,3 11,5 26,1 Colombia 431,9 3,1 4,4 45,5 28,5 Ecuador 115,3 3,3 3,7 33,1 3,6 Mexico 1.560,0 4,1 5,0 18,2 116,4 Paraguay 33,3 7,2 14,5 18,8 4,1 Peru 276,9 1,5 8,7 34,8 44,1 Uruguay 48,4 6,9 8,5 20,9 7,7 Venezuela 344,2 29,8 -2,8 37,9 29,5 data for 2010 PPP – purchasing power parity Inflation – consumer price Population below poverty lineSource: United Nations, International Monetary Fund, Economic Commission for Latin America; Delta analysis 26
  • Economics (cont.)• Brazil and Mexico are the largest economies in LA. Growth rates have a strong dispersion. Brazil, for nearly two decades have grown slowly compared to other countries in the region GDP growth rate (real) GDP growth rate (real) GDP growth rate (real) %, 1992-2011 %, 2007 %, 2010 Argentina 2,7 8,7 7,5 Bolivia 3,4 4,6 3,8 Brazil 2,6 6,1 7,5 Chile 6,0 4,6 5,3 Colombia 2,7 6,3 4,4 Ecuador 2,3 2,0 3,7 Mexico 3,0 3,3 5,0 Paraguay 1,7 6,8 14,5 Peru 3,8 8,9 8,7 Uruguay 2,2 7,5 8,5Venezuela 1,5 8,2 -2,8Source: World Bank, International Monetary Fund; Delta analysis 27
  • Economics (cont.)• The production structure is similar, with differences for Bolivia and Paraguay (agriculture), Bolivia and Paraguay (industry), and Brazil and Uruguay (services) Agriculture Industry Services % of GDP 2010 , % of GDP 2010 , % of GDP 2010 , Argentina 9 32 60 Bolivia 40 17 43 Brazil 6 26 68 Chile 6 41 54 Colombia 9 38 53 Ecuador 6 36 58 Mexico 4 33 63 Paraguay 22 18 60 Peru 6 33 53 Uruguay 9 23 68Venezuela 4 35 61Source: World Bank, International Monetary Fund; Delta analysis 28
  • Economics (cont.)• There is a strong correlation between population and the labor force. Brazil, as expected, has by far the largest labor force, but other countries present higher growth rates. Unemployment is generally high Labor force Unemployment Millions of inhabitants, 2010 % of labor force, 2010 Argentina 16,6 7,9 Bolivia 4,2 6,5 Brazil 103,6 7,0 Chile 7,6 8,7 Colombia 21,3 11,8 Ecuador 4,6 5,0 Mexico 47,0 5,6 Paraguay 3,0 5,7 Peru 15,7 7,9 Uruguay 1,6 6,8Venezuela 13,3 12,1Source: World Bank, International Monetary Fund; Delta analysis 29
  • Economics (cont.)• Mexico (NAFTA) and Brazil are responsible for most of the international trade in LA Exports Imports Trade balance US$ billions, 2010 US$ billions, 2010 US$ billions, 2010 Argentina 68,0 52,6 15,4 Bolivia 7,0 5,4 1,6 Brazil 199,7 187,7 12,0 Chile 64,3 54,2 10,1 Colombia 40,2 36,3 4,0 Ecuador 17,4 17,7 -0,3 Mexico 303,0 306,0 -3,0 Paraguay 8,0 9,6 -1,6 Peru 33,7 25,7 8,0 Uruguay 6,7 8,3 -1,6Venezuela 64,9 31,4 33,5Source: World Bank, International Monetary Fund; Delta analysis 30
  • Natural resources and agriculture/livestock Agriculture/ Hydropower Minerals Oil/gas Other Livestock sunflower seeds, lemons, lead, zinc, tin, copper, soybeans, grapes, corn, fertile plains of the Argentina iron ore, manganese, oil tobacco, peanuts, tea, pampas uranium wheat; livestock soybeans, coffee, coca, tin, zinc, tungsten, X cotton, corn, sugarcane, Bolivia antimony, silver, iron, oil/gas rice, potatoes timber lead, gold coffee, soybeans, wheat, bauxite, gold, iron ore, rice, corn, sugarcane, manganese, nickel, X cocoa, bananas, apples, arable land, timber, Brazil phosphates, platinum, oil/gas lemons, citrus; beef, cellulose, fish tin, rare earth elements, poultry, pork uranium grapes, apples, pears, onions, wheat, corn, copper, iron ore, nitrates, X oats, peaches, garlic, Chile precious metals, asparagus, beans; beef, timber, fish, wool molybdenum poultry coffee, cut flowers, bananas, rice, tobacco, corn, sugarcane, cocoa coal, iron ore, nickel, Colombia X gold, copper, emeralds oil/gas beans, oilseed, vegetables; forest products; shrimp bananas, coffee, cocoa, rice, potatoes, manioc (tapioca), plantains, Ecuador X oil sugarcane; cattle, sheep, timber pigs, beef, pork, dairy products; balsa wood; fish, shrimpSource: CIA World Factbook; Delta analysis 31
  • Natural resources and agriculture/livestock Agriculture/ Hydropower Minerals Oil/gas Other Livestock corn, wheat, soybeans, rice, beans, cotton, silver, copper, gold, lead, Mexico zinc oil/gas coffee, fruit, tomatoes; timber beef, poultry, dairy products iron ore, manganese, Paraguay X limestone timber asparagus, coffee, cocoa, cotton, sugarcane, rice, potatoes, corn, plantains, grapes, oranges, pineapples, guavas, copper, silver, gold, iron bananas, apples, lemons, Peru X ore, coal, phosphate, oil/gas pears, coca, tomatoes, timber, fish potash mango, barley, medicinal plants, palm oil, marigold, onion, wheat, dry beans; poultry, beef, dairy products; guinea pigs beef, soybeans, rice, arable land, fish, wheat, lumber, dairy Uruguay X minor minerals products cellulose corn, sorghum, iron ore, gold, bauxite, sugarcane, rice, bananas, Venezuela X other minerals, diamonds oil/gas vegetables, coffee; beef, fish pork, milk, eggsSource: CIA World Factbook; Delta analysis 32
  • Industries Main industries food processing, motor vehicles, consumer durables, textiles, chemicals and petrochemicals, printing, metallurgy, steel, tourism Argentina mining, smelting, petroleum, food and beverages, tobacco, handicrafts, clothing Bolivia food processing and beverages, textiles, consumer durables, shoes, chemicals and petrochemicals, cement, lumber, tin, metallurgy, Brazil iron and steel, aircraft, motor vehicles and parts, other machinery and equipment, tobacco, wood and wood products, tourism copper, lithium, other minerals, foodstuffs, fish processing, iron and steel, wood and wood products, transport equipment, cement, Chile textiles, tourism textiles, food processing, oil, clothing and footwear, beverages, chemicals, cement; gold, coal, emeralds Colombia petroleum, food processing, textiles, wood products, chemicals Ecuador food and beverages, tobacco, chemicals, iron and steel, petroleum, mining, textiles, clothing, motor vehicles, consumer durables, Mexico tourism sugar, cement, textiles, beverages, wood products, steel, metallurgic, electric power Paraguay mining and refining of minerals, steel, metal fabrication, petroleum extraction and refining, natural gas and natural gas liquefaction, Peru fishing and fish processing, cement, textiles, clothing, food processing food processing, electrical machinery, transportation equipment, petroleum products, textiles, chemicals, beverages Uruguay Venezuela petroleum, construction materials, food processing, textiles; iron ore mining, steel, aluminum; motor vehicle assemblySource: CIA World Factbook; Delta analysis 33
  • Doing business• The Doing Business database provides objective measures of business regulations and their enforcement. They indicate the regulatory costs of business and can be used to analyze specific regulations that enhance or constrain investment, productivity, and growth Rank Rank Change in rank 2005 2006 Last two years Argentina 115 113 -2 Bolivia 149 148 -1 Brazil 127 124 -3 Chile 43 53 10 Colombia 39 38 -1 Ecuador 130 127 -3 Mexico 35 41 6 Paraguay 106 105 -1 Peru 36 46 10 Uruguay 124 122 -2Venezuela 172 170 -2Source: International Finance Corporation; Delta analysis 34
  • Doing business (cont.) Vibrant financial markets with a full array of financial products and services (Brazil, Chile and Mexico, mostly) Openness to Foreign Direct Investment (FDI); Brazil is the largest recipient of FDI in Latin America Prudent monetary and fiscal policies, solid macroeconomic position and controlled inflation (most counries) Domestic consumption-led growth (most counries) Booming middle class – better educated, more disposable income and spending (most counries) Increasing demand for imports – consumption and investment goods (most counries)Source: Delta analysis 35
  • FundamentalsGlobal ScenarioLatin AmericaBrazil 36
  • A land of contrastsSource: Delta analysis 37
  • Overview • 8.5 million km2 • More than 5,500 cities Geography • 7,500 km coastline • 84% of households in urban areas • 190 million inhabitants (census 2010) • Growth rate: 12.3% over 2000 Population • Life expectancy: 71 years • Poverty: 11% of population • Illiteracy rate: 11% Education and • More than 80% with water living standards • More than 90% with electricity • Ranks 65th in UN’s HDI • Labor force: 100 million Labor • Urban unemployment: 7,0% • Public/private investments Infrastructure • Main gaps: roads, railways, ports, airportsSource: IBGE, Bacen; Delta analysis 38
  • GDP GDP (US$ trill) official exchange GDP (US$ trill) PPP – 2010 rate – 201016 14,7 16 14,714 1412 12 9,910 108 8 5,76 5,4 6 4,0 4,34 3,3 4 3,0 2,3 2,6 2,2 2,0 2,0 2,2 2,2 2,2 1,82 1,4 1,5 20 0 Germany France Germany France Italy United States Italy United States Russia Russia China Japan China Japan India Brazil India Brazil United Kingdon United KingdonSource: World Bank, International Monetary Fund; Delta analysis 39
  • GDP (cont.) GDP growth (%) Savings and investment (% GDP)8,0 7,5 20,0 19,17,0 18,4 6,1 18,06,0 5,7 17,4 5,1 16,95,0 16,4 16,4 4,0 16,0 16,1 15,94,0 15,3 3,23,0 2,7 14,02,0 Gross savings 1,11,0 Gross investment 12,00,0 -0,2-1,0 10,0 2002 2004 2006 2008 2010 2002 2004 2006 2008 2010Source: IBGE; Delta analysis 40
  • GDP (cont.) Natural resources • Iron ore, manganese, bauxite, nickel, uranium, gemstones, oil, wood, and aluminum • 14% of world´s renewable fresh water Agriculture • 6% of GDP • Coffee, soybeans, sugarcane, cocoa, rice, livestock, corn, oranges, cotton, wheat, and tobacco Industry • 26% of GDP • Steel, iron ore, coal, commercial aircraft, chemicals, petroleum, machinery, motors, vehicles, auto parts, consumer durables, cement, and lumber Services • 68% of GDP • Mail, telecommunications, banking, transportation, commerce and computingSource: Delta analysis 41
  • GDP and population Inequalities • South/Southeast account for 73% of GDP and 57% of populations • Slow income level 8,1 convergence 5,1 • South/Southeast 13,1 27,6 • slower growth of GDP and population •North/Northeast/Middle-west • new frontier 8,7 7,1 56,8 42,6 % of GDP per capita % of GDP North 63,0 % of population Northeast 47,5data for 2010; GDP per capita US$ 10.900 16,3 Southeast 133,3 14,6 South 111,6 Middle-west 122,6Source: IBGE; Delta analysis 42
  • Rise of middle classe• Since 2002, around 25 million Brazilians have moved to the middle of the social pyramid. In 2010, the C class accounts for about 103 million Brazilians and will continue to expand in coming years. For the period between 2008 and 2010, the estimate is that the class C percentage of population will increase 21.5% 2003 2009 2014 % of pop and million individuals % of pop and million individuals % of pop and million individuals 8% 13 11% 20 16% 31 37% 66 50% 95 56% 113 27% 47 24% 44 20% 40 28% 49 15% 29 8% 16Source: Fundação Getúlio Vargas, IBGE; Delta analysis 43
  • Sustainable development Low and stable inflation Sustainable Income, investment, Social development employment inclusion growth strategy Public governanceSource: Delta analysis 44
  • Sustainable development (cont.) Sustainable development Economic policy Social policy Regional policy - inflation targeting - protection - incentives - floating exchange rate - focalization - scale and scope - fiscal control - efficiency - relocation • Good fundamentals • Growth of production, employment and income Virtuous cycle • Improvement in regulatory framework and risk mitigation • Social inclusion and income transfer programs • GDP growth and low inflation • Infrastructure expansion and new development vectors Expected results • Expansion of brazilian firms abroad (2011-2015) • Income distribuition and reduction of poverty • Change in labor force – higher qualificationSource: Delta analysis 45
  • Political environment Votes in second round Results and inaugural speech RR AP • Dilma Rousseff, from the Labor Party (PT), AM was elected president with 56% of valid PA CE MA RN votes PB PI PE AC RO TO SE AL • The runoff for several state elections also MT BA took place: in the end, 16 out of 27 elected DF state governors are from parties within the GO PTs coalition. This adds to an already Total electors 135.804.433 MG favorable picture in Congress, where MS ES support for Dilma is about 70% in both SP RJ houses PR SC Dilma Rousseff • Inaugural speech: José Serra RS • fight inflation • domestic economy • social policies to end poverty and Votes % homelessness Dilma 55.745.867 56,0 Serra 43.707.472 44,0Source: Tribunal Superior Eleitoral; Delta analysis 46
  • Business climate Growth and consumption • Macroeconomic stability • Growth led by domestic consumption and investiment • Emerging middle class Investment • Gaps in infrastructure • Higher demand for durable and non-durable goods • Attraction of foreign investment Demographics • Changing structure • Better educated • Higher income per capita Financial markets • Consolidated • Social inclusionSource: Delta analysis 47
  • Business climate (cont.) Business climate Investor consideration • Auto Industry: new players entered the • Political stability has been maintained market in the recent past. Capacity for almost three decades adjustment. Repositioning of major • There is a large domestic market brands • Favorable site for South America • Major Manufacturing Industries: expansion – foreign investment is petrochemicals, steel, mining, cement, welcome pulp and paper, and food processing are • Many state and local governments offer in expansion. Consolidation expected incentives to attract investment; foreign • Service Industries: now a significant investors are elegible for most incentives and growing part of the economy. Apart available from restrictions in the banking, finance • Local and foreign investors are treated and telecommunications sectors equally – joint-ventures with local (gradually being put down), foreign partners are favored but not essential investors may participate in service industries. Consolidation expected • Exports are being encouraged; trade barriers are gradually being reduced • High-Tech Industries: comprised mainly of the assembly of imported components and parts. Multinationals dominate, but there are several large domestic goups. Consolidation expectedSource: Delta analysis 48
  • Growth Acceleration Program 2 PAC 2 (2011-2014) city • PAC Cidade Melhor – major cities challenges energy and pre- citizenship • PAC Comunidade Cidadã – state sal presence Planning Investment • PAC Minha Casa Minha Vida – Development housing deficit • PAC Água e Luz Para Todos – transport housing universalization • PAC Transportes – expansion and water and interconnection energy • PAC Energia – renewable energy and development of pre-salSource: federal government; Delta analysis 49
  • Social agenda Fundamentals Education • Announced by former president Lula, in 2007, the objectives of the social agenda are: • consolidate Social Policy as a guaranty to citizen´s rights The social agenda is managed by the • reduce social inequality federal government, Social • integrate initiatives to promote Employment with initiatives inclusion opportunities and emancipation of throughout the poor families Executive • enhance and improve the integration of inter governmental agents, and articulate with States and Cities TechnologySource: federal government; Delta analysis 50
  • Regional development Multiplier effects NORTH • derived demand • income and employment NORTHEAST • new frontiers • new markets • new clusters MIDDLE-WEST energy • South/Southeast • focus – scale and scope sugar cane SOUTHEAST • sectors – oil & gas, steel education, agribusiness, energy (including biomass), ports construction cattle SOUTH pré-sal • North/Northeast/Middle-west soybean • Focus – frontier (new railroads industries) • sectors – agribusiness, retail, constructionSource: federal and local governments, companies; Delta analysis 51
  • World soccer cup 2014 Potential market – main drivers • North: infrastructure (transport/energy), NORTH housing • Northeast: infrastructure NORTHEASAT (transport/energy/telecom), industrial location, housing • Southeast: infrastructure MIDDLE-WEST (transport/telecom), housing • South: housing SOUTHEASAT • Middle-west: infrastructure (transport/energy/telecom), housing States Cities SOUTH North AM Manaus, Northeast CE, RN, PE e BA Fortaleza, Natal, Recife and Salvador Southeast MG, RJ e SP Belo Horizonte, Rio de Janeiro and São Paulo South PR e RS Curitiba and Porto Alegre Middle-west MT Brasília and CuiabáSource: Delta analysis 52
  • Risks Short-term Medium-term Long-term Population, mortality, fertility, and urbanization x x x x x x Religion x x x x x x Social structure x x x x x x Cultural unity and diversity x x x x x x Social conflict and participation x x x x x x Government and politics x x x x x x Economics x x x x x x Environment x x x x x x Regulation x x x x x x x x very relevant x x relevant x x indifferent x x not relevant x x very unrelevantSource: Delta analysis 53