Investing in infrastructure
in Brazil


Market research


September 2010
Disclaimer

  Visitors who access the website http://www.infrak.com (the “website”) and use this market report (the
  “rep...
Content


    • Macro-economics: Brazil, an attractive
      country


    • The infrastructure sector in Brazil: an overa...
GDP: a growth economy
 REAL GDP growth at 2009 prices and 2008-2050 forecast
 Percentage
                                 ...
Population: the key to sustained
competitiveness
 Brazil: population                                                      ...
Brazil is one of the main FDI destination
AT Kearney 2010 FDI Confidence Index®
Values calculated on a 0 to 3 scale
      ...
Motorization rate: strongly increasing

 Evolution of the motorization rate 2000-09                                       ...
Brazil is a serious economic power
  Comparison of BRICs countries
                               Brazil                  ...
Content


    • Macro-economics: Brazil, an attractive
      country


    • The infrastructure sector in Brazil: an
     ...
Brazil is moving forward in PPPs (1/2)

          High                Stage 3
                                            ...
Brazil is moving forward in PPPs (2/2)
    Selection of some countries at different stage of development of PPPs




     ...
Forecasted investments in infrastructure
Forecasted investments in infrastructure
Brazilian R$ Billions
                  ...
PAC: Government Accelerated Growth
  Programme (1/2)
    Expectations for PAC1 2007-09                                    ...
PAC: Government Accelerated Growth
Programme (2/2)                                                                        ...
Infrastructure finance perspectives

                           Main institutions     Infrastructure financing role
      ...
Content


    • Macro-economics: Brazil, an attractive
      country


    • The infrastructure sector in Brazil: an overa...
Attractiveness of the different
infrastructure sub-sectors

           Types of projects                Main players      ...
Main investment opportunities (1/2)
                                                                                      ...
Main investment opportunities (2/2)
                                                                                      ...
FIFA 2014 and Rio Olympics 2016 impact
  FIFA World Cup 2014                       Rio Olympics Games 2016

  • Projects c...
Who we are
We are civil engineers and management consultants. We understand infrastructure,
from the details of any specif...
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Infra k brazil infrastructure 30aug2010.

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Brazil is one of the most attractive markets for infrastructure in the World today thanks to favourable macroeconomics, a competitive infrastructure sector developing fast and a pipeline with specific projects close to be a reality.


At the macro-economic level: aprox. 4% stable projected GDP growth, an increasing population (close to 200 millions people today), being one of the main recipient of forign direct investment worldwide and a rapidly increasing motorization rate, shape a bright future in the short and long term

Brazil is moving forward in Public Private Partnerships, with a lot of projects in railways, roads and ports. There are local and international players and a stable legal framework allowing an increasing number of projects being tendered. The government Accelerated Growth prgram (PAC) is making progresses despite a slow start. Current expectations are high, with investments of more than US$500 billons planned in the period 2011-14

Opportunities for investment in infrastructure in Brazil exist mainly in roads, railways, aiports, stadiums and energy. The fact that Brazil will host the two premier world sports events, FIFA World Cup 2014 (12 host cities) and Rio Olympic Games 2016 is pushing all this infrastructure development. Brazil is a relevant market for any global player in infrastructure. Are you going to miss it?

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Infra k brazil infrastructure 30aug2010.

  1. 1. Investing in infrastructure in Brazil Market research September 2010
  2. 2. Disclaimer Visitors who access the website http://www.infrak.com (the “website”) and use this market report (the “report”) do so on the following conditions: Infra-k pays the utmost care and attention to the content that it has placed on the Website. Nevertheless, we cannot exclude the possibility that the Website may contain flaws or incorrect or incomplete content. Visitors use the content placed on the Website at their own risk. Infra-k is not liable for damage suffered as a consequence of flaws, incorrect or incomplete content on the Website. Nor is Infra-k liable for damage suffered as a consequence of the use of, distribution of or the reliance on the content placed on the Website. Infra-k does not give any guarantees with respect to the quality of the content and/or reliability of the sources to which this report refers to. Infra-k is not liable for damage suffered as a consequence of the use of the content of these sources in whatever way. Visitors are permitted to reproduce, make public or in any way, commercially exploit the content on the Website, only under these conditions. This report has been prepared by Infra-k for his clients. In preparing this report, Infra-k has used mostly information available from sources publicly as of September 2010. Although the material contained herein is believed to be accurate in all material respects, no express or implied representation or warranty as to the accuracy or completeness of such information is made by Infra-k. Nothing contained herein is, or shall be, relied upon as a promise or representation as to the future. The contents of this document are subject to corrections or change at any time and Infra-k will not notify of such corrections or changes. No responsibility or liability (express or implied) is accepted for any errors, omissions or misstatements by Infra-k 1
  3. 3. Content • Macro-economics: Brazil, an attractive country • The infrastructure sector in Brazil: an overall perspective • Specific investment opportunities in infrastructure 2
  4. 4. GDP: a growth economy REAL GDP growth at 2009 prices and 2008-2050 forecast Percentage India 5,8% China 4,7% USA 2,4% Brazilian Real crisis and 6,1 5,7 Lula´s election 5,1 4,3 4,0 3,8 3,2 2,7 1,3 1,1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008 - 2050 Brazil´s growth story is forecasted to continue at a solid pace ´ Source: Banco Central do Brasil; PWC 3
  5. 5. Population: the key to sustained competitiveness Brazil: population 5th most populated country Millions of inhabitants in 2008 and 2050 215 183 190 171 159 147 1990 1995 2000 2005 2008 E 2050 One of the main advantages of the Brazilian economy is the high availability of labor resources which is predicted to remain stable in the coming decades Source: IBGE (Instituto Brasileiro de Geografia e Estatistica), United Nations 4
  6. 6. Brazil is one of the main FDI destination AT Kearney 2010 FDI Confidence Index® Values calculated on a 0 to 3 scale Vs ranking Low confidence High confidence 2009 China 1,93 = •Brazil´s ´ USA 1,67 economy is one of the main India 1,64 recipient of Brazil 1,53 foreign direct investment (FDI) Germany 1,43 •Lately, the Poland 1,35 45 Bi. US$ improvements in inward inflow institutional Australia 1,33 credibility and in 2008 Mexico 1,32 regulatory framework are Canada 1,32 helping to UK increase FDI 1,32 Source: AT Kearney; United Nations 5
  7. 7. Motorization rate: strongly increasing Evolution of the motorization rate 2000-09 59 Millions of vehicles Vehicles per 1.000 inhabitants (x2 in 2000-09) 285 311 262 243 216 228 196 207 174 185 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Strong increase in the motorization rate in the last decade, showing the fast modernization of the country Source: DENATRAN (Departamento Nacional de Transito; Ministerio das Cidades); IBGE; Infra-k analysis 6
  8. 8. Brazil is a serious economic power Comparison of BRICs countries Brazil Russia China India • 190 millions • 142 millions • 1,328 millions • 1,148 millions Population* • 1.4% growth • 0.4% growth • 0.6% growth • 1.7% growth rate rate rate rate • 1,981 bi. USD • 2,260 bi. USD • 8,148 bi. USD • 3,357 bi. USD • 10,325 USD • 15,937 USD • 6,136 USD per • 2,924 USD per GDP** per capita per capita capita capita • 5.8% growth • 9.2% growth • 13.4% growth • 10.2% growth • Imports / • Imports / • Imports / • Imports / Trade balance exports: 223 / exports: 369 / exports: 1,233 exports: 372 / 226 bi. USD 523 bi. USD / 1,580 bi. USD 294 bi. USD • 45 billion • 70 billion • 138 billion • 41 billion FDI USD in 2008 USD in 2008 USD in 2008 USD in 2008 Brazil, as one of the largest of the world´s developing economies, will play a ´ relevant role in the global economy * Population in 2008; growth rate in the period 1998-2008 ** Nominal GDP in billion USD at PPP; GDP per capita in USD at PPP; GDP annual growth in the period 1998-2008 in USD at PPP 7 Source: KPMG and Infra-k analysis
  9. 9. Content • Macro-economics: Brazil, an attractive country • The infrastructure sector in Brazil: an overall perspective • Specific investment opportunities in infrastructure 8
  10. 10. Brazil is moving forward in PPPs (1/2) High Stage 3 UK Australia Market development curve Ireland Stage 2 Netherlands Spain Sophistication Italy France New Zealand Canada US Greece Japan Portugal Germany Stage 1 Belgium South Africa China Hungary Denmark Mexico India Czech Republic Finland Slovakia Bulgaria Brazil Latvia Croatia Poland Russia Albania Low Low Activity High Brazil is still in the Stage 1 but remains as one of the countries with the most activity at this stage 9 Source: Deloitte
  11. 11. Brazil is moving forward in PPPs (2/2) Selection of some countries at different stage of development of PPPs Health&Hospitals LEGEND Sports&Leisure Heavy Railway accomodation Light Railway 0 Discussions ongoing Wastewater 1 Projects in procurement Defence Housing Schools 2 Many procured projects, Airports Central Water& Prisons Roads some projects closed Ports 3 Substantial number of closed Country IT projects 4 Substantial number of closed projects, majority of them in UK 4 4 4 4 4 4 4 4 4 4 4 4 4 4 operations Australia 1 4 1 1 2 2 4 3 3 1 4 1 2 3 Spain 1 1 - - 2 - 4 1 0 1 4 0 0 3 Canada 1 - - - 2 - - 0 - 1 2 1 1 1 Mexico - 1 - - 1 - - 0 - 1 1 1 - 0 Brazil - 0 - - - - 2 - 1 0 3 - 0 0 Brazil has made progresses in PPPs, specially in railways, roads and ports, but there is still room for improvement 10 Source: PWC and Infra-k analysis
  12. 12. Forecasted investments in infrastructure Forecasted investments in infrastructure Brazilian R$ Billions 274 14 +37% 33 199 29 • Investments in basic Ports 5 infrastructure are Roads 23 expected to soar: 39 Railways 16 −Ports: +203% Sanitation 22 67 −Roads: +45% Telecom 66 −Railways: +82% −Sanitation: +77% 92 Energy 68 2005-2009 2010-2013 11 Source: APE/BNDES; GT Investimento
  13. 13. PAC: Government Accelerated Growth Programme (1/2) Expectations for PAC1 2007-09 Projects completed under PAC1 2007-09 Social and Transportation urban Transportation 12% 16% 34% Total Total R$504 Bi. R$257 Bi. 56% Social and 28% urban Energy 45% Energy Expectations for PAC1 were quite high but the real execution of projects has been well below the targets 12 Source: Financial Times; Federal Government/Contas Abertas; National Treasury; Ministry of Finance
  14. 14. PAC: Government Accelerated Growth Programme (2/2) Transportation Energy Social and urban Expectations for PAC2 2011-14 Logistics Railways Project1 Highways Health, education 1,3% 4,6% 6,8% Subsidized home Other energy 5,0% 4,7% loan programme 4,1% 7,5% Urbanisation 3,2% of favelas Expectations for Total PAC2 are much R$959 Bi. more aggressive Oil and natural 29,8% gas 18,4% Mortgage finance 14,6% Electricity infrastructure 13 Source: Financial Times; Federal Government/Contas Abertas; National Treasury; Ministry of Finance
  15. 15. Infrastructure finance perspectives Main institutions Infrastructure financing role •BNDES •BNDES (National development bank) State-owned •Banco do Brasil is the main provider of long term banks •Caixa Economica financing for any infra project Federal •Itaú Unibanco •Limited participation so far (co- Private •Santander financing with BNDES) banks •Bradesco •Market starting to develop •Axxon •First infra funds launched Private •Carlyle •Equity financing plays a very equity •Santander important role houses •Franklin Templeton Capital markets (both equity and debt) are at a very incipient stage, but they are starting to grow given the huge amount of capital needed to fund the large pipeline of projects 14 Source: Infra-k analysis
  16. 16. Content • Macro-economics: Brazil, an attractive country • The infrastructure sector in Brazil: an overall perspective • Specific investment opportunities in infrastructure 15
  17. 17. Attractiveness of the different infrastructure sub-sectors Types of projects Main players Key success factors • Few PPP projects • International operators • Select the right business opportunity and be a partner Airports to Infraero • Very large PPP opportunities • Large consortia of specailized • Local partners selection operators and OEMs with Railways local construction companies • Few PPP projects but • Local and international • Tender bidding skills Roads profitable and already specialized operators • M&A capabilities to acquiere developed model current operators • Many projects but profitable • Local construction and real • Find a profitable business model still to be defined estate players model Stadiums • Few and large projects in • Local and international • Local partners selection generation specialized players Energy • PPP opportunities in trasnmission 16
  18. 18. Main investment opportunities (1/2) Estimated investment Project R$ Millions • Passeger terminal expansion of the Confins international airport in Belo Horizonte (MG) • 216 • Passenger Terminal 3 and runways in Sao Paulo international airport / Guarulhos (SP) • 1,370 • New traffic control tower and passenger terminal in Sao Paulo airport / Congonhas (SP) • 300 • Expansion of Rio de Janeiro international airport / Galeao (RJ) • 688 Airports • Runway expansion in Porto Alegre international airport • 122 • Passenger terminal expansion in Brasilia international airport (DF) • 439 • Passenger terminal expansion and new runway in Manaus international airport (AM) • 794 • Passenger terminal expansion in Fortaleza international airport (CE) • 525 • High speed railway Sao Paulo - Rio de Janeiro • 34,600 • Airport Express Railway from Sao Paulo downtown to SP Intl. Airport / Guarulhos (SP) • 1,440 • Rio de Janeiro subway (RJ) • 1,150 • Curitiba subway (PR) • 2,000 • Centralized system of fees collection in Sao Paulo metropolitan area (smart card) (SP) • 220 Railways • Transcatarinense railway (SC) • 1,000 • South SP Railway ring (Ferroanel Sul) (SP) • 333 • Litoranea railway (SC) • 954 • North-South railway – 2,258 km on North and Central region • 6,400 • Transnordetina railway – 1,728 km of railways on Northeast region • 4,500 • Rodoanel Sao Paulo (SP ringroad) – East part (SP) • 1,750 • Rodoanel Sao Paulo (SP ringroad) – North part (SP) • 1,600 • ERS 010. Progresso highway. Porto Alegre (RG) • 4,500 Roads • Federal roadways concession program: BR-116 Minas Gerais, BR-381 Belo Horizonte, • N.A. BR-040 Brasilia • Road privatization in Minas Gerais. 13 packages (MG) • N.A. 17
  19. 19. Main investment opportunities (2/2) Estimated investment Project R$ Millions • Mané Garrincha Stadium – Brasilia (DF) • 600 • Verdao stadium – Cuiabá (MT) • 430 • Arena da baixada Stadium – Curitiba (PR) • 138 • Castelao Stadium – Fortaleza (CE) • 400 • Vivaldao Stadium – Manaus (AM) • 580 FIFA World • Dunas Stadium – Natal (RN) • 301 Cup • Beira Rio Stadium – Porto Alegre (RS) • 130 stadiums • Arena Sao Lourenço – Recife (PE) • 500 • Maracaná Stadium – Rio de Janeiro (RJ) • 430 • Fonte Nova Stadium – Salvador (BA) • 550 • Morumbi Stadium – Sao Paulo (SP) • 250 • Joaquim Americo Guimaraes Stadium – Curitiba (PR) • 204 • Santo Antonio hydroelectric power plant – 1st plant of the Madeira complex (3,150 MW) • 5,200 • Jirau hydroelectric power plant – 2nd plant of the Madeira complex (3,300 MW) • 5,000 • Belo monte hydroelectric power plant (5,681 MW) • 3,000 Energy • Angra 3 nuclear power plant (11,181 MW) • 7,000 • Madeira transmission system • 521 • Interconnection North-Northeast • 279 • Sao Paulo water and sewage company expansion – PPP projects • N.A. • Santa Catarina Logistics hub (several ports) • 400 • Multimodal Tiete Paraná hydroway (alcohol pipeline) • 1,400 Other • 262 • Datacenter for Banco do Brasil and Caixa Economica Federal – Brasilia (DF) projects • 4,560 • Porto Maravilha project (RJ) • Canoas Prison Complex • 2,800 • Petrolina irrigation project • 474 18
  20. 20. FIFA 2014 and Rio Olympics 2016 impact FIFA World Cup 2014 Rio Olympics Games 2016 • Projects coordinated by each of the • The project is coordinated by 12 host cities states & municipal Federal, State and City governments governments as well as by the • Federal government involved in Brazilian Olympic Committee major infrastructure areas through the Rio 2016 Organizing • Investments to build and reform Committee but most of the efforts stadiums around US$5.7 billions and decision power concentrated at • Estimated number of tourists during the City level the event: 500,000 • 11 permanent and 4 temporary • Commercial air traffic should double installations to be built until 2014 • A bus rapid transport system to be • Large investments in hotels, ports implemented as well as a and airports modernisation of the subway • Regeneration of Rio´s historic port area • +15% increase in tourism expected Brazil will host the world´s 2 premier sporting events in a time span of 2 ´ years 19
  21. 21. Who we are We are civil engineers and management consultants. We understand infrastructure, from the details of any specific project to the overall vision and strategy of any trend or policy Why you should trust us We simply ask you to try our services. Please subscribe to Infra-knowledge and see what we can do for you and your research needs on PPP/infrastructure. We just work with reliable sources of information, the most trusted names, combined with local knowledge in selected countries. Our proprietary research reaches the highest levels of quality. Additionally, we can work on specific research requests, with very affordable pricing schemes thanks to our market knowledge and experience. Our values & vision 1. Deliver the best quality content on PPP/infrastructure at a global scale 2. Be your research partner on the projects, countries or topics you work daily 3. Make available all the valuable data, analysis and insight to help you make your best decisions on infrastructure 20
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