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Brazil Redux

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Presentation at the Australian Department of Foreign Affairs and Trade

Presentation at the Australian Department of Foreign Affairs and Trade


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  • 12 milhoes de familias sob Bolsa Familia
  • Transcript

    • 1. BRAZIL'S REDUX:The Long-Awaited Emergence22 July 2010Department of Foreign Affairs and Trade
      Patrick Carvalho
      MA International Relations – University of Wollongong
      MSc Economics – Getulio Vargas Foundation
      PhD Candidate in Economics – ANU
      Brazilian Licensed Lawyer
      Former Head of Economic Studies Division at the
      Federation of Industries of Rio de Janeiro
    • 2. Sections
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      The Change of Paradigm
      The Grand Test: The Current World Crisis
      Back to the Future
      Political Scenario: The 2010 Presidential Election
      Appendix: Brazilian Macroeconomic Time-series
    • 3. Sections
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      The Change of Paradigm
      The Grand Test: The Current World Crisis
      Back to the Future
      Political Scenario: The 2010 Presidential Election
      Appendix: Brazilian Macroeconomic Time-series
    • 4. Basic Facts
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Federative Republic of Brazil
      Extension Area: 8.5 Mil. km2
      Urban Rate: 86.1%
      Bicameral Presidential System
      Federation of 26 States
      (5,564 Municipalities over 5 regions)
      Official Language: Portuguese
      Magna Carta: Constitution of 1988
      Currency: REAL (R$)
      GDP: US$ 1.6 Tril.
      Population: 194 Mil.
      GDP per capita: US$ 8,108
    • 5. Basic Facts
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Population:
      • Gender Distribution: 48.7% Men / 51.3% Women
      • 6. Racial Composition: 48.4% White / 50.6 % Black&Mulatto / 0.9% Others
      • 7. Age Demographics: 25.7% Children / 64.3% Adults / 10.0% Elderly (over 60 years)
      • 8. Life Expectancy: 72.7 years
      • 9. Population Growth Rate: 0.98% per year
      • 10. Human Development Index: 0.813
      • 11. GINI Coefficient: 0.552
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      Composition of the Gross Domestic Product
      Demand Side of GDP
      Supply Side of GDP
      Source: IBGE – GDP in 2009
    • 12. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      Position of Selected Goods in World Production & Trade
    • 13. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      Main Exports & Destinations in 2009(share over aggregate exports)
    • 14. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      Energy Supply Matrix
      Source: Ministry of Energy of Brazil
    • 15. Sections
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      The Change of Paradigm
      The Grand Test: The Current World Crisis
      Back to the Future
      Political Scenario: The 2010 Presidential Election
      Appendix: Brazilian Macroeconomic Time-series
    • 16. The Change of Paradigm
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Prelude: The Real Plan (1994)
      The Macroeconomic Stability Tripod:
      • Inflation Targeting (1999)
      • 17. Flexible Exchange Rate (1999)
      • 18. Fiscal Responsibility Act (2000)
      The China Effect
    • 19. The Change of Paradigm
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The China Effect
      Source: Economist Inteligence Unit
    • 20. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Change of Paradigm
      Old Dynamics:
      External Crisis -> Devaluation -> (Dollarized) Debt Explosion & Inflation -> Fiscal & Monetary Contraction -> RECESSION (The Hen's Flight Business Cycle)
      Current Dynamics:
      External Crisis -> Devaluation -> Net External Debt Creditor & Anchored Inflation Expectations -> Fiscal & Monetary Expansion -> Short Slowdown
    • 21. The Change of Paradigm
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Business Cycles in Brazil
    • 22. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Change of Paradigm
      • Steady currency appreciation since 2003
      • 23. Tamed prices through inflation targeting
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Source: The Economist, Nov 12, 2009
      The Change of Paradigm
      • Better performance of monetary stimulus
      • 24. Lower interest rates & expansion of credit
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Change of Paradigm
      • The China Effect on Brazil`s terms of trade boosted exports, mitigating external vulnerability
      • 25. Current Account under control
      • 26. Composition of Curr.Acc.:
      -Higher trade balances
      -Lower debt services
      -Higher profit & dividends remittances
    • 27. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Change of Paradigm
      • First boom of FDI led by privatisations
      • 28. Current FDI inflows rely on market stability and growth
      Source: The Economist, Nov 12, 2009
    • 29. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Change of Paradigm
      • FDI + Export boost fueled the accumulation of extensive International Reserves, eliminating external vulnerability
      • 30. Net External Creditor since 2007
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Change of Paradigm
      • Primary Fiscal Surplus (ex-debt interest services) since 2000
      • 31. Nominal Fiscal Surplus expected from 2013 onwards
      • 32. Fiscal adjustment came mainly through an increase in taxation
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Change of Paradigm
      • As a result, Brazil significantly reduced its Public Debt since 2002
      • 33. Currency appreciation + domestic boom + fiscal adjustment led to a Net External Creditor position since 2007
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Change of Paradigm
      • The improvement of macroeconomic fundamentals opened road to a higher average growth rate, with emphasis in investments
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Change of Paradigm
      • New job market dynamics
      • 34. Highest level of purchasing power since 1979
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Source: The Economist, Nov 12, 2009
      The Change of Paradigm
      • GDP growth followed by strong job creation & higher purchasing power reduces class inequality and enhances mass consumer market
    • Sections
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      The Change of Paradigm
      The Grand Test: The Current World Crisis
      Back to the Future
      Political Scenario: The 2010 Presidential Election
      Appendix: Brazilian Macroeconomic Time-series
    • 35. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Grand Test: The Current World Crisis
      • The elements of the World Financial Crisis were not present in the Brazilian economy
      • 36. Irresponsible expansion of credit-Housing bubble-High leverage of financial and banking system
      • 37. Strong economic fundamentals reduced the impact of the World Crisis
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Grand Test: The Current World Crisis
      • The elements of the World Financial Crisis were not present in the Brazilian economy
      • 38. Although the rapid credit expansion over the previous years…
      …the credit ratio is still modest for international standards
    • 39. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Grand Test: The Current World Crisis
      • The elements of the World Financial Crisis were not present in the Brazilian economy
      • 40. Brazil presents one of the lowest percentage shares of household income committed to mortgage and private debt
      • 41. Historically high levels of Interest Rate + economic instability prevented the accumulation of mortgages
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Grand Test: The Current World Crisis
      • The elements of the World Financial Crisis were not present in the Brazilian economy
      • 42. Healthy banking system with high relation between capital and risk weighted assets
      • 43. Balanced mix of credit portfolio among State, Domestic Private and Foreign Lenders.
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Grand Test: The Current World Crisis
      • The elements of the World Financial Crisis were not present in the Brazilian economy
      • 44. Resulting in faster recovery of the market values of Brazilian banks
      • 45. Three Brazilian banks (2 Privates, 1 Public) are ranked among the largest in the world
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Grand Test: The Current World Crisis
      • Strong economic fundamentals reduced the impact of the World Crisis
      • 46. Brazil at the onset of the current World Crisis: better prepared than in the past…
      …less turbulence in the present
    • 47. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Grand Test: The Current World Crisis
      • Strong economic fundamentals reduced the impact of the World Crisis
      • 48. Recovery of exports relies on the demand of foreign countries and on the international price of commodities
      Exports & Imports12 Month-moving average (US$ Bil.)
      Exports
      Imports
      Source: FUNCEX
    • 49. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Grand Test: The Current World Crisis
      • Strong economic fundamentals reduced the impact of the World Crisis
      • 50. After strong adjustment, Industrial Output recovers to pre-crisis level
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      The Grand Test: The Current World Crisis
      • Strong economic fundamentals reduced the impact of the World Crisis
      • 51. Expansion of credit, jobs and wages pick up the retail trade market, after a slowdown period
    • BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      IBOVESPA in points
      The Grand Test: The Current World Crisis
      • Strong economic fundamentals reduced the impact of the World Crisis
      • 52. International confidence in the Brazilian economy boosts the Domestic Stock Market
    • Sections
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      The Change of Paradigm
      The Grand Test: The Current World Crisis
      Back to the Future
      Political Scenario: The 2010 Presidential Election
      Appendix: Brazilian Macroeconomic Time-series
    • 53. Back to the Future
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Sound Macroeconomic Fundamentals
      • Low Inflation
      • 54. Unprecedented low level of Interest Rates
      • 55. Rising Mass Consumption Class based on low unemployment rate and higher salaries
      • 56. Better Terms of Trade
      • 57. Strong and flexible currency
      • 58. Positive fiscal budgets
      • 59. Net External Creditor with robust International Reserves
      • 60. Big recipient of FDI
      • 61. Solvent and transparent financial and banking system
      • 62. Investment Grade and lower country-risk premiums
      Young and large Population
      Stable and nonviolent Democracy
      Big Natural Reserves (including water basins)
      Pre-salt Oil & Gas Reserves
      Potential to consolidate as the main food supplier to the world (increasing productivity, large unexploited/cheap lands and Doha Round)
      2014 World Cup and 2016 Olympics
      High housing deficit
      Increasing levels of investments at macro and micro level
    • 63. Back to the Future
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      • According to the Brazilian Development Bank, the total amount of major investments announced for 2010-2013 is US$ 700 Bil.
    • Back to the Future
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      • The Country Housing Deficit is estimated at 8 million units
    • Back to the Future
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Challenges
      Oversized and convoluted tax system
      Distorted labour market
      Poor educational system
      Slow judicial system and bureaucracy
      Weak infrastructure
      Environmental issues
    • 64. Sections
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      The Change of Paradigm
      The Grand Test: The Current World Crisis
      Back to the Future
      Political Scenario: The 2010 Presidential Election
      Appendix: Brazilian Macroeconomic Time-series
    • 65. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Political Scenario: The 2010 Presidential Election
      President is elected directly to a four-year term, with a limit of two terms. Lula is not eligible, since he was elected in 2002 and re-elected in 2006.
      Two Ballot Rounds: October 3rd & 31st
      Two Main Parties: PSDB (Jose Serra) vs PT (Dilma Roussef)
      All candidates are commited to maintain the macroeconomic stability tripod
      Source: IBOPE – July 3rd, 2010
    • 66. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Political Scenario: The 2010 Presidential Election
      Lula`s appointee (who plans to return in 2014…)
      PT (Labour Party) since 2001
      63 years old
      Former Marxist / Economist
      Political Prisoner in 1970-1972
      Minister of Energy, 2003-2005
      Chief of Staff (highest-ranking member of the Executive Office of Brazil, senior aide to the President) 2005-2010
    • 67. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Political Scenario: The 2010 Presidential Election
      President of the National Student Union in1964
      Exiled from 1964-1978 in Chile, Argentina and US
      Member of Parliament 1986–1994
      Elected Senator for Sao Paulo in 1995–2002
      Minister of Planning 1995–1996
      Minister of Health 1998–2002 (pioneer of generic drugs policy)
      Mayor of Sao Paulo City 2005–2006
      Governor of Sao Paulo State 2007–2010
      FHC’s political heir
      Runner-up for Presidential election against Lula in 2002
      67 years old
      PhD in Economics at Cornell University
      Founder of PSDB (Party of Social Democracy of Brazil) in 1988
    • 68. Sections
      BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Basic Facts
      The Change of Paradigm
      The Grand Test: The Current World Crisis
      Back to the Future
      Political Scenario: The 2010 Presidential Election
      Appendix: Brazilian Macroeconomic Time-series
    • 69. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Appendix: Brazilian Macroeconomic Time-series
      Source: Moody’s Statistical Handbook, May/2010
    • 70. BRAZIL'S REDUX: The Long-Awaited Emergence 22 July 2010, Department of Foreign Affairs and Trade Patrick Carvalho
      Appendix: Brazilian Macroeconomic Time-series
      Source: Moody’s Statistical Handbook, May/2010
    • 71. BRAZIL’S REDUX: The Long-Awaited Emergence22 July 2010, Department of Foreign Affairs and Trade
      THANK YOU
      Patrick Carvalho
      MA International Relations – University of Wollongong
      MSc Economics – Getulio Vargas Foundation
      PhD Candidate in Economics – ANU
      Brazilian Licensed Lawyer
      Former Head of Economic Studies Division at the
      Federation of Industries of Rio de Janeiro