Brazilian Economy Outlook

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Brazilian Economy Outlook

  1. 1. Ministry of FinanceB R A Z I L I A N G O V E R N M E N T Brazilian Economic OUTLOOK 14 th Special Edition | February | 2012
  2. 2. Ministry of FinanceSummaryForeword 7Economic Activity 9Employment and Income 33Inflation 45Interest Rates and Credit 57Fiscal Policy 75External Sector 91 Special Edition | Year 2011International Overview 109Special Section – Brazil: A Decade of Progress 135Glossary 154 3
  3. 3. NOTEBrazilian Economic Outlook is published by the Ministry of Finance.The report consolidates and updates the main macroeconomicvariables resulting from the economic policy conducted by thefollowing Secretariats from the Ministry of Finance: Economic PolicySecretariat (SPE), National Treasury Secretariat (STN), InternationalAffairs Secretariat (SAIN), Secretariat for Economic Monitoring(SEAE) and Federal Revenue Secretariat (RFB).Data used in this report were updated by February 2nd, 2012.
  4. 4. Ministry of Finance2011 at a glance and prospects for 2012 ForewordIn the global context, 2011 was affected by the worsening of the 2008 financial crisis, sovereign debt problemswithin the Eurozone and the political gridlocks in the U.S. The quantitative easing policy fostered by the UnitedStates and Europe turned out to put upward pressure on commodity prices, fueling global inflationary processand leading to the breaching of inflation targets in most inflation targeting countries.The Brazilian government acted promptly to quell the acceleration of prices via macro-prudential and fiscalmeasures. It’s worth noting the fiscal consolidation program issued early in 2011, which helped to meet thefull primary surplus at the end of the year and had a decisive role in the monetary easing process. In the FXmarket, the management of capital inflows has been recognized by international experts and agencies, and ithas helped price stabilization policy in Brazil, in addition to financial stability.In 2011, the success of the economic growth model adopted by the Brazilian government included severalimportant measures, such as: new stages of “PAC” investment and strategy program, and “Minha Casa, MinhaVida” housing program; expansion of the “Bolsa Familia” conditional cash transfer program along with the“Brasil sem Miseria” program; the new industrial policy in the “Brasil Maior” plan; expansion of the “Simples”tax regime for microenterprises; “Pronatec” program aiming technical and professional qualification of workersand “Crescer”, a productive-oriented microcredit program. Furthermore, several measures of bureaucratic Special Edition | Year 2011rightsizing and modernization were taken by the Internal Revenue Service and the National Treasury. It is stillworth mentioning the consolidation of a long-term minimum wage increase policy, with a real increase of66% since 2003, reaching R$ 622 in January 2012.As a result of the growth model, Brazil has become the world’s 6th largest economy. Forecasts from internationalagencies indicate that the country may be the 5th largest world power in the near future. The year of 2012 has 7
  5. 5. Ministry of Financestarted with a more competitive exchange rate, lower interest rates, sound fiscal and financial institutions, low Forewordunemployment, controlled inflation, high consumer and business confidence, along with a strong portfolio ofpublic and private investments for the coming years in various sectors of the economy.For 2012, the Federal Government will work to support the well-succeeded growth model, encouraging publicand private investments in infrastructure and industry, increasing professional qualification, and substantiallyreducing extreme poverty. Special Edition | Year 2011 8
  6. 6. Brazilian EconomyOUTLOOK Economic Activity Ministry of Finance B R A Z I L I A N G O V E R N M E N T
  7. 7. Ministry of FinanceEconomic growth even under worsening international crisis Economic ActivityBy the third quarter of 2011, government policies and international crisis worsening have put the Brazilian economy intoa process of accommodation. From that time on, policies have been gradually withdrawn, especially those for easingeconomic activity. Late in 2011, the country’s economic performance started to rebound even under the aggravation inthe international landscape. Such recovery can be seen through the economic indicators such as Economic Activity Indexof the Central Bank of Brazil, industrial production and energy consumption.The quality in 2011 GDP growth has been even more important than its expansion pace. Investment has grown fasterthan household and government consumptions, which indicates increase in the productive capacity higher than demandin the coming years. Thus, the Government announced a set of measures in 2011 focusing on the strengthening of thedomestic industry. Such policy is called “Plano Brasil Maior” filled with tax proposals, trade policy and a wide workforcequalification program.It’s also worth mentioning the vigorous growth of “PAC” investment and strategy program, from R$ 29.7 billion in 2010to R$ 35 billion in 2011. The disbursements of “Minha Casa, Minha Vida” housing program amounted to R$ 41.4 billion,compared to R$ 37.2 billion in 2010. Special Edition | Year 2011 10
  8. 8. Ministry of FinanceA sustainable economic growth in Brazil Economic ActivityThe year of 2011 was important to consolidate the Brazilian long term growth path in an environment ofinternational growth slowdown. After a lower growth in 2011, the Brazilian economy will grow faster in2012. Since investments will come from both private and public sectors, the average growth rate until 2014will be higher than previous four years.GDP Growth (% YoY) International International International 7.5 International Crisis Crisis Crisis Crisis 6.1 5.7 5.2 4.3 4.8% 4.0 4.6% Average 3.2 Average 5.5 6.0 Special Edition | Year 2011 5.2 2.7 4.5 Data: % annual 3.5% 3.2 Average 1.7% * 2011: IBGE data accumulated in 0.3 Average the first three quarters over the 0.0 same period in 2010 1.3 1.1 ** Ministry of Finance estimates -0.3 Source: IBGE and Ministry of Finance Elaboration: Ministry of Finance 98 99 00 01 02 03 04 05 06 07 08 09 10 * ** ** ** 11 12 13 1419 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 11
  9. 9. Ministry of FinanceIndex indicates growth in the economic activity Economic ActivityAccording to the IBC-BR (Economic Activity Index of Central Bank of Brazil), there has been a 1.15%expansion in November 2011 compared to the previous month. Therefore, a positive change is expected inthe third and fourth quarters of the year. Economic Activity Index (index number, seasonally adjusted) 150 140.19 135 120 Special Edition | Year 2011 105 Data: index number, seasonally adjusted (2002=100) 90 Source: Central Bank of Brazil 10 06 03 04 8 09 No 11 11 7 3 05 00 0 00 Elaboration: Ministry of Finance 20 20 20 20 20 20 20 20 20 l2 c2 ay p n v n r v g ct Ju Se Ap De No AuJa Ju M O 12
  10. 10. Ministry of FinanceIndustrial production Economic ActivityIndustrial production grew 0.3% in 2011 below the 10.5% posted in 2010. In the first three months of theyear, there was a general increase in the level of production due to the expansion pace in 2010. In 2011, themain highlights are the transportation sector and the capital goods industry as a whole, with a 3.3% hikein annual terms.Industrial Production Index (index number, seasonally adjusted)135 127.7124113 Special Edition | Year 2011102 91 Data: index number, seasonally adjusted (average 2002=100) 80 Source: IBGE 09 10 11 06 08 1 07 08 01 Elaboration: Ministry of Finance 20 20 20 20 20 20 20 c2 ct De O 13
  11. 11. Ministry of FinanceRetail sales growth slows down Economic ActivityIn the accumulated 12 months up to November, retail sales grew 7.0% and broad retail sales grew 7.7%.For the whole 2011, the sector’s performance should be less than in 2010, when it accumulated respectiveincreases of 10.9% and 12.2%.Retail Sales Volume (%, 12-month basis) Total Per Sector 16 18.6 Equip. and mat. to esc., inf. and communication Retail Monthly Survey 14 Furniture and household 16.9 Art Farm., Doctors. ort. of perf. and cosm 10.4 Retail Monthly Survey 12 (Broad)* Material of construction 10.0 10 Books, newspapers, magazines and stationery 9.0 Retail Sales Per Sector 7.7 8 Vehicles, motorcycles, parts and accessories 8.4 Data: % in a 12-month basis up Special Edition | Year 2011 Textiles, apparel and footwear 5.0 to November 2011 6 7.0 Other personal and household articles 4.8 4 * Including automobiles, 4.2 Hyper&Supermkt, Food, Beverages and Tobacco motorcycles, parts and pieces, 4.2 2 Hypermarkets and supermarkets and construction materials Fuels and lubricants 2.1 0 Source: IBGEM 009M 010Ap 008 Se 009 S e 10 11 g 1 v 11Au 01 Elaboration: Ministry of Finance 20 20No 20 2 2 2 r2 2 p p v ar arNo 14
  12. 12. Ministry of FinanceCapacity utilization slows down in 2011 Economic ActivityIn line with the slowdown in industrial activity throughout the year, indicators of the Installed CapacityUtilization (NUCI) showed some decline in 2011. For 2012, more positive economic performance figuresare expected and are likely to be reflected in a more intense capacity utilization of the domestic industry.Installed Capacity Utilization Level (%, seasonally adjusted) 89 87 85 83 83.4 NUCI - CNI Special Edition | Year 2011 81.5 NUCI - FIESP* 81 80.9 NUCI - FGV 79 Data: %, seasonally adjusted 77 * Covering the industry of São Paulo only 75 Source: CNI, Fiesp and FGV Se 07 Se 08 Se 09 Se 10 v 1 06 n 7 n 8 n 9 n 0 M 07 M 08 M 09 M 10 M 11 De 011 1 No 201 Elaboration: Ministry of Finance 0 0 0 1 01 20 20 20 20 20 20 20 20 20 20 20 20 20 20 2 c2 ay ay ay ay ayp p p p p nSe Ja Ja Ja Ja Ja 15
  13. 13. Ministry of FinanceCapacity utilization per sector Economic ActivityThe process of accommodation of the economy had a slight decrease in its capacity utilization indexes.However, the sectoral levels have been within regular economic activity conditions.Installed Capacity Utilization Level per Sector (%, seasonally adjusted) NUCI per Setor Dec 2010 Dec 2011 Average by Sector* NUCI per Sector 84.9 83.4 82.6 General Industry 90.3 88.6 84.6 Construction material 91.2 87.1 84.5 Non-metallic minerals 90.1 86.6 81.5 Material of Transport 85.2 86.3 84.7 Clothing and Footwear 89.2 85.9 80.8 Durable goods 78.3 85.0 76.7 Electrical equipment 85.2 84.5 82.0 Mechanics 88.8 84.4 83.7 Plastic products 84.5 83.3 80.4 Special Edition | Year 2011 Capital goods 83.1 83.0 82.1 Food 85.0 82.9 80.3 Consumer goods 80.2 81.5 78.2 Other products 74.5 69.9 69.5 Pharmaceutical products 92.1 91.7 92.3 Pulp and Paper 85.0 84.1 84.5 Chemistry 85.9 83.8 86.2 Data: %, seasonally adjusted Intermediate goods 89.3 83.6 88.5 Metallurgy 86.4 83.1 86.5 * Period: 2000-2011 Textiles 82.0 79.8 79.9 Source: FGV Non-durable goods 75.1 75.8 77.8 Elaboration: Ministry of Finance 16 Furniture 75.1 75.8 77.8
  14. 14. Ministry of FinanceConfidence in the Brazilian economy remains positive Economic ActivityThe Industry Confidence Index has stabilized since November, closing at 101.8 points in 2011. In January2012, there was an even better performance (102.3 points). On the other hand, consumer confidenceended the year at 119.6 points and reached 116.0 in January. Despite the marginal decline, the indicator isstill at optimistic levels and a gradual recovery for the industry is expected in 2012.Industry and Consumer Confidence Indexes (points, seasonally adjusted)130120 116.0110 Special Edition | Year 2011 Optimistic 102.3100 Pessimistic Consumer Confidence Index 90 Industry Confidence Index Data: points, seasonally adjusted 80 Source: FGV n 10 n 11No 20 0No 20 1Ap 20 0Ap 20 1M 20 0 ay 10 c 10 c 11M 20 0Au l 20 0 g 10M 20 1 ay 11M 20 1Au l 20 1 g 11 12O 20 0O 20 1 n 10 n 11 v 10 v 11 ct 1 ct 1 ar 1 ar 1 b 1 r 1 Ju 201 b 1 r 1 Ju 201 Se 201 Se 201Ju 20Ju 20 Elaboration: Ministry of FinanceFe 20De 20De 20Fe 20 20Ja 20Ja 20 p p nJa 17
  15. 15. Ministry of FinanceNew record for the Brazilian harvest in 2011 Economic ActivityThe agricultural production in Brazil reached a record of 163 million tons of grains in 2011, an increase of 9.2%when compared to the previous year. The result consolidates Brazil as one of the world’s leading food producers.Brazilian Grain Crop - Cereal grains, vegetables and oilseeds (millions of tons) 200 163.0 150 149.3 144.1 135.1 Special Edition | Year 2011 131.8 123.2 119.1 122.5 114.7 100 96.8 Data: millions of tons 50 Source: CONAB/MAPA 2 3 4 5 7 8 9 0 1 6 /0 /0 /0 /0 /0 /0 /0 /1 /1 /0 Elaboration: Ministry of Finance 01 02 03 04 06 07 08 09 10 05 20 20 20 20 20 20 20 20 20 20 18
  16. 16. Ministry of FinanceHarvest Plan fosters agricultural dynamism Economic ActivityThe 2011/2012 Agriculture and Livestock Plan reached a total of R$ 123.2 billion, an increase of 6.2%compared to the previous crop. From this total, R$ 107.2 billion is directed to business agriculture and R$ 16billion to family farming. The resources will be used to operation funding, investment, trading, insurancepremium subsidy to rural areas and support to sustainable agronomic practices.Rural Financing Program (R$ billion)150 123.2 116.0120 108.0 16.0 16.0 15.0 90 78.0 70.0 Special Edition | Year 2011 63.0 13.0 Total 56.9 12.0 60 46.5 Family Agriculture 9.0 10.0 16.0 32.6 7.0 Commercial Agriculture 24.7 30 5.4 Data: R$ billion 4.2 * Including other credits 20.5 27.2 39.5 44.4 50.0 58.0 65.0 93.0 100.0 107.2 0 Source: CONAB/MAPA 03 04 05 * * 8 9 0 1 2 06 07 /0 /0 /1 /1 /1 Elaboration: Ministry of Finance 2/ / / 03 04 07 08 09 10 11 5/ / 06 0 0 20 20 20 20 20 20 20 20 20 20 19
  17. 17. Ministry of FinanceInvestments growing larger than GDP Economic ActivitySince 2004, investment growth rates have been higher than GDP growth, with the exception of 2009. Theresult is a higher production capacity able to meet an increasing domestic demand. For the following years,the growth model adopted by the Federal Government will give even greater emphasis on investment inall sectors of the economy.GDP and Investment – GFCF (% YoY) 25 20 15 Investment (GFCF) 10 GDP Special Edition | Year 2011 Data: % annual 4.0 3.6 5 3.2 3.2 13.9 13.6 21.3 10.8 * Ministry of Finance estimate 1.1 9.1 5.7 9.8 6.1 5.2 7.5 5.3 4.5 0 Source: IBGE -4.6 -6.7 -0.3 -5 Elaboration: Ministry of Finance-10 ** 03 04 05 06 08 09 0 * 07 11 12 1 20 20 20 20 20 20 20 20 20 20 20
  18. 18. Ministry of FinanceParticipation of investments in GDP on an upward trend Economic ActivityThe opportunities in the Brazilian economy and the measures taken to encourage long-term investmentwill enlarge the contribution of investment to economic growth, which is expected to reach 20.8% of GDPin 2012.Investment – GFCF (% of GDP)25 20 15 Special Edition | Year 2011 10 5 Data: % of GDP 16.4 15.3 16.1 15.9 16.4 17.4 19.1 18.1 19.5 19.6 20.8 * Ministry of Finance estimate 0 Source: IBGE 02 3 4 5 6 07 08 9 0 * * 11 12 Elaboration: Ministry of Finance 0 0 0 0 0 1 20 20 20 20 20 20 20 20 20 20 20 21
  19. 19. Ministry of FinanceInvestments of PAC on a rise Economic ActivityThe second stage of the Growth Acceleration Program (PAC 2) aims to provide infrastructure throughinvestments near R$ 1 trillion within 2011-2014. Nearly 50% of the total will be directed to investments inenergy and 30% in “Minha Casa, Minha Vida” housing program. Investments in energy and transportationsectors have already been established from 2014 on.PAC 2 (R$ billion) PAC 2 Axes 2011-2014 After 2014 Total PAC Better city 57.1 57.1 PAC Citizenship Community 23.0 23.0 Special Edition | Year 2011 PAC My House My Life 278.2 278.2 PAC Water and Light for All 30.6 30.6 PAC Transportation 104.5 4.5 109.0 PAC Energy 461.6 626.9 1,088.5 Data: R$ billion Total 955.0 631.4 1,586.4 Source: MPOG Elaboration: Ministry of Finance 22
  20. 20. Ministry of FinancePAC commitment will grow 20% in 2012 Economic ActivityThe amounts committed to PAC increased significantly, reaching R$ 35.4 billion in 2011. It represents agrowth of almost 20%, when compared to 2010, and a 121.3% expansion between 2007 and 2011. In linewith the economic growth model based upon investments, a 20.3% expansion has been estimated for2012, reaching R$ 42.6 billion.PAC: Committed nominal values (R$ billion)504030 Special Edition | Year 20112010 Data: R$ billion 16.0 17.0 27.1 29.7 35.4 42.6 * LOA 2012 0 Source: STN/Ministry of Finance 07 08 09 10 11 * 12 Elaboration: Ministry of Finance 20 20 20 20 20 20 23
  21. 21. Ministry of Finance“Minha Casa, Minha Vida”housing program: growth with social inclusion Economic ActivitySince 2009, disbursements for the MCMV housing program have grown by 431% reaching R$ 37.2 billion in2011, which is equivalent to 480,000 new homes in 2011 alone. In the period 2011-2014, two million newunits are expected to be built, with investments predicted to reach a total of R$ 142.3 billion.Disbursement of MCMV Program (R$ billion)50 Goal for the 2011 - 2014 period (MCMV 2): Minha Casa, Minha Vida 240 2 million homes Accomplished 2011: 480 thousand homes30 Special Edition | Year 201120 Data: R$ billion10 7.0 30.4 37.2 41.3 31.6 32.2 * Caixa Econômica Federal estimate 0 Source: Caixa Econômica Federal 09 10 11 * * * 12 13 14 Elaboration: Ministry of Finance 20 20 20 20 20 20 24
  22. 22. Ministry of FinanceInvestments for the World Soccer Cup Economic ActivityIn the coming years, the country will rely on investments in several sectors, including sports. A total of R$ 33billion will be allocated in the implementation of the infrastructure for the World Soccer Cup in 2014. Mostwill be directed to transportation projects, of which R$ 11.6 billion for urban mobility and R$ 5.5 billion forports and airports.Investments to the 2014 World Soccer Cup (R$ billion) Stadiums 5.7 Urban Mobility 11.6 Ports and Airports 5.5 Civil Infrastructure (Total) 22.8 Special Edition | Year 2011 Telecom and Energy 3.8 Security and Health 4.6 Hotels 1.9 Total Infrastructure 33.1 Data: R$ billion Source: Ministry of Finance Elaboration: Ministry of Finance 25
  23. 23. Ministry of FinanceBrazil stands out in port investments Economic ActivityBrazil has two of the largest projects of investment in ports in the world: the expansion of the Port of Santosand the construction of the Açu Port in Rio de Janeiro, the largest venture investment in port in Latin America.Nine Major Projects of Ports in the World* (US$ billion) China Yangshan Port 8.0 Panama Panama Canal expansion 6.5 Netherlands Port of Rotterdam expansion 4.0 China Yangtze River dredging 3.6 Brazil 2.9 Port of Santos expansion (SP) Special Edition | Year 2011United Kingdom London Gateway Port 2.5 Data: US$ billion Qatar 2.0 Ras Laffan Port expansion Brazil 1.8 Açu Superport (RJ) * In the final stages of preparation or in progress Oman 1.0 Port of Sohar expansion Source: CG-LA, Exame yearbook 2011-2012 Elaboration: Ministry of Finance 26
  24. 24. Ministry of FinanceInvestments in the Oil and Gas sectors Economic ActivityPetrobras investments in building platforms and ship-oil-platforms are also highlights in the Oil and Gassectors. Together, they total US$ 40 billion.Ten Major Projects in the Oil and Gas Sectors in the World* (US$ billion) Australia Gorgon gas field 44.0 Australia Pilbara gas field 35.0 Australia Wheatstone gas field 30.0 Australia Ichthys gas field 30.0 Brazil Petrobras oil platforms (RJ-ES-SP) 25.0 Special Edition | Year 2011 Canada Keystone XL oil pipeline 20.0 Nigeria Trans-Saharan gas pipeline 20.0 Brazil 15.0 Petrobras platform ships (ES-RJ-SP) Data: US$ billion Turkey 11.3 Nabucco gas pipeline * In the final stages of preparation or in progressIndonesia 10.0 Abadi gas field Source: CG-LA, Exame yearbook 2011-2012 Elaboration: Ministry of Finance 27
  25. 25. Ministry of FinanceBrazil has a wide investment program in transports Economic ActivityAmong the 16 largest investment projects related to transportation in the world, four of them are in Brazil:two related to the expansion of its railway network, one for subway system and another to build highwaysthroughout the country.Sixteen Major Transport Projects in the World* (US$ billion) China New Kunming Airport 23.1 USA O´Hare airport modernization program 15.0 China Harbin-Dalian railroad 14.0 China Hong Kong-Zhuhai-Macau bridge 10.7Malaysia Kuala Lumpur-Klang Valley railroad 10.3 USA 6.9 Railroad transportation (Colorado) Brazil 6.7 Norte-Sul railroad (GO-MA-MG-MS-PA-SP-TO)Vietnam 5.7 Nha Trang railroad Special Edition | Year 2011 USA 5.3 Detroit river international bridge China 5.0 Shangai-Hangzhou train Brazil 4.3 São Paulo subway expansion Data: US$ billionVietnam 4.0 Hau river underground railroad Brazil 3.8 São Paulo beltway, north section * In the final stages ofVietnam 3.7 Ho Chi Minh City beltway preparation or in progress Brazil 3.4 Transnordestina railroad (CE-PE-PI) Source: CG-LA, Exame yearbook 2011-2012 Elaboration: Ministry of Finance 28
  26. 26. Ministry of FinanceSignificant investments in the electricity sector Economic ActivityThe energy sector is also a priority for the Brazilian government. Among the fifteen largest sector projectsin the world, six are located in Brazil, with emphasis on the construction of the Belo Monte power plant.Fifteen Major Projects in the the Electricity Sector in the World*(US$ billion) China Jiuquan wind power base 18.2 Brazil Belo Monte (PA) hydroelectric power plant 16.0 Brazil São Luiz do Tapajós (PA) hydroelectric power plant 12.6 USA Green Power Express transmission 12.0 China Yangjiang nuclear plant 10.2 Brazil Santo Antônio (RO) hydroelectric power plant 10.0 Brazil Jirau (RO) hydroelectric power plant 8.2 Special Edition | Year 2011 China Xiluodu hydroelectric power plant 6.8 Canada Pace River hydroelectric power plant 6.6 Canada Romaine hydroelectric power plant 6.5 China 6.3 Xiangjiaba hydroelectric power plant Brazil Angra 3 nuclear plant 6.3 Data: US$ billion India 4.2 Mundra thermal power plant * In the final stages ofColombia 3.0 Pescadero hydroelectric power plant preparation or in progress Brazil 2.5 Teles Pires (MT-PA) hydroelectric power plant Source: CG-LA, Exame yearbook 2011-2012 Elaboration: Ministry of Finance 29
  27. 27. Ministry of FinanceInvestments: High Speed Rail Economic ActivityInvestments for the construction of high-speed train linking the cities of Rio de Janeiro, Sao Paulo andCampinas will total approximately R$ 35 billion. The model of transport will benefit the whole population.High-speed Train: Investment and its composition (R$ billion and % of total) High Speed 11.3% Expropriations Train (TAV) 9.8% Systems and Equipment Total: R$ 34.6 billion* Special Edition | Year 2011 7.9% Trains Data: R$ billion and % of total Phase 1 Phase 2 71% * Estimated amounts subjected 6.7 billion 27.9 billion to changes Civil Works * Estimate data from 2009, subject to changes. Source: STN/Ministry of Finance Elaboration: Ministry of Finance 30
  28. 28. Ministry of FinanceAirport concessions generate more investments in the sector Economic ActivityThe investments scheduled for the airport sector in Brazil are close to R$ 3 billion, if only the concessions ofthe airports in Brasilia, Guarulhos and Viracopos are considered. The licensing system will be important forthe private sector to take part in the growth process. The well-succeeded auction showed the great interestof the private sector and its potential for profit.Airport Concession: Planned Investments (R$ billion) Brasilia Guarulhos Viracopos Expansion of passengers New terminal building, Terminal building (first terminal, land transport new taxiway, departure phase) and departure networks, departures expansion. expansion. Special Edition | Year 2011 and boarding area. Planned Investments 2012 - 2014 2012 - 2014 2012 - 2014 Data: R$ billion R$ 627 million R$ 1.38 billion R$ 873 million Source: STN/Ministry of Finance Elaboration: Ministry of Finance 31
  29. 29. Brazilian EconomyOUTLOOK Employment and Income Ministry of Finance B R A Z I L I A N G O V E R N M E N T
  30. 30. Ministry of FinanceSocial inclusion and job creation are the highlights in 2011 Employment and IncomeThe unemployment rate reached 4.7% in December 2011, the lowest level registered by IBGE (the Brazilian Bureauof Statistics). Growth of formalization in the labor market is equally important. Since 2003, the economy has createdalmost 17.3 million formal jobs. The performance is even more significant when contrasted with the adverse scenarioof the labor market in the world’s largest economies.Economic growth with social and productive inclusion has oriented Government policies. In 2011, 325,000 newhouseholds have started to collect the benefits from the “Bolsa Familia” conditional cash transfer program, totaling13.3 million beneficiaries. Special Edition | Year 2011 34
  31. 31. Ministry of FinanceIncome inequality in a continuous decrease Employment and IncomeThe Gini index, used to measure income inequality, has been falling continuously in recent years. Theexplanation comes from the reduction of inequality in labor income and from the minimum wage increasepolicy, along with the income transfer programs and macro-economic stability.Gini Income Index* (12- month moving average)0.5650.5600.555 Special Edition | Year 2011 Data: 12-month moving average0.550 * People over 10 years of age. Based upon the per capita income, considering the monthly0.545 income of all types of work 0.541 effectively received 0.540 Source: IBGE 11 Au 09 09 De 09 Fe 09 Ap 10 Ju 10 Au 10 10 De 10 Fe 10 Ap 11 1 11 11 01 Elaboration: Ministry of Finance 20 20 20 20 0 20 0 20 20 20 0 20 20 20 c2 r2 c2 r2 g n g ct b n g ct b n v Au No Ju Ju O O 35
  32. 32. Ministry of Finance“Bolsa Família” cash transfer program helps to fight inequality Employment and Income“Bolsa Família” is considered one of the most efficient programs to reduce poverty focused on the poorestof the population. The program has contributed significantly to the reduction of inequality, encompassing,with a relative low cost, 13.3 million households in December 2011.“Bolsa Família” Income Transfer Program (% of GDP, R$ billion and million of households) 20 0.5 17.0 0.4 15 13.3 0.3 Special Edition | Year 2011 10 Bolsa Família (% of GDP) 0.2 Bolsa Família (R$ billion) Number of Households 5 (million) 0.1 Data: % of GDP, R$ billion 0.20 0.27 0.32 0.34 0.35 0.38 0.38 0.41 and million households 0 0.0 2004 2005 2006 2007 2008 2009 2010 2011* Source: MDS Elaboration: Ministry of Finance 36
  33. 33. Ministry of FinanceReal minimum wage increased more than 66% in the past 10 years Employment and IncomeThe acceleration of economic growth in recent years has led to a relevant increase in the per capita income.As a result of the Government’s policy, the minimum wage had an even more significant rise of 66%between 2002 and 2012. In January 2012, it increased from R$ 545 to R$ 622, which will inject up to R$ 50billion in the domestic market.Real Minimum Wage Evolution (R$ - annual average in 2011 prices) 800 700 600 500 66% owth eal gr 1% Special Edition | Year 2011 R th 21 400 nal grow 300 Nomi 200 Data: R$ - Annual average 100 in 2011 prices 200 240 260 300 350 380 415 465 510 540 545 622 0 Source: IPEA 02 03 04 05 06 07 08 09 10 11 11 12 20 20 20 20 20 20 20 20 20 20 20 20 Produced by: Ministry of Finance r r ay ay r r ar b n n ar n Ap Ap Ap Ap Ja Ja Ja Fe M M M M 37
  34. 34. Ministry of FinanceA sharp decline in unemployment rate Employment and IncomeEven in a scenario of low economic growth, there has been a good performance in the labor market. Therewas a decline of unemployment, which reached 4.7% in December 2011. It shows the dynamism of theBrazilian economy in a scenario rather different from advanced economies.Unemployment Rate (% of economically active population) 14 13 12 11 10 Special Edition | Year 2011 9 8 7 6 Data: % of economically 5 active population 4 4.70 Source: IBGE 9 10 11 03 04 5 06 07 08 20 2 1 0 0 n 0 01 Elaboration: Ministry of Finance 20 20 20 20 20 20 20 20Ja c 20 c2 n n n n n n n nDe De Ja Ja JaJa Ja Ja Ja Ja 38

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