The document provides an international and domestic macroeconomic outlook. Key points internationally include concerns over Greek debt maturing in March and potential impacts on stock markets. Domestically, industry figures in January are expected to remain weak year-over-year. Recent inflation estimates show a slowing trend towards the 5.5% target for 2012. The current account deficit is expected to widen further in coming months.

1. Macroeconomic Outlook
February 10, 2012
1

2. Index
1. International Outlook
2. Domestic Outlook
2

3. Will the stock market “rally” end?
Performance of stock markets
(index 31/08/11=100) 1. Critical points:
Greek debt matures in March:
120
S&P Bovespa Delay in concluding agreement
between the Greek authorities and
FTSE Nikkei creditors;
110 New imposition of fiscal adjustment by
the “troika” to release the second aid
package to Greece;
French elections in March with opposition
100 standing great chance of winning;
Consolidation of view that Portugal will
need a new aid package to honor its
commitments in 2013;
90 Elections in the US;
09/12/11 09/01/12 09/02/12
Will the oil price continue to rise?
3

4. Greece: more fiscal adjustment?
GDP (annual var.- %) Total debt (% of GDP)
8 200
4 170 165.4
Debt
0 140
-4 110
-5.0
-8 80
GDP 50
-12
1/9/03 1/9/07 1/9/11 2003 2007 2011
Current account (% of GDP) Nominal salary
-4 (index: 4-month moving average )
120
Current account
-8
110 109
-10.0
-12 100
90 Salaries
-16
1/6/03 1/6/07 1/6/11 80
Source: Bloomberg. Production: MB Associados 1/6/03 1/6/07 1/6/11
4

5. Greece: more fiscal adjustment?
Industrial production Unemployment rate
(Annual variation - %) (% )
Dec-10 Jun-11 Dec-11
25
20.9
-1.7 20
-2.8
-4.8 -4.8 15
-5.3
-8.1 -7.8 10
-10.0
-10.9
-11.3 5
-11.7
-12.3 Nov-07 Nov-09 Nov-11
-13.1
Source: Bloomberg. Production: MB Associados
.
5

6. Portugal: on the same path as Greece?
GDP growth Maturity Profile
(% a year) (billion euros)
30
3
20
15 15 13
0 2012 2013 2014 2015 2016
10-year interest rates
-1.7 (% p.a.)
-3 20
GDP 15
13,28
-6
10
1/9/07 1/9/09 1/9/11 5
9/2/11 9/8/11 9/2/12
Source: Bloomberg. Production: MB Associados
6

7. Portugal and Greece: medium-term outlook
Public spending on social security
Population (% of GDP – 2007 figures)
(´000 people)
Italy 14.1
France 12.5
12
12 Austria 12.3
Greece 11.9
Portugal 10.8
Germany 10.7
10
Poland 10.6
9 Slovenia 9.6
Hungary 9.1
Belgium 8.9
8
Japan 8.8
Greece Finland 8.3
Spain 8.0
Portugal
Czech Republic 7.4
6
Sweden 7.2
1950 1975 2000 2025 2050
OECD average 7.0
Source: UN, OECD. Production: MB Associados.
7

8. France: will the primary result start worsening again?
8

9. US: job creation in the private sector
ADP survey Payroll survey
(absolute var. – ´000 people) (absolute var. – ´000 people)
400
500
131 176
170 257
0 0
-400 -500
ADP Total
Av. Apr/10-Jan/12 Média Out/10 a Jan/12
-1.000
-800
Jan-08 Jan-10 Jan-12 jan/08 jan/10 jan/12
Source: ADP and BLS. Production: MB Associados.
9

10. US: job creation figures*
Revised figures show that an extra 180,000 jobs were created in
2011.
300
Current Revision
250 243
Previous 203
200
157
150
112
100
50
0
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12
Source: BLS. Production: MB Associados * In seasonally-adjusted terms
10

11. US: job creation figures (YoY change)
11

12. US: initial jobless claims figures (´000)
470 Average*
430
390
366
350 358
3/2/11 3/8/11 3/2/12
Source: Department of Labor. Production: MB Associados. *4-week moving average

13. US: GDP growth without government contribution (QoQ -%)
6,0
3,7
2,8
2,0
-2,0
-6,0 GDP without government
GDP
-10,0
2008q4 2009q4 2010q4 2011q4
13

14. US: Ongoing fiscal adjustment in the government
Development of fiscal deficit Federal spending, defense
(% do PIB) and non-defense (annual var.
%)
3.0 10
-1.0 6
2
-5.0
-2 -2,6
-9.0 -3,7
-8.6 -6
Defense
-13.0 Non-defense
-10
Sep-01 Sep-06 Sep-11 2005q4 2008q4 2011q4
Source: Bloomberg/BEA/Treasury. Production: MB Associados.
14

15. China: consumer inflation (CPI)
Crescimento acumulado em 12 meses - %
25 CPI
CPI – Food
20 CPI – Except food
15
10 10,5
5 4,5
0
1,8
-5
Jan-04 Jan-06 Jan-08 Jan-10 Jan-12
Source: National Bureau of China. Production: MB Associados
15

16. Drought in the southern US
Concern over the winter
wheat harvest, particularly in
the Mid-South areas
(Nebraska, Kansas, Oklahoma
and Texas) most affected by
the drought;
The drought has not affected
the corn and soybean crop
for the time being as it is not
yet planting time but if the
soil humidity is below that of
Spring, the need for rain
during planting increases to
ensure the crops are not
damaged at the beginning of
their development.
16

17. Drought in Mexico
The New York Times reported: “A drought that a government official called the most
severe Mexico had ever faced has left two million people without access to water and,
coupled with a cold snap, has devastated cropland in nearly half the country”;
The drought, accompanied by lower than usual temperatures, has already raised the
price of some products, such as corn and beans.
Goldman Sachs has revised its estimates for the coming three months: (i) Soybeans from
US$ 12.15 to 12.90; (ii) Corn from US$ 6.30 to 6.90; and (iii) Wheat from US$ 6.20 to
6.80.
17

18. Europe: Intense cold
The intense cold in important producing regions of Europe could put the winter grains harvest at risk.
It is still too early to calculate losses as the forecast points to this extremely cold weather continuing in
the coming days.
18

19. Index
1. International Outlook
1. Domestic Outlook
19

20. Industry in January should remain weak (annual variation - %)
20

21. Production, exports and imports of autos and light commercial
vehicles
Production, imports and exports
(6-month moving average) – ´000 units
Production (right axis)
320 80
Exports (left axis) Var.
Imports (left axis) Jan11/Jan10 - %
280
60 Production -6,6%
240 Exports + 8,2%
40 Imports + 17,7%
200
160 20
Jan-08 Jan-10 Jan-12
Source: Anfavea. Production: MB Associados
21

22. Anfavea: total inventories (plant and retail)
Inventories in days Total inventories
56
6-month moving
49 average
42
35
28
21
14
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Source: Anfavea. Production: MB Associados
22

23. FGV Surveys : retail and services
Services Retail
(index) (index)
140 140
135
125
130
125
110
120
95 115
Jul-08 Sep-09 Nov-10 Jan-12 Apr-10 Nov-10 Jun-11 Jan-12
Fonte: FGV. Elaboração: MB Associados.
23

24. FGV survey: homebuilding
Homebuilders´ Confidence Index
150
140
130
120
Jul-10 Jan-11 Jul-11 Jan-12
Fonte: FGV. Elaboração: MB Associados.
24

25. Inflation estimates (%)
IPCA
IGP - M IGP - DI
Montlhy 12 months
Dec-11 -0,12 -0,16 0,50 6,5
Jan-12 0,25 0,30 0,56 6,2
Feb-12 0,30 0,25 0,56 6,0
2010 11,3 11,3 5,9
2011 5,1 5,0 6,5
2012 4,5 4,7 5,5
Sources: FIPE, FGV and IBGE Estimates: MB Associados 07/02/2012.
25

26. IPCA – categories of use – accumulated over 12 month in %
15
Monitored Services IPCA
10
7,9
5,5
5
4,8
0
Dec-04 Dec-06 Dec-08 Dec-10 Dec-12
Source: IBGE. Production and estimate: MB Associados
26

27. IPCA – free and controlled prices – accumulated over 12 months in %
Acc. Growth 12 months - %
2010 2011 2012
13,0 5.9 6.5 5.5
IPCA Free prices
7.1 6.6 6.2
Controlled 3.1 6.2 4.8
9,0
5,0
1,0
Dec-04 Dec-06 Dec-08 Dec-10 Dec-12
Fonte: IBGE. Elaboração e projeção: MB Associados.
27

28. MB Nairu estimate (non-accelerating inflation rate of unemployment)
14,5
13,5 Nairu
12,5
Unemployment
11,5
10,5
9,5
8,5
7,5
6,5
5,5
May-03 May-05 May-07 May-09 May-11
Fonte: IBGE, MB Associados. Elaboração: MB Associados.
Note: The NAIRU rate measures the unemployment needed to maintain inflation at the target.
28

29. Worsening in the Current Account deficit in the coming months
(accumulated over the last 12 months – US$ billion)
29

30. Balance of Current Transactions (US$ billion)
2011 2012(E)
Current transactions -52,6 -78,0
Trade balance 29,8 18,0
Exports 256,0 302,2
Imports -226,2 -284,2
Services -37,9 -44,5
Travel -14,5 -15,5
Transport -8,3 -11,0
Equipment rental -16,7 -19,0
Other services 1,6 1,0
Income -47,3 -54,5
Salaries 0,6 0,5
Interest -9,7 -12,0
Profits and dividends -38,2 -43,0
Current transfers 2,8 3,0
0,0 0,0
Current transactions (% GDP) -2,1 -3,1
Source: Central Bank. Production and estimate: MB Associados
30

31. Exports (US$ billion)
Raw materials 156
Semi-manufactured
122
manufactured
102
93 90 92
84 80
75 73
65 67
62
52
35 40
36 42
22 27 28
16 20 20
2005 2006 2007 2008 2009 2010 2011 2012 (P)
Semi-
Raw materials Manufactured
Annual manufactured
variation - % 2011/10 36 28 16
2012/11 (P) 27 17 11
Source: MDIC. Production and estimate: MB Associados.
31

32. Was the worsening of the Trade Balance in January
unusual?
Trade balance in January Exports
(US$ million) (US$ million)
2012 2011 Var. %
Jan-05 2.195 January Average January Average 2012/11
Raw materials 6.954 316 6.686 318 -0,7
Jan-06 2.835 Semi-man. 2.503 114 2.332 111 2,5
Manufactured 6.214 283 5.924 282 0,1
Jan-07 2.523
Highest falls – Raw materials
Jan-08 923 (Daily average Var. %)
Jan-09 -530
Iron ore - 31.1
Jan-10 -180
Corn - 7.6
Jan-11 398
Soy bran - 7.0
Jan-12 -1.291 Coffee grain - 5.1
Copper ore - 3.7
Source: Mdic. Production and estimates: MB Associados.

33. Difficulty in expanding the quantum of manufactured goods
250
Raw materials Manufactured
200
150
100
nov-03 nov-07 nov-11
Source: Funcex. Production and estimate: MB Associados
33

34. Balanço de Pagamentos (US$ bilhões)
2011 2012 E
Current transactions -52,6 -78,0
Capital and financial account 111,9 91,5
Capital account 1,6 1,5
Brazilian investment abroad -23,0 -25,0
Foreign investment in Brazil 114,3 90,0
FDI 66,7 55,0
Total shares 6,2 15,0
Securities in Brazil -0,1 10,0
Loans and medium and long-term securities abroad 47,6 15,0
Loans and short-term securities abroad -6,1 -5,0
Others 18,9 25,0
Errors and omissions -0,6 0,0
Reserve assets 58,6 13,5
Source: Funcex. Production and estimate: MB Associados

35. APPENDIX
Macroeconomic Estimates
35

36. Summary of short-term estimates
2010 2011 2012
GDP (at market prices) - % 7,5 2,7 3,5
Exchange rate (end of period) – R$/US$
1,66 1,87 1,80
SELIC (end of period) - % p.a. 10,75 11,00 10,50
IPCA - % 5,9 6,5 5,5
Source: FGV, IBGE and Central Bank
Estimates: MB Associados
36

37. MB Associados
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São Paulo – SP – 01452-001
Telephone: (011) 3062 - 1085
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www.mbassociados.com.br