Olympics are here, and so is recession. Four years ago, the idea of hosting the Olympic Games seemed gloomier; now, Brazil hosts a global event while struggling to recover from one of its worst economic downturns in history. Rio is no better; bad financial management and fall in revenues hit the State pretty hard. To make it worse, an unprecedented corruption investigation and falling oil prices brought down the State’s most important industry and its needed royalties. However, not all is bad news. The Games meant opportunities for UK businesses, and the British House in Rio will celebrate the best of the UK, promoting a business agenda and bringing to Brazil a taste of what we have to offer in terms of excellence in sports, culture and business. Finally, pre Olympics positive social legacy in the city of Rio may translate into opportunities to UK on sustainability of improvements.

1. August 2016
Bruno Pomeranz
Bruno.pomeranz@fco.gov.uk
Brazil Economic Focus:
Monthly Chart Pack
OFFICIAL
1

2. 2
1. Brazil has for a long time been
a closed economy
UNCLASSIFIED

3. It is the ‘most closed’ among G20 countries
Source: International Chamber of Commerce
* Grade range: 1 to 6
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
Argentina
Australia
Brazil
Canada
China
France
Germany
India
Indonesia
Italy
Japan
South Korea
Mexico
Russia
Saudi Arabia
South Africa
Turkey
United Kingdom
United States
Openess to International Trade - G20 Countries

4. Has minor participation in global value chains
0 10 20 30 40 50 60
Brazil
Developing Economies
Developed Economies
Global Value Chain Participation Index (grade)*
Source: WTO
*2011 data (most updated)

5. And foreign trade accounts for a small
proportion of GDP
0
10
20
30
40
50
60
70
80
Brazil China Russia Mexico UK
Exports & Imports (% of GDP)*
Source: World Bank
*2015 data

6. 6
2. But recent initiatives indicate a
move towards openness
UNCLASSIFIED

7. 2015 saw the beginings of a change in
mindset...
• Development of the National Exports Plan
• Relaxation of restrictions to foreign companies in the
reinsurance sector
• Liberalization of foreign investments in the health
sector

8. ...which accelerated in 2016
• Government is more focused on trade:
– Exports promotion Agency transfered to the Foreign Ministry
– Foreign Trade Chamber transfered to direct supervision of the
Presidency
• Government supports proposal for legislation change relaxing pre-
salt oil extraction rules
• National Oil Agency studies relaxating local content rules
• Taskforce within Finance Ministry works on delivering strong
agenda on concessions and privatizations
• Government expresses interest in joining TISA negotiations

9. 9
3. The UK can seize this opportunity
to intensify trade relations
UNCLASSIFIED

10. We have been working together with Brazilian
government
- Information to Trade: CAPTA is the new online platform to facilitate
trade! Businesses now find all trade agreements Brazil signed in a
interactive plataform
- Tax Reform: Brazil with a simpler tax system. Proposed changes in
Value Added Tax, Fiscal Rules and Budgetary processes to increase
competition being negotiated in Congress and Ministries.
- Time for Change: 4 projects fed in National Confederation of
Industry’s demands for President Candidates in 2014 to improve
business environment: trade, tax and finance improvements!

11. Supported by the Prosperity Fund...
Prosperity Fund – Business Environment Portfolio – FY 15/16
9 Prosperity Fund Projects - £ 1,121,270
2 Tactical Fund Projects - £30,000
Total value of the portfolio: 11 Projects - £1,151,270
Benefit to the UK:
Create opportunities for UK companies to compete in a more efficient, fairer, and
stable market with fewer barriers to trade, an internationally comprehensive tax
system, a transparent environment, and increased integrated market.
This unlocks £1,260 billion worth in opportunities for the UK in Brazil.

12. ...to boost UK exports to Brazil...
0
5
10
15
20
25
30
35
China USA Germany Argentina UK
Origin of Brazilian Imports (US$ billion)*
Source: Ministry of Development, Industry, and Foreign Trade
*2015 data

13. and diversify our exports, exploring new
opportunities
0
100
200
300
400
500
600
700
800
900
Top UK Exports to Brazil (Goods & Services – US$
million)*
Source: Local data source - SISCOSERV
*2015 data

14. Potentially regaining market share, which
decreased from 25% in 1912 to 1.6% today
1.25%
1.45%
1.65%
1.85%
2.05%
2.25%
2.45%
2.65%
2.85%
3.05%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
UK Market Share on Brazilian Imports
Source: International Trade Centre

15. And increasing UK’s presence in Brazil
-
20
40
60
80
100
120
USA Netherlands Spain UK China
Origin of Foreign Direct Investment in Brazil (US$
billion)*
Source: Central Bank of Brazil
* 2014 data

16. Strengthening the relationship both ways
0
5
10
15
20
25
30
35
40
China USA Argentina Netherlands UK
Destination of Brazilian Exports (US$ billion)*
Source: Ministry of Development, Industry, and Foreign Trade
* 2015 data

17. Use timing to negotiate new agreements?
• “We will multiply bilateral agreements”.
• “We are going to seek a direct agreement with the UK,
that will be easier than via EU-Mercosur”.
Foreign Minister José Serra

18. Mercosur has been positive for Brazil but
insufficient ....
-10
0
10
20
30
40
50
0
50
100
150
200
250
300
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Brazil-Mercosur Trade Balance (US$ billion)
Exports Imports Trade Balance
Source: Ministry of Development, Industry, and Foreign Trade

19. To engage Brazil in the global economy

20. Key Macroeconomic Indicators
Monthly Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16
Inflation (12 mth. accum.) 10.71 10.36 9.39 9.28 9.32 8.84
Benchmark Interest Rate 14.25 14.25 14.25 14.25 14.25 14.25
Unemployment (%) 9.93 10.00 10.20 10.62 10.91 11. 3
Trade Balance (US$ bn.) 0.9 3.0 4.4 4.8 6.4 3.9
Exports (US$ bn.) 11.2 13.3 16.0 15.4 17.5 16.7
Imports (US$ bn.) 10.3 10.3 11.6 10.5 11.1 12.8
Quarterly 2016 Q1 Q2 Q3 Q4
GDP (% var. QoQ) -0.3