Brazil has the 5th largest area and population in the world, and the 10th largest economy. Agriculture, mining, and manufacturing industries have led Brazil's economy, and it is the largest exporter of coffee, sugar, cattle, and orange juice. The value of the Brazilian Real has fluctuated over time depending on economic and political conditions both domestically and globally. Looking to the future, further growth in key exports, commodity prices, foreign investment, and recent oil discoveries suggest the Real will continue to appreciate against the U.S. dollar, though the government may intervene to support export competitiveness.

1. Brazilian Real Mai Kato Benjamin Carrion Schafer

2. Brazil Overview 5 th largest area (8.5M km 2 = 5.7% of world total) 5 th largest population (191M = 2.83% of world total) Oct 9, 2009 10 th largest GDP ($1.6T), 68 th per capita ($7,350) 2008 PPP GDP, 9 th for total, 80 th for per capita GDP(PPP) per capita

3. Brazil’s Economy Agriculture, Mining & Manufacturing industries have led Brazil 10 th largest economy Largest exporter of Coffee, Sugar, Cattle, Orange Juice, and Biofuel Export 197.9B USD in 2007 Source: The World Bank

4. Currency History sf Source: Banco Central do Brazil Asian crisis ↓ stock market crash ↓ high interest rate Russian crisis ↓ Investments taken out ↓ high interest rate to protect currency Real - US$ pegged appreciation hurt exports floating exchange

5. Real/USD Exchange Rate Between 1999-2003 depreciating due to political uncertainties Since 2003 continuously appreciating vs. USD except last economic crisis  Real sell off in favor of “safe” currencies

6. Analysis: Future Perspective

7. Increase of Exports Largest coffee, sugar, cattle exporter Exports in 2006 =$137B, where 37% agricultural Only 1/5 of cultivable land used Source: Bank of Brazil

8. Commodity Prices Exports increased in 2007 by 5.3% in Volume, but price increase accounted 72%  If prices decrease Real will be under pressure to become weaker Source: International Monetary Fund

9. Carry Trade Interest differential reducing, but stable around 10% (interest rates between Brazil and other countries Brazils Moody’s credit rating in 2008 = Baa+ (investment rate) Higher in order to control inflation Source: Thomson-Reuters

10. Stock Market Growth Outperforming traditional Indices (even other BRIC country stock markets)  Attracting foreign investment Source: Thomson-Reuters

11. Oil Discovery 2007: Tupi oil field with 12 billion barrels in 2007 found (about 1% of the world’s total) 2008: discovery might hold 33 billion barrels, third-largest field ever found.  Brazil becomes from 17 th to 8 th position in the global oil rankings

12. Inflation Inflation decreasing  unemployment decreasing  Interest rates go down  carry trade will decrease Source: Thomson-Reuters

13. Conclusions We expect the Real to get stronger with regard to the USD BUT the government will have to intervene to limit its strength to keep their exports competitive

14. Questions? … see you all in