Brazil is the largest economy in South America with a GDP of USD 1.8 trillion and population of 206 million. While Brazil experienced economic challenges in recent years due to falling commodity prices, the new government is implementing reforms and increasing infrastructure investment to support economic recovery anticipated from 2017 onward. A key initiative is the new Investment Partnership Program which aims to increase private investment in infrastructure through privatization, concessions, and public-private partnerships.

1. 1
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Mauricio Endo
October 2016
kpmg
UKTIWebinar
InvestinginBrazilinatimeofchange

2. 2
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■Largest country in South America (7th largest
country in the world): 8.5 million km2
■Population (2015): 206 million people (87.3% urban
area / 12.7% rural area)
■GDP (2015): USD 1.8 trillion
■Currency: Real (BRL/USD = 3.30 in Sept 15th,2016)
■26 States, 1 Federal District and 5,565
Municipalities
■Brazilian economy experienced accelerated
growth untill 2013 largely driven by increased
demand from China, coupled with a boom in
commodities prices, and internal consumer
market growth
■In the last couple of years, Brazilian economy
stagnated due to the fall in global commodities
prices, driven by a slowdown in Chinese demand,
political turmoil and the rise of the national debt
■The general consensus anticipates a return to
growth from 2017 on
Source: (1) Demografic sensus for 2016, IBGE (2) Oxford Economics, July, 2016. (3) Central Bank of Brazil.
BrazilisthelargesteconomyinSouthAmericawithaGDPofUSD1.8trillionanda
populationof206millionpeople
Brazil overview
SOUTH EAST
86 million
55% of GDP
NORTH EAST
57 million
14¨of GDP
.
NORTH
18 million
6% of GDP
MIDWEST
16 million
9% of GDP
SOUTH
29 million
16% of GDP
GDP and population by region (2015)

3. 3
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Brazilistheseventhlargesteconomyintheworld
17.929
16.549
7.328
4.457
3.541 3.426 2.946 2.622 2.462 2.455
China United
States
India Japan Germany Russia Brazil Indonesia United
Kingdom
France World
0.9CAGR
(2015 – 2020)
Top 10 countries GDP (US$ bn at PPP, 2015)
Source: Oxford Economics, July, 2016.
GDP by country region
10.6
GDP per capita
(USD ‘000)
2.2
52.1
6.0
6.7
7.0
1.7
0.3
45.0
1.5
45.3
1.0
11.9
1.6
41.5
1.6
42.2
3.5
10.3
5.4
3.9
103,820
% of GDP
CAGR
(2010 – 2013)
North 6% 4.3%
Northeast 14% 3.3%
Central-west 9% 4.3%
Southeast 55% 2.4%
South 16% 3.3%
Brazil overview

4. 4
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Brazilhasastrongconsumermarketandisexpectedtobethe8thlargestin
theworldby2020
Forecast
4,7
3,4
2,2
1,7 1,7 1,7 1,5 1,3 1,1
12,8
Note: (a) Almacenes Exito acquired 18.8% stake in Companhia Brasileira de Distribuicao. (b) The Hershey Company, the listed US-based manufacturer of confectionery, chocolates and snack products has
agreed to acquire the remaining 49% stake Hershey do Brasil Ltda.
Source: Oxford Economics, database 2016
Country’s consumer market (USD trillion), 2020Brazilian personal disposable income (USD’000)
and unemployment rate (%)
1,204
1,133
1,214
1,641
1,701 14%
7%
8%
20132011 20162015
12%
9%
2018
12%
1,346
2020
Disposable incomeUnemployment rate
1
Brazil overview – Consumer context

5. 5
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Furthersupportingtheeconomicrecoveryisthehealthydemographics of
Brazil
10.4%
63.6%
23.8%
2.2%
Lending Interest Rate, Average, % Average household personal disposable
income (US$’000)
Average Wages per hour (US$)
Total Household Income
from all Sources (US$/month)
Breakdown of Income Groups in Brazil
(Percentage of total households)
Class “A”
Class “B”
Class “C”
Class “D”
Class “E”
3.670
2.202
440
294
0
Note: (a) All historical data and projections are in real terms and aligned to the overall Global macroeconomic trend scenario described by both the IMF and Oxford Economics Database;
Source: (1) EIU; (2) IMF; (3) Central Bank; (4) Oxford Economics Global Database (September 2015); (5) The Economist Intelligence Database Unit; (6) KPMG interview program; (7) IBGE; (8) Valor Econômico
2015
Forecast Forecast Forecast
Evolution of social classes, in millions and percentage of population:
Brazil overview – Social context
Class “A”
Class “B”
Class “C”
Class “D”
Class “E”

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Despitethechallenging macroeconomic context,thestrongFDInumbersshow
abullishstandpointfrominternational investorsinBrazil
Source: Institute of Applied Economic Research (Ipea), accessed July 2016.
18,8
17,1
9,3
18,6
15,0 15,4
26,1
30,1
19,9
75,0
84,7
64,1
30,8
57,9
56,4
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
FDI (USD billion 2001 – 2015)
Brazil overview – Foreign investments

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M&Avolumeshaveremainedhighdespitetheeconomyturmoil,historically,
cross-bordertransactions representlargersharethandomesticdeals
161 168
130
101
123
146 143
116
100
150
183
351
379
219
333
410
342
365
331
269
167
204
221
208
230 194
84 114
199
213
290
348
284
235
393
407 474
431
487
504
328
372
351
309
353 340
227 230
299
363
473
699
663
454
726
817 816
796
818
773
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Domestic Cross Border
Number of M&A transactions 1996 - 2015)
Crisis in
Argentina
and
elections
Financial
Crisis
Russian
Crisis
Source: Merger & Acquisitions Research 2016 – 1st Semester: Mirror of transactions undertaken in Brazil, KPMG.
Brazil overview - Transctions

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8
Newgovernment(PresidentMichelTemer),itsnewteam,reformsandfocuson
infrastructure
Source: Eurasia Group
Reforms Description
Pension A priority within the team. They will
at a minimum introduce a retirement
age, but also talking about delinking
minimum wage from inflation.
Ceiling on
Spending
Will establish a ceiling on spending
that will tackle earmarked provisions
of health and education, but not
tackle social security.
Tax Proposals to unify state based value
added tax ICMS, and federal taxes,
but that will come only at the end of
the year.
Labor More flexibility of labor code, but not
constitutional reforms; government
will piggy back on a bill in congress.
Microeconomic
reforms
Oil reform highly likely to get
approved and also
telecommunications reform.
Logistics infrastructure will have an
upside potential.
 New government understands he has a very narrow window of
opportunity for reforms
 Political survival strategy predicated on boosting confidence in
private sector
 A very credible economic team
 Ceiling will come quicker than pension
 Microeconomic reforms will move in parallel
A market friendly economic team
A sequential strategy on reforms
Energy, logistics to benefit
 Pre-salt reform (2H2016)
 SOE reform (2H2016)
 State pension reform (2H 2016)
 Doubling infrastructure investment (2017 onwards)
 Commercial opening under Minister Serra
 Telecom overhaul (2017)
 Mining code (2017)
Microeconomic agenda will move faster
Brazil overview – New Government

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Brazileconomyisanticipated toreturntogrowthfrom2017
-4%
-2%
0%
2%
4%
6%
8%
00 01 03 0402 05 1312111009080706 18
EIU
16 1714
BACEN
2015 19
Oxford
Sources: Economist Intelligence Unit (EIU); Oxford 2015; Banco Central do Brasil, 2015
Brazil GDP year over year growth (real)
EIU, Oxford Econimics and BACEN (Brazilian Central Bank) forecasts anticipate a return to growth from 2017 on
  

Real GDP has been declining since 2014 due to a recession that triggered by the decline in commodity prices and
political turmoil.

Brazil’s economy overall grew at a relatively stable rate until 2013 (except 2009) following growth in global commodity
markets.
Forecast
Brazil overview – Economic context

10. 10
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Macroeconomic indicators supporteconomicanalystsestimateofanimminent
recoveryin2017–2018
Interest Rate Evolution, SELIC, % Inflation, CPI, %
Note: (a) All historical data and projections are in real terms and aligned to the overall Global macroeconomic trend scenario described by both the IMF and Oxford Economics Database;
Source: (1) EIU; (2) IMF; (3) Central Bank; (4) Oxford Economics Global Database (September 2015); (5) The Economist Intelligence Database Unit; (6) KPMG interview program; (7) IBGE; (8) Valor Econômico
Forecast
Forecast
Brazil overview – Economic context

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Brazilhasbeeninvestingaround2%to2.5%ofitsGDPininfrastructure,
howevertheminimumnecessaryforsustainable growthis5%
*Estimate
3,1%
2,0%
1,4%
1,8% 2,0% 2,0% 1,9%
2,5% 2,5% 2,4%
2,1% 2,3% 2,4% 2,4%
Investment in Infrastructure in Brazil (% GDP)
13,4%
10,3%
7,3%
5,1% 4,8% 4,2%
2,2%
China (2010) Vietnam (2009) China (2003) Chile (2008-11) India (2009-10) Peru (2008-11) Brazil (2008-13)
Investment in Infrastructure (% GDP)
Minimum necessary for sustainable growth is 5%
Source: IBGE; Frischtak, 2012 “Brasil e China: Perspectivas”
Brazil overview - Infrastructure

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One of the first actions of President Michel Temer as interim government was the announcement
of the Provisional Measure 727/16, establishing the Investment Partnership Program (PPI –
Programa de Parcerias de Investimento), with the objective to incentivize and increase private
investment through Privatization, Concessions and PPPs (Public-Private Partnerships).
Newgovernment’sInvestmentPartnershipProgram(PPI)
Brazil overview – PPI
PPI key benefits:
 Governance
 Executive Board of PPI: led by the President and composed by the Secretary of PPI, Ministry of Civil
House, Ministry of Finance, Ministry of Planning, Ministry of Transportation, Ministry of Energy and
Mining, Ministry of Environment and President of The Brazilian Development Bank (BNDES)
 Secretary of PPI subordinated directly to the President
 One Stop Shop for investors - the Secretary of PPI will have a dedicated team of 30 specialists that will
accumulate technical information of all projects in the program and be a single interface with the private sector
investors
 Technical support - Company Planning and Logistics (EPL – Empesa de Planejamento e Logistica), with 120
engineers, will be the technical supporting body to the Secretary of PPI.
 Funding - BNDES will create FAEP (Fundo de Apoio à Estruturação de Parcerias), a fund with an initial term of
10 yeras, renewable for similar periods, with the objective to contract services to structure projects for the
partnerships (privatizations, concessions and PPP) within PPI.

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such
information without appropriate professional advice after a thorough examination of the particular situation.
© 2016 KPMG Assessores Ltda., uma sociedade simples brasileira, de responsabilidade limitada, e firma-membro da rede KPMG de firmas-
membro independentes e afiliadas à KPMG International Cooperative (“KPMG International”), uma entidade suíça. Todos os direitos
reservados. Impresso no Brasil.
Mauricio Endo
Partner, Head of Government & Infrastructure in Brazil and Latin America
KPMG in Brazil
+55 11 3940 8322
mendo@kpmg.com.br