Tam 6 Mb Tam 20081110 Eng

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Tam 6 Mb Tam 20081110 Eng

  1. 1. MB ASSOCIADOS Brazilian Macroeconomic Perspectives “T A M DAY” November 2008 1
  2. 2. Financial crisis impact on commodities prices and on the Brazilian economy perspectives 2
  3. 3. Financial crisis impact on commodity prices Oil prices • Prospects for global (US$/barrel) growth have deteriorated as 140 financial crisis has 130 120 worsened. 110 • Weakening global 100 demand is 90 80 depressing 70 commodity prices. 60 60,8 50 06/11/07 06/02/08 06/05/08 06/08/08 06/11/08 Source: Bloomberg. Prepared by: MB Associados. 3
  4. 4. Oil: Supply and Demand (mb/d) mb/d October 2008 2009 Demand 86,5 87,2 Supply non Opec 54,4 56,1 Source: Opec. IEA Forecast: Demand projections have been reduced (mb/d) 4 Source and forecasts: Opep. Prepared by: MB Associados.
  5. 5. CRB – Commodities Index 900 CRB Total Food Metals 700 500 300 100 set/98 set/00 set/02 set/04 set/06 set/08 Source: CRB. Prepared by: MB Associados.
  6. 6. Brazilian banks have strong fundamentals Total Private Credit (% of GDP) Average BIS ratio of the 50 largest banks (%) 255,3 Islândia 194,8 EUA 186,9 Japão 165,5 Reino Unido 114,4 China 111,4 Alemanha Emirados 61,0 Árabes 34,8 Brasil 25,7 Rússia 18,2 México Source: Bacen. Prepared by: Credit Suisse. 11,7 Argentina 9,0 Noruega 1,9 Congo Source: Nation Master (2004/2005 data). Prepared by: MB Associados.
  7. 7. Financial crisis impact on the Brazilian economy? Strong contraction in • credit availability; Reduction in the Brazilian Exchange rate • economy depreciation growth aggravated by investors deleveraging; 7
  8. 8. Strong devaluation in domestic exchange rate (R$/US$) Central bank’ sales of dollars in the spot 2,40 and future exchange rate markets 2,30 (data until November 06, 2008 - US$ bi) 2,20 2,10 24,5 Swap 2,12 2,00 6,3 Spot 1,90 1,80 Swap with repurchase 5,8 agreement 1,70 Dollars lines for 1,60 3,1 exporters 1,50 05/11/2006 05/05/2007 05/11/2007 05/05/2008 05/11/2008 Source: Bacen. Prepared by: MB Associados.
  9. 9. Inflation dilema: activity x exchange rate Optimistic Scenario : Pessimistic Scenario: – If the exchange rate – If the exchange rate returns to R$/US$ 1,90 remains above combined with a strong R$/US$ 2,00, then it reduction in activity, will be necessary to then the exchange rate increase interest pass-through into rates to curb inflation inflation should be low; surge; 9
  10. 10. Inflation (IPCA) in 2008 and 2009 (%) 7,0 6,5 IPCA optimistic 6,5 6,0 IPCA pessimistic 6,1 5,5 5,0 4,8 4,5 4,3 4,0 OPTIMISTIC PESSIMISTIC 3,5 2008 2009 2008 2009 Exchange rate R$/US$ 1,90 R$/US$ 1,90 Above R$/US$ 2,0 R$/US$ 2,0 3,0 Interest rates 13,75 12,75 14,25 16,25% 2,5 I/07 II/07 III/07 IV/07 I/08 II/08 III/08 IV/08 I/09 II/09 III/09 IV/09 Source: IBGE. Prepared by and Forecast: MB Associados. 10
  11. 11. Reduction in credit availability Evolution of ACC lines to exports • Reduction in dollar (US$ millions) – daily average credit lines Central bank first (including ACC); offer of credit lines in dollars for 393 exporters • Uncertainty about Lehman Lehman (US$ 1,6 billions). Brothers Brothers small banks bankruptcy bankruptcy 291 balance situation; 229 • Concerns about 186 173 150 144 companies 133 106 92 exposure to loans that combine exchange rate 1-5 8-12 15-19 22-26 29-30 1-3 6-10 13-17 20-24 27-31 derivatives Sept/08 Oct/08 transactions; 11 Source: Banco Central. Prepared by: MB Associados.
  12. 12. When will the credit availability normalize? The Central Bank measures to address liquidity • problems should help small banks to deal with their balance sheet, reducing solvency risks. It also may help to increase interbank credit availability. Despite that, the normalization in the credit • market will take time. For now, companies that have access to credit are paying much higher interests (140 to 150% of the CDI interest for short term credit lines). 12
  13. 13. Demand slowdown in the 4th quarter of 2008 13
  14. 14. Consumer expectation and business confidence indexes Change over the same month last year - % 15 12.1 10 7.7 6.3 5.6 4.6 5.2 Consumer 4.3 4.2 5 3.4 0 -1.0 -1.7 -5 -5.8 -10 Index -10.1 70.0 ICEI Actual Conditions Expectations -15 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 65.0 Source: FGV. Prepared by: MB Associados. 60.0 55.0 53.4 50.5 50.0 Business 45.0 40.0 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 14 Source: Sondagem de Opinião da CNI. Prepared by: MB Associados.
  15. 15. Commerce indicators in São Paulo (consults to SCPC) % SCPC Jul/08 - Jul/07 6,5 Ago/08 - Ago/07 13,5 Sep/08 - Sep/07 0,2 Oct/08 - Oct/07 0,0 Source: ACSP. Prepared by: MB Associados. 15
  16. 16. New vehicle sales Units Change Oct/08 - Oct/08 Sept/08 Sept/08 (%) Auto + light trucks 224.744 254.182 -11,6 Trucks 12.100 12.040 0,5 Bus 2.485 2.512 -1,1 Motorcycle 150.110 184.368 -18,6 Others 9.068 9.254 -2,0 TOTAL 398.507 462.356 -13,8 Source: Fenabrave. Prepared by: MB Associados. 16
  17. 17. Vehicle inventories are increasing, as sales fall production will have to adjust Vehicles: Inventories Vehicles: Production and sales (in days of supply) (yoy montly change - %) Sales Production 17
  18. 18. Industrial Electrical Energy consumption 12 - month accumulated growth - % 5,6 5,6 5,3 5,2 5,2 5,2 5,1 Previous forecast 4,8 4,8 4,8 4,7 4,6 4,6 4,1 Current 3,8 forecast 3,6 jan/08 fev/08 mar/08 abr/08 mai/08 jun/08 jul/08 ago/08 set/08 dez/08 Source: EPE. Prepared by: MB Associados.
  19. 19. GDP Growth in 2009 (%)? Optimistic Scenario: Pessimistic Scenario: – Even if the credit – If the international availability starts to crisis don’t show recuperate, the signs of economy is expected to improvement then expand slower in 2009, GDP growth rate with GDP growth of should be significant 3,5%; smaller, around 2,3%. 19
  20. 20. 2009 Most Probable GDP Growth Scenario • GDP growth is expected to slow from 5,4% to 5,1%, due to signs that 4th quarter growth will be lower than previously forecasted. • Activity is now expected to grow 2,8%, down 0,7 percentage point from our previous estimative. A recovery is expected to begin late in 2009. 20
  21. 21. 2009 GDP slowdown will be led by a decline in investment growth • Most companies have decided to delay further investments as the international financial crisis deteriorated. This decision was intensified by the fact that most companies deadline for fiscal budged review occurs in September and October, exactly when the credit crunch worsened. 21
  22. 22. Companies that already announced investments postponement Sectors Companies Oil and Gas Petrobrás Minerva, VCP, Suzano Papel e Celulose, Cosan e Crystalsev (Uniduto), Agribusiness Klabin, Aracruz, Grupo Orsa, Stora Enso, Duratex, Coopercentral Aurora, John Deere, Grupo Equipav, Nova America Automotive Hyundai, Volkswagen, GM, Delphi, Bosch CR2, Even, Camargo Correa Desenvolvimento Imobiliário, Condomínio Civil Construction RN, Inpar, Holcim Mining and Gerdau, ArcelorMittal Steelmaker Chemical and Elekeiroz, Comperj, Reliance petrochemical Electrical energy Tractebel Energia Telecomunications Vivo Retail Lojas Renner, Magazine Luiza, Ponto Frio, Amis Information Samsung technology Sources: Jornal Valor, Estado de S.Paulo, Gazeta Mercantil , Folha de S. Paulo e Relatório Reservado. Prepared by: MB Associados.
  23. 23. 2009 Most Probable Scenario: Breakdown on Brazil's quarterly GDP growth Previous forecast (2008: 5,3% e 2009: 3,5%) Current forecast (2008: 5,1% e 2009: 2,8%) 6,1% 5,8% 5,3% 5,1% 4,6% 4,4% 4,0% 3,6% 3,2% 3,0% 2,9% 2,6% 2,1% 1,9% I/08 II/08 III/08 IV/08 I/09 II/09 III/09 IV/09 Source: IBGE. Prepared by: MB Associados.
  24. 24. 2009 Most Probable Scenario: GDP growth by main components 19,3 12,9 7,8 6,0 5,5 4,4 4,0 3,3 2,9 2,5 Household Government Investment Exports Imports consumption consumption 5,5 5,1 4,5 4,2 2,9 2,8 2,4 2,0 Source: IBGE. Agriculture Industry Services GDP 24 Prepared by and forecast: MB Associados.
  25. 25. Real income on 2006 and 2007, by minimum wage (variation in R$ billions) On 2006 low income classes got real income growth because of minimum wage and social welfare. By 2007 middle class income has also started to improve. 2006 2007 30.0 25.7 25.0 20.3 20.1 20.0 17.3 16.9 15.4 14.1 15.0 9.6 10.0 6.5 2.9 2.8 5.0 0.8 0.0 -0.5 -5.0 -6.4 -10.0 Up to 1 From 1 to 2 From 2 to 3 From 3 to 5 From 5 to 10 From 10 to 20 More than 20 Source: IBGE. Prepared by MB Associados. 25
  26. 26. Real income on 2008 and 2009, by minimum wage (variation in R$ billions) Growth has accelerated income gain of the upper classes. This may diminish by 2009 with the economy slowdown. 25.0 19.4 18.8 20.0 17.0 2008 14.4 14.6 14.1 2009 15.0 8.8 10.0 7.2 5.2 5.0 4.6 4.7 5.0 2.01.7 0.0 Up to 1 From 1 to 2 From 2 to 3 From 3 to 5 From 5 to From 10 to More than 10 20 20 Source: IBGE, MB Associados. Prepared by MB Associados. 26
  27. 27. Perspectives for 2009 and 2010 • Gradual recovery in credit availability; • Exchange rate stabilization around R$/US$ 2,00; • End of the interest rate hike cycle; • Inflation should converge towards the Central Bank’s target; • In 2008 GDP is expected to grow 5,1%. For 2009, GDP growth rate will fall to around 3,0%. By 2010, growth rate is expected to pickup to around 4,0%. 27
  28. 28. Strong improvement in Brazil’s political, social and macroeconomic indicators 28
  29. 29. Investment Grade reflects the strong improvement in Brazil’s economy • Stabilization: domestic and external; • Strong links with high growth regions; • Formalization and consolidation in most markets; • Reduction in poverty, credit expansion and growth in the domestic market; • Investment expansion; 29
  30. 30. Improvements in the External Sector Current Account Evolution (US$ Billion) International Reserves (US$ Billion) 60 201 Current Account Balance 50 46 45 180 Trade Balance 40 40 31 30 20 14 14 15 13 11 11 10 10 2 86 6 0 -3 -1 -1 -6 -2 -2 -7 -4 54 53 49 -10 38 36 33 -20 -18 -24 -30 -30 -40 2000 2001 2002 2003 2004 2005 2006 2007 2008* 1990 1991 1992 1993 1994 1995 1996 1997 2005 2006 2007 2008* External Debt and Exports Ratio (%) 3,9 3,6 3,5 2,9 2,1 1,4 1,3 Source: Central Bank of Brazil. 1,2 1,2 Prepared by: MB Associados 30 (*) 12-month accumulated until June. 2000 2001 2002 2003 2004 2005 2006 2007 2008*
  31. 31. Domestic Stabilization Inflation rate Reduction in Net Public Debt (12 months accumulated growth) (% of GDP) 60 20 57,2 Exchange 55,5 rate shock Inflation (CPI) 18 55 52,6 (political 51,7 16 Inflation Target transition) 48,7 48,8 50 14 46,5 44,7 45 12 42,7 41,7 40,4 10 40 8 8,5 34,4 35 4,5 33,3 6 4,5 45,8 30,0 30,6 5,5 5,1 30 4,4 2 25 0 1994 1996 1998 2000 2002 2004 2006 2008* dez/01 jan/03 jan/04 jan/05 jan/06 jan/07 jan/08 Source: Bacen. Prepared by: MB Associados. Source: Bacen, IBGE. Prepared by: MB Associados. (*) Until June-08. 31
  32. 32. Formal markets are expanding Exports (US$ Billion) and number of exporting Formal and Informal Employment companies (thousands) (12 months accumulated growth - %) 20 0 23 8,0 Num ber of com p anies 8 20,6 20,6 20,9 18 0 21 Exp orts 16 0 6 18,6 19 17,7 17,7 14 0 17,3 17,4 17 4 12 0 15,8 14,8 Formal Informal 10 0 15 2 80 13 -1 60 -0,8 11 8,5 40 -3 9 20 0 7 -5 1990 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008* mar/05 set/05 mar/06 set/06 mar/07 set/07 mar/08 set/08 So urce: Secex. Prepa red by: M B A ssociados. Source: IBGE. Prepared by: MB Associados. 64 R$ billions No. IPOs IPOs in Bovespa 26 55,7 9 7 4 15,4 4,5 5,4 6,7 (*) 12-month accumulated 2004 2005 2006 2007 2008 32 until June. Source: Bovespa. Prepared by: MB Associados.
  33. 33. Accumulated Change in Poverty – Brazil (%) 2005/2003 1995/1993 2003/1995 2005/1993 0,00 -2,15% -0,05 -0,10 -0,15 -0,20 -18,47% -19,18% -0,25 -0,30 -0,35 -35,53% -0,40 Source: Neri, Marcelo (2007). “ Poverty, Inequality and Income Policies”. 33
  34. 34. Credit Expansion, Duration and Delinquency rate Personal Credit - Duration and Total Credit - % of GDP Delinquency rate % of GDP 38 Meses % 36,7 Duration (in months) 16,5 7 ,6 36 34,7 Deliquency rate (%) 7,5 15,5 34 7,4 7 ,4 7,3 7,3 32 30,7 14,5 7,2 7,2 7 ,2 30 7,1 7,1 7,1 7,1 7,1 7,1 7,1 28,1 13,5 7,0 7,0 7,0 7,0 7 ,0 26,4 28 6,9 12,5 26 24,9 6 ,8 24,7 24,5 24,0 24 22,0 11,5 6 ,6 22 10,5 6 ,4 20 ago/07 out/07 jun/08 ago/08 jun/07 jul/07 dez/07 jan/08 jul/08 abr/07 mai/07 nov/07 abr/08 mai/08 mar/08 set/07 fev/08 set/08 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008* Source: Banco Central. Elaboration: MB Associados. Source: Bacen. Prepared by: MB Associados. 34 (*) Until June-08.
  35. 35. Gross Domestic Product is Growing Faster % 7,0 GDP Growth 6,0 5,7 6,0 5,4 5,0 3,8 4,0 3,2 2,7 3,0 2,0 1,3 1,1 1,0 0,0 2001 2002 2003 2004 2005 2006 2007 2008* 35 (*) 4-quarter accumulated growth until the 2nd quarter of 2008. Source: IBGE. Prepared by: MB Associados.
  36. 36. Increase in Investment in recent periods Var.% 20 15,7 15 13,4 10,0 9,1 8,7 10 5,0 3,6 5 1,5 0,4 0 -0,3 -5 -4,6 -5,2 -8,2 -10 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008* 36 Source: IBGE. Elaboration and Forecast: MB Associados. (*) 4 trimestresaccumulated growth until the 2nd quarter of 2008. Fuente: IBGE. Elaboración y proyección: MB Associados. (*) Acumulado 4-quarter até Junho/08. (*) Acumulado hasta II/08.
  37. 37. Real Overall Income Growth by minimum wage classes — in 2007/06 % 6,0% 5,5% 5,0% 4,0% 3,4% 2,9% 3,0% 2,3% 1,7% 2,0% 1,6% 1,2% 1,0% 0,0% Up to 1 From 1 From 2 From 3 From 5 From 10 More to 2 to 3 to 5 to 10 to 20 than 20 Source: IBGE. Prepared by: MB Associados. 37
  38. 38. Real State Sector Expansion Construction Sector Credit to Real State Percentage growth - % 12 months accumulated growth - % 25 10,3 9,4 Credit to Real State 8,5 20 22,9 8,3 6,6 15 6,3 5,0 10 4,6 4,3 3,2 5 2,0 1,8 2,3 0 1,1 0,3 -5 -1,7 -10 -2,1 -2,2 -2,9 -15 -3,7 -3,3 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008* set/04 mai/05 jan/06 set/06 mai/07 jan/08 set/08 Source: IBGE. Elaboration and Forecast: MB Associados Source: BCB, IBGE e SNIC. Prepared by: MB Associados. 38 (*) 4-quarter accumulated growth until the 2nd quarter of 2008.
  39. 39. Conclusions: Medium and long term perspectives are very good considering: • Democracy in better shape compared to important countries in Latin America; • Population sees low inflation as an important value; • Brazil’s importance as a global supplier of food and energy is increasing; • Long term links with China; • Internationalization of some Brazilian companies; • Brazil is becoming a more open economy; 39
  40. 40. MB Associados Av. Paulista, 2421 – 6°andar São Paulo – SP – 01311-300 Telephone: (011) 3062 - 1085 Fax: (011) 3062 – 8482 macro@mbassociados.com.br 40

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