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Impact of European Union crisis on Brazil
Presented By:

Wasim Akram
Agenda
• A Brief History of the EU
• Brazil
• Relationship Between European union
and Brazil
• Brazil-Trade
• BRIC
• Global Economic Crisis Effect On EU
• Overall Impact on Brazil
• Recovery plan
A BRIEF HISTORY OF THE EU
• 1952:
Treaty of Paris
European Coal and Steel Community
(ECSC)
European industry & improve commerce, post
WWII.
Started with 6 countries expanded over time to
27 countries.
Fore-runner of the EEC, EC, and EU
• Phases of growth
– European Economic Community (EEC)
(1958)
– European Communities (EC) (1967)
– European Union (EU) (after 1992)
GROWTH OF THE EU
GROWTH OF THE EU
Admission
of
Romania
and
Bulgaria

2007
Croatia and
Macedonia
are new
candidates
BRAZIL
Named after Brasilwood Tree
Geography of Brazil
• Brazil is the worlds
fifth largest country in
both geography, and
population.

*Population Density
Geography of Brazil
• It occupies roughly
half of South America.
• Brazil is home to two
of the world’s fifteen
largest cities of Sao
Paulo and Rio de
Janeiro, the Capital
however is Brasilia.
• Brazil covers a total
land area of
3,287,357 sq. mi.
Geography of Brazil
• The Amazon River is
located in Brazil
which is the largest
river in Brazil as well
as one of the longest
in the world.
• Amazon Jungle
World’s Largest
Jungle
• Covers upto 50% of
Brazil
Brazil-Facts and Figures

Total Population

Local
Currency

194,400,000
(est.)

FLAG

Literacy 86.4%

Real (BRL)

Dilma Rousseff President

GDP
$2.493 trillion
They gained their
independence on 7 September,
1822
Most of them have mixed backgrounds.

Intermarry and
share culture

Portuguese brought
African slaves.
CULTURE
• The core culture of
Brazil came from the
Portuguese culture
because of the strong
ties to the Portuguese
empire.
• The Portuguese
introduced their
language as well as
their Catholic religion
to the Brazilians.
Brazil is very crazy for sports,
especially Soccer.
Each big cities of Brazil has a
football (soccer) stadium
Well-known for agricultural products
Largest Coffee
producer in the
world
World leader in
the production of livestock.
Mining are major industries too

Mine lots of minerals
Major producer of steel
What is brazil doing to be so dynamic?
• Infrastructure
• Reducing poverty and inequality
• Increased openness to the world
• Institutional reform
What is holding Brazil back ?
• Policy failures
• Failures in the regulatory and legal systems
• Inequality
• External factors
Relationship between Brazil and
European union
• Brazil and the European union established their
relation in 1960. Brazil entered in a strategic
partnership with the European Union.

• The relationship is governed by the Framework
Cooperation Agreement(1992),the EUMERCOSUR framework cooperation
Agreement(1995) and the Agreement for
Scientific and technological Cooperation(2004).
Summits of EU -Brazil
1st EU-Brazil summit on 4th July 2007 in Lisbon.
They established an energy partnership.
2nd summit on 22nd December 08 in Rio de Janerio.
They discussed global issues, regional situations and
the strengthening of EU-Brazil relations .
3rd summit on 6th October 09 in Stockholm.
Implementation of EU-Brazil joint action Plan adopted
at the 2nd summit.
4th summit on 14 July 2010 in Brasília .
Leaders view point were discussed on implementation
of plan which were positive.
5th summit on 4 October 2011 in Brussels .
Concentrated on strong united nations to tackle
global challenges .
On June 30 2009, the 1st EU-Brazil Civil society
meeting .
They discuss the social consequences of the
Financial crisis as well as energy resources .
Trade in goods
• The EU is Brazil’s leading trade partner and represents
23.4% of Brazil’s total trade.
• Brazil's exports to the EU are mainly primary products
(agricultural).
• The EU's exports to Brazil are mainly manufactured
machinery, transport equipment and chemicals.
• At the detailed level, the main EU exports
to Brazil were motor vehicles & parts, medicine and
aircraft & parts, while the main imports were iron ore,
coffee, oilcake, soya beans, wood pulp and crude oil.
SOURCE:http://www.wto.org/english/tratop_e/markacc_e/namachairtxt_dec08_e.pdf
Growth in EU-Brazil Trade
• The first half of 2011 showed a continued growth
in EU trade with Brazil.
• Exports rose from 14.8 bn in the first six month of
2010 to 16.9 bn in the first half of 2011, and imports
from 14.9 bn to 18.5 bn.
• As a result, the EU27 deficit in trade of goods
with Brazil increased from 0.1 bn in the first half of
2010 to 1.6 bn in the same period of 2011.
• Brazil accounted for just over 2% of the EU's external
trade in goods, and was the EU's ninth most important
trading partner in the first six months of 2011.
Source:http://europa.eu/rapid/pressReleasesAction.do?reference=STAT/11/141&format=HTML&aged=0&language=EN&guiLang
uage=en
EU trade with main partners
Brazil trade with main partners

SOURCE:http://www.wto.org/english/tratop_e/markacc_e/namachairtxt_dec08_e.pdf
GLOBAL ECONOMIC CRISIS
EFFECT ON EU
• Crisis starts in us sep.’08, but spreads to
Europe, where in many countries experienced
similar problems consisting of housing bubble,
excess debt of consumers and Governments.

• Crisis most severe in Greece, Portugal (fiscal
deficits) Ireland, Spain (housing bubbles,
banking system)
How did Brazil handle the global
financial Crisis so well?
• Brazil banks were still less exposed to the
U.S. mortgage-backed securities market
where the crisis started.
• Brazil banking sector is benefitted from
having one central regulator-The Central
Bank.
• Low unemployment rate
• Increased trade ties with other developing
and emerging economics
BRIC
 BRIC is a grouping acronym that refers to the countries of
Brazil , Russia ,India and China.
 It is typically referred to as “the BRICSs” or “the BRIC
countries “or “the BRIC Economies” or the “Big Four”.
 The countries of Brazil, Russia, India and China are four of
the biggest emerging economies today.
 In 2001, Goldman Sachs had predicted that , these countries
would become bigger than the six most-industrialized
nations in dollar terms by the year 2050.
 Now, things have changed to such an extent, that the
prediction has been moved closer to year 2025.
What is so special about “BRIC”?
“BRICS” accounts for:
 40% of the worlds population
 25% of its total geographic area.
 40% of global GDP.
The „B‟ in BRIC:
Unlocking Brazils growth potential
• One of the fastest growing economies in the last

•

•
•

•

century
But over-reliance on agricultural commodity
exports resulted in a development marked by boom
and bust
Focus on equitable development has resulted in
significant poverty reduction
Brazilian economy becoming less dependent on
exports
A global leader in renewable fuels.
What will happen to emerging economies such as Brazil?
If crisis does not become worse?

Source: IMF World Economic Outlook (June 2011)
Produced by: Ministry of Finance
Sound fiscal situation when compared to other countries
Budget balance forecast, in % GDP

* The Economist (September 17th, 2011 edition)
** For Brazil: Ministry of Finance forecast

Source: The Economist
Produced by: Ministry of Finance
How does it affect Brazil?
• Stock market volatility.
• Financial institutions exposed to the debt will
write it down, affecting their bottom line.
• Borrowing will get costlier as interest rate will
remain high.
• As a result, spending will be less leading to a
longer recession.
• Weak consumption and spending in Europe
spells trouble for the rest of the world economy,
that is struggling to get out of the downturn.
Impact on Brazil
• The Brazilian debate on the future of
Europe is still superficial, but has a
particular concern for the impact the crisis
will have on its growth rate.
• Brazilian companies, already operating in
the continent before the crisis, have been
revaluating whether it would make sense
for them to continue operations.
Impact on Brazil
The European crisis has had an impact on Brazil in three
different areas:
• The spill-over effect from Europe s trade reduction
with its current number one trading partner, China,
now Brazil s main trading partner, too;
• The decrease in exports to Europe due to protectionist
measures; and
• An overall impact of the European crisis in worldwide
growth, which has affected the Brazilian GDP,
reducing the expected growth from 3.5 percent to 2.5
percent in 2012.4
Impact on Brazil
• According to the World Trade
Organisation (WTO),Brazilian exports
were reduced by almost 17 percent in the
last quarter of 2011 and the first quarter
of 2012, as a result of the European
crisis.
Impact on Brazil
• When it comes to investments, there has
been a dual scenario. The expansion
plans of Brazilian companies that were
already operating in Europe before the
crisis have been adjusted.
More confidence in Brazil
5-year CDS (Credit Default Swap), in basis points

* Updated on September 21st, 2011.

Source: Moody’s
Produced by: Ministry of Finance
What’s being done to avoid the crisis?
• Stronger economies are pushing for stringent
spending control guidelines, where a country’s
spending will be directly proportional to its
economic strength.
• Several options are being discussed, such as,
issuance of Euro Bonds, backed by the entire EU.
• Restructuring of debt, with strict austerity
measures placed on countries at risk of default.
• Troubled eurozone countries are pledging to cut
back government spending to show they can be
trusted.
Recovery Plan
• Brazilian government clearly signals its firm
belief that oil should serve as a tool to
increase its international weight and
strengthen ties with key partners,
particularly China, USA and Europe.
• The Brazilian experience has proven that
crisis have invariably had a short-term
negative impact with positive long run
results.
Recovery Plan
• The current crisis should be a new
moment for Brazil to rethink its positioning
strategy in the global scene.
• A common agenda for Brazil and Europe
for the near future should be developed
including
1. Education and immigration
2. Trade
3. Collective security
Recovery Plan
• For every $2 invested in Brazil from
Europe, there is $1.5 invested back by
Brazil.
• The European crisis has represented a
unique opportunity for brazilian capitalism
to be more competitive internationally.
• The new Brazil Is entirely dependent on
Brazil for growth
Conclusion
• Crisis come and go, so do Governments.
Policies and institutions should be,
however, long lasting. Their strength is
essential for longevity. Brazil should look
to Europe as a vital partner in building the
new world order, with increasing influence
over emerging countries, who should take
over responsibilities in the international
arena.
Group suggestions for Brazil
 FISCAL CONSOLIDATION
• Achieve high PRIMARY RESULTS in 2011, 2012 and
afterwards
• Control new CURRENT EXPENDITURES
• Create fiscal space to continue expanding INVESTMENTS
and TAX EXEMPTIONS
• Create conditions to reduce INTEREST RATES
• NEW MIX OF FISCAL-MONETARY POLICIES
 TRADE DEFENSE: Federal Revenue and MDIC measures
 CURRENCY WAR:
• Reserves
• Taxation
• Derivatives
• Incentives to innovation and local content
THANK YOU!!!

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Impact of european union crisis on brazil

  • 1. Impact of European Union crisis on Brazil Presented By: Wasim Akram
  • 2. Agenda • A Brief History of the EU • Brazil • Relationship Between European union and Brazil • Brazil-Trade • BRIC • Global Economic Crisis Effect On EU • Overall Impact on Brazil • Recovery plan
  • 3. A BRIEF HISTORY OF THE EU • 1952: Treaty of Paris European Coal and Steel Community (ECSC) European industry & improve commerce, post WWII. Started with 6 countries expanded over time to 27 countries. Fore-runner of the EEC, EC, and EU • Phases of growth – European Economic Community (EEC) (1958) – European Communities (EC) (1967) – European Union (EU) (after 1992)
  • 5. GROWTH OF THE EU Admission of Romania and Bulgaria 2007 Croatia and Macedonia are new candidates
  • 8. Geography of Brazil • Brazil is the worlds fifth largest country in both geography, and population. *Population Density
  • 9. Geography of Brazil • It occupies roughly half of South America. • Brazil is home to two of the world’s fifteen largest cities of Sao Paulo and Rio de Janeiro, the Capital however is Brasilia. • Brazil covers a total land area of 3,287,357 sq. mi.
  • 10. Geography of Brazil • The Amazon River is located in Brazil which is the largest river in Brazil as well as one of the longest in the world. • Amazon Jungle World’s Largest Jungle • Covers upto 50% of Brazil
  • 11. Brazil-Facts and Figures Total Population Local Currency 194,400,000 (est.) FLAG Literacy 86.4% Real (BRL) Dilma Rousseff President GDP $2.493 trillion
  • 12. They gained their independence on 7 September, 1822
  • 13. Most of them have mixed backgrounds. Intermarry and share culture Portuguese brought African slaves.
  • 14. CULTURE • The core culture of Brazil came from the Portuguese culture because of the strong ties to the Portuguese empire. • The Portuguese introduced their language as well as their Catholic religion to the Brazilians.
  • 15. Brazil is very crazy for sports, especially Soccer. Each big cities of Brazil has a football (soccer) stadium
  • 16. Well-known for agricultural products Largest Coffee producer in the world
  • 17. World leader in the production of livestock.
  • 18. Mining are major industries too Mine lots of minerals Major producer of steel
  • 19. What is brazil doing to be so dynamic? • Infrastructure • Reducing poverty and inequality • Increased openness to the world • Institutional reform What is holding Brazil back ? • Policy failures • Failures in the regulatory and legal systems • Inequality • External factors
  • 20. Relationship between Brazil and European union • Brazil and the European union established their relation in 1960. Brazil entered in a strategic partnership with the European Union. • The relationship is governed by the Framework Cooperation Agreement(1992),the EUMERCOSUR framework cooperation Agreement(1995) and the Agreement for Scientific and technological Cooperation(2004).
  • 21. Summits of EU -Brazil 1st EU-Brazil summit on 4th July 2007 in Lisbon. They established an energy partnership. 2nd summit on 22nd December 08 in Rio de Janerio. They discussed global issues, regional situations and the strengthening of EU-Brazil relations . 3rd summit on 6th October 09 in Stockholm. Implementation of EU-Brazil joint action Plan adopted at the 2nd summit. 4th summit on 14 July 2010 in Brasília . Leaders view point were discussed on implementation of plan which were positive.
  • 22. 5th summit on 4 October 2011 in Brussels . Concentrated on strong united nations to tackle global challenges . On June 30 2009, the 1st EU-Brazil Civil society meeting . They discuss the social consequences of the Financial crisis as well as energy resources .
  • 23. Trade in goods • The EU is Brazil’s leading trade partner and represents 23.4% of Brazil’s total trade. • Brazil's exports to the EU are mainly primary products (agricultural). • The EU's exports to Brazil are mainly manufactured machinery, transport equipment and chemicals. • At the detailed level, the main EU exports to Brazil were motor vehicles & parts, medicine and aircraft & parts, while the main imports were iron ore, coffee, oilcake, soya beans, wood pulp and crude oil.
  • 24.
  • 26. Growth in EU-Brazil Trade • The first half of 2011 showed a continued growth in EU trade with Brazil. • Exports rose from 14.8 bn in the first six month of 2010 to 16.9 bn in the first half of 2011, and imports from 14.9 bn to 18.5 bn. • As a result, the EU27 deficit in trade of goods with Brazil increased from 0.1 bn in the first half of 2010 to 1.6 bn in the same period of 2011. • Brazil accounted for just over 2% of the EU's external trade in goods, and was the EU's ninth most important trading partner in the first six months of 2011. Source:http://europa.eu/rapid/pressReleasesAction.do?reference=STAT/11/141&format=HTML&aged=0&language=EN&guiLang uage=en
  • 27. EU trade with main partners
  • 28. Brazil trade with main partners SOURCE:http://www.wto.org/english/tratop_e/markacc_e/namachairtxt_dec08_e.pdf
  • 29. GLOBAL ECONOMIC CRISIS EFFECT ON EU • Crisis starts in us sep.’08, but spreads to Europe, where in many countries experienced similar problems consisting of housing bubble, excess debt of consumers and Governments. • Crisis most severe in Greece, Portugal (fiscal deficits) Ireland, Spain (housing bubbles, banking system)
  • 30. How did Brazil handle the global financial Crisis so well? • Brazil banks were still less exposed to the U.S. mortgage-backed securities market where the crisis started. • Brazil banking sector is benefitted from having one central regulator-The Central Bank. • Low unemployment rate • Increased trade ties with other developing and emerging economics
  • 31. BRIC  BRIC is a grouping acronym that refers to the countries of Brazil , Russia ,India and China.  It is typically referred to as “the BRICSs” or “the BRIC countries “or “the BRIC Economies” or the “Big Four”.  The countries of Brazil, Russia, India and China are four of the biggest emerging economies today.  In 2001, Goldman Sachs had predicted that , these countries would become bigger than the six most-industrialized nations in dollar terms by the year 2050.  Now, things have changed to such an extent, that the prediction has been moved closer to year 2025.
  • 32. What is so special about “BRIC”? “BRICS” accounts for:  40% of the worlds population  25% of its total geographic area.  40% of global GDP.
  • 33. The „B‟ in BRIC: Unlocking Brazils growth potential • One of the fastest growing economies in the last • • • • century But over-reliance on agricultural commodity exports resulted in a development marked by boom and bust Focus on equitable development has resulted in significant poverty reduction Brazilian economy becoming less dependent on exports A global leader in renewable fuels.
  • 34. What will happen to emerging economies such as Brazil? If crisis does not become worse? Source: IMF World Economic Outlook (June 2011) Produced by: Ministry of Finance
  • 35. Sound fiscal situation when compared to other countries Budget balance forecast, in % GDP * The Economist (September 17th, 2011 edition) ** For Brazil: Ministry of Finance forecast Source: The Economist Produced by: Ministry of Finance
  • 36. How does it affect Brazil? • Stock market volatility. • Financial institutions exposed to the debt will write it down, affecting their bottom line. • Borrowing will get costlier as interest rate will remain high. • As a result, spending will be less leading to a longer recession. • Weak consumption and spending in Europe spells trouble for the rest of the world economy, that is struggling to get out of the downturn.
  • 37. Impact on Brazil • The Brazilian debate on the future of Europe is still superficial, but has a particular concern for the impact the crisis will have on its growth rate. • Brazilian companies, already operating in the continent before the crisis, have been revaluating whether it would make sense for them to continue operations.
  • 38. Impact on Brazil The European crisis has had an impact on Brazil in three different areas: • The spill-over effect from Europe s trade reduction with its current number one trading partner, China, now Brazil s main trading partner, too; • The decrease in exports to Europe due to protectionist measures; and • An overall impact of the European crisis in worldwide growth, which has affected the Brazilian GDP, reducing the expected growth from 3.5 percent to 2.5 percent in 2012.4
  • 39. Impact on Brazil • According to the World Trade Organisation (WTO),Brazilian exports were reduced by almost 17 percent in the last quarter of 2011 and the first quarter of 2012, as a result of the European crisis.
  • 40. Impact on Brazil • When it comes to investments, there has been a dual scenario. The expansion plans of Brazilian companies that were already operating in Europe before the crisis have been adjusted.
  • 41. More confidence in Brazil 5-year CDS (Credit Default Swap), in basis points * Updated on September 21st, 2011. Source: Moody’s Produced by: Ministry of Finance
  • 42. What’s being done to avoid the crisis? • Stronger economies are pushing for stringent spending control guidelines, where a country’s spending will be directly proportional to its economic strength. • Several options are being discussed, such as, issuance of Euro Bonds, backed by the entire EU. • Restructuring of debt, with strict austerity measures placed on countries at risk of default. • Troubled eurozone countries are pledging to cut back government spending to show they can be trusted.
  • 43. Recovery Plan • Brazilian government clearly signals its firm belief that oil should serve as a tool to increase its international weight and strengthen ties with key partners, particularly China, USA and Europe. • The Brazilian experience has proven that crisis have invariably had a short-term negative impact with positive long run results.
  • 44. Recovery Plan • The current crisis should be a new moment for Brazil to rethink its positioning strategy in the global scene. • A common agenda for Brazil and Europe for the near future should be developed including 1. Education and immigration 2. Trade 3. Collective security
  • 45. Recovery Plan • For every $2 invested in Brazil from Europe, there is $1.5 invested back by Brazil. • The European crisis has represented a unique opportunity for brazilian capitalism to be more competitive internationally. • The new Brazil Is entirely dependent on Brazil for growth
  • 46. Conclusion • Crisis come and go, so do Governments. Policies and institutions should be, however, long lasting. Their strength is essential for longevity. Brazil should look to Europe as a vital partner in building the new world order, with increasing influence over emerging countries, who should take over responsibilities in the international arena.
  • 47. Group suggestions for Brazil  FISCAL CONSOLIDATION • Achieve high PRIMARY RESULTS in 2011, 2012 and afterwards • Control new CURRENT EXPENDITURES • Create fiscal space to continue expanding INVESTMENTS and TAX EXEMPTIONS • Create conditions to reduce INTEREST RATES • NEW MIX OF FISCAL-MONETARY POLICIES  TRADE DEFENSE: Federal Revenue and MDIC measures  CURRENCY WAR: • Reserves • Taxation • Derivatives • Incentives to innovation and local content