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8/2/2019 A Tombini EconomicandFinancialSectorOverview08!15!2011
1/94
Brazil
Economic andFinancial Sector Overview
August 2011
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2
General Overview Demographics,Macroeconomic Policy and Social Development
Recent Economic Indicators
The National Financial System
Prudential Regulation and Supervision
Access to Banking Services
Competition in the Banking Sector
Index
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3
General OverviewDemographics
Macroeconomic PolicySocial Development
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Brazil is among the largest countries in
terms of territory, population and GDP.
Brazil has vast natural resources,including recently discovered largeoffshore oil fields, a diverse industrialbase, a dynamic and sophisticatedprivate sector, and a well-structured
public sector.
Brazil is a vigorous democracy, with freemultiparty elections and a stable politicalsystem.
Brazil has good relations with all itsneighbors and has increased its ties withall regions of the world.
Sources: IBGE / IMF/WEO estimates
Brazil DemographicsGeneral Overview
7th largest GDP: US$ 2,090 billion (2010).
Continental country: 5th largest area8,514,877 km2.
5th largest population: 191 millionpeople.
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5
Sources: IBGE / UN
Sources: IBGE / UN
DemographicsGeneral Overview
Dependency Ratio
Population Pyramid (2010)
Note: The dependency ratio is the ratio of the sum of the populationaged 0-14 and that aged 65+ to the population aged 15-64.
Brazils dependency ratio is stilldeclining, while other countries alreadyface an upward trend.
Brazils population is highly concentratedwithin the Economically ActivePopulation range.
-10 -5 0 5 10
0-410-1420-2430-3440-4450-5460-6470-7480-8490-94100+
million of people
men women
25
50
75
100
1950
1960
1970
1980
1990
2000
2010
2020
2030
2040
2050
Brazil China India Russia
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Main features of the macroeconomic policy framework:
- Inflation targeting- Fiscal responsibility
- Exchange rate flexibility
The macroeconomic fundamentals, combined withadequate prudential policy and strong bank supervisionresulted in:
- Capacity to absorb internal and external shocks
- Macroeconomic and financial stability- Sustainable growth
- Credit and capital market development
- Investment growth
Macroeconomic PolicyGeneral Overview
8/2/2019 A Tombini EconomicandFinancialSectorOverview08!15!2011
7/947Source: IBGE
GDP Real GrowthGeneral Overview
-4.4
1.0
-0.5
4.9
5.9
4.2
2.2
3.4
0.0 0.3
4.3
1.3
2.7
1.1
5.7
3.2
4.0
6.1
5.2
-0.6
7.5
4.0
-6
-4
-2
0
2
4
6
8
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
%
*Forecast from Central Bank of Brazil (Inflation Report June 2011)
8/2/2019 A Tombini EconomicandFinancialSectorOverview08!15!2011
8/948Source: IBGE
GDPGeneral Overview
0
500
1,000
1,500
2,000
2,500
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
US$billion
US$ 2,335
*Forecast from Central Bank of Brazil (Inflation Report June 2011)
8/2/2019 A Tombini EconomicandFinancialSectorOverview08!15!2011
9/949Source: IBGE
GDP per CapitaGeneral Overview
*Forecast from Central Bank of Brazil (Inflation Report June 2011)
0
2,000
4,000
6,000
8,000
10,000
12,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
US$
US$ 11,978
8/2/2019 A Tombini EconomicandFinancialSectorOverview08!15!2011
10/9410Source: IBGE
Unemployment RateGeneral Overview
%(seasonally
adjusted)
5
6
7
8
9
10
11
12
13
14
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
Jun 116.1%
8/2/2019 A Tombini EconomicandFinancialSectorOverview08!15!2011
11/9411Source: IBGE
Consumer Price Index (IPCA)General Overview
%in12months
0
5
10
15
20
25
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Jul 116.87%
8/2/2019 A Tombini EconomicandFinancialSectorOverview08!15!2011
12/9412Source: IBGE
Consumer Price Index (IPCA) - BreakdownGeneral Overview
%in12m
onths
0
1
2
3
4
5
6
7
8
9
Jan07
Jul07
Jan08
Jul08
Jan09
Jul09
Jan10
Jul10
Jan11
Jul11
Tradables Non-tradables Services
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13Source: IBGE
Consumer Price Index (IPCA)General Overview
%in12
months
0
2
4
6
8
10
12
14
16
Jun07
Dec07
Jun08
Dec08
Jun09
Dec09
Jun10
Dec10
Jun11
IPCA ex-Food and Beverage IPCA Food and Beveragedata until July 2011
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14Source: IBGE
Consumer Price Index (IPCA)General Overview
change yoy (%)
2004 2005 2006 2007 2008 2009 2010 2011*
Consumer Price Index (IPCA) 7.6 5.7 3.1 4.5 5.9 4.3 5.9 6.9
Food and beverage 3.9 2.0 1.2 10.8 11.1 3.2 10.4 9.4
Housing 7.1 6.4 3.1 1.8 5.1 5.7 5.0 6.3
Household equipment 5.4 2.7 -2.7 -2.5 2.0 3.1 3.5 1.3
Apparel 10.0 7.1 5.1 3.8 7.3 6.1 7.5 8.8
Transportation 11.0 8.1 3.0 2.1 2.3 2.4 2.4 5.7
Health and personal care 6.9 6.2 6.0 4.5 5.7 5.4 5.1 5.9
Personal expenses 6.9 7.0 7.3 6.5 7.4 8.0 7.4 8.3
Education 10.4 7.2 6.2 4.2 4.6 6.1 6.2 8.3
Communication 13.9 6.4 -0.2 0.7 1.8 1.1 0.9 1.8
Tradables 6.3 2.7 1.3 4.7 7.0 2.6 6.9 6.4
Nontradables 6.9 6.4 4.0 6.6 7.1 5.5 7.3 8.2
Regulated 10.2 9.0 4.3 1.7 3.3 4.7 3.1 5.7
Services 6.7 6.8 5.5 5.2 6.4 6.4 7.6 8.8
*July 2011 (12months)
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15Sources: BCB / IBGE
Inflation Convergence to TargetsGeneral Overview
%,yoy
target (4.5%)
market expectation: August 12th
marketexpectation
0
2
4
6
8
10
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
Jan12
Jan13
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16Sources: BCB / IBGE
Inflation Targeting RegimeGeneral Overview
CPI(%YoY),inter
estrate(%p.a.)
0
5
10
15
20
25
30
Mar00
Mar01
Mar02
Mar03
Mar04
Mar05
Mar06
Mar07
Mar08
Mar09
Mar10
Mar11
Monetary policy interest rate CPI
G O
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17Source: BCB
Commodity Price IndexGeneral Overview
Dec05
=100
60
80
100
120
140
160
180
200
220
Dec05
Jun06
Dec06
Jun07
Dec07
Jun08
Dec08
Jun09
Dec09
Jun10
Dec10
Jun11
IC-Br IC-Br agriculture
Jul 11/ Jun 11-5.9%
Jul 11/ Jun11
-3.3%
IC-Br: Brazilian Commodity Price Index in Brazilian Currency
G l O i
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18Sources: BM&FBovespa / BCB
Real Interest RateGeneral Overview
%
Aug 126.2%
Market Rate 360 days and IPCA expected 12 months (Focus)
0
5
10
15
20
25
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
G l O i
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19Source: BCB
Net Public DebtGeneral Overview
%o
fG
DP
52.0
60.4
54.8
50.648.4 47.3
45.5
38.5
42.840.2 39.7
20
30
40
50
60
70
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
*June 2011
General Overview
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20Source: BCB
Federal Securities - BreakdownGeneral Overview
Composition of total federal security debt (%)*
2004 2005 2006 2007 2008 2009 2010 2011**
Fixed rate 20.1 27.9 36.1 37.3 32.2 33.7 37.9 39.1
Price linked 14.9 15.5 22.5 26.3 29.3 28.6 28.1 28.1
Selic linked 57.1 51.8 37.8 33.4 35.8 35.8 32.5 32.4
Exchange rate 5.2 2.7 1.3 0.9 1.1 0.7 0.6 -0.4
Other 2.7 2.1 2.2 2.1 1.6 1.2 0.8 0.8
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
**Jun 2011
* Do not include securities held by the Central Bank.
General Overview
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Trade Balance Exports and ImportsGeneral Overview
US$billion
*July 2011 (12 months)
Source: MDIC
5558 60
73
96
118
138
161
198
153
202
236
56 5647 48
6374
91
121
173
128
182
209
0
50
100
150
200
250
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
Exports Imports
General Overview
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22Source: MDIC
Trade BalanceGeneral Overview
US$billion
-0.7
2.7
13.1
24.8
33.6
44.7 46.5
40.0
24.8 25.3
20.3
27.1
-10
0
10
20
30
40
50
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
*July 2011 (12 months)
General Overview
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23Source: MDIC
Exports in 2010General Overview
Composition Destination
Basic goods44.6%
Manufacturedgoods41.5%
Semi-manufactured
goods14.0%
US9.6%
EU (ex-Germany)
17.3%
Germany4.0%
Asia (ex-MEand China)
12.6%China15.2%
Latin Americaand the
Caribbean(ex-
Argentina)
14.6%
Argentina
9.2%
Others17.4%
* excluded Argentina
** excluded China and Middle East
*** excluded Germany
General Overview
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Current AccountGeneral Overview
-11.7
-16.3
-6.8
0.1
-0.2
-5.3
-1.4
4.21.0
-3.8-1.4
6.1
-0.7-1.8
-18.4
-23.5
-30.5-33.4
-25.3-24.2-23.2
-7.6
4.2
11.714.013.6
1.6
-28.2
-24.3
-47.4
-60.0
-70
-60
-50
-40
-30
-20
-10
0
1020
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011*
US$billion
*June 2011 (12 months)
Source: BCB
General Overview
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25Source: BCB
Current AccountGeneral Overview
%o
fGD
P
-4.5
-6.0
-3.6
0.1
-0.1
-2.1
-0.5
1.4
0.3
-0.8
-0.4
1.6
-0.2-0.3
-2.4-2.8
-3.5
-4.0-4.3
-3.8
-4.2
-1.5
0.8
1.81.6
1.3
0.1
-1.7-1.6
-2.3-2.5
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011*
*June 2011 (12 months)
General Overview
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26Source: BCB
FX InflowsGeneral Overview
US$billion
(12months)
-80
-60
-40
-20
0
20
40
60
80
100
Jan06
Jul06
Jan07
Jul07
Jan08
Jul08
Jan09
Jul09
Jan10
Jul10
Jan11
Jul11
trade in goods and services financial totalUp to July 29th
General Overview
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27Source: BCB
Foreign Direct InvestmentGeneral Overview
2.5 3.1 1.3 1.5 1.4 0.3 1.22.8 1.1 1.0 1.1 2.1 1.3 2.1 4.4
10.8
19.0
28.928.6
32.8
22.5
16.6
10.1
18.115.1
18.8
34.6
45.1
25.9
48.4
68.8
0
10
20
30
40
50
60
70
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011*
US$billion
*June 2011 (12 months)
General Overview
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28Source: BCB
Foreign Direct Investment / GDPGe e a O e e
1.01.1
0.7 0.8 0.7
0.1
0.4
0.9
0.30.2
0.30.5
0.3 0.40.6
1.3
2.2
3.4
4.95.1
4.1
3.3
1.8
2.7
1.7 1.7
2.52.7
1.6
2.3
3.2
0
1
2
3
4
5
6
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011*
%G
DP
*June 2011 (12 months)
General Overview
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29Source: BCB
FDI (-) Current Account Deficit
-0.6
-0.1
2.1
0.1 0.1
-1.8-1.5
-1.3
-0.5
0.6
1.3
-0.1
1.8
2.6
4.5
3.33.0
2.6
1.0
0.1 0.1
0.9
-3
-2
-1
0
1
2
3
4
5
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
%G
DP
*June 2011 (12 months)
General Overview
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30Source: BCB
External Liability Debt vs Equity
0
10
20
3040
50
60
7080
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
Debt Equity
%o
ftotalex
ternalliability
*June 2011
General Overview
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31Source: BCB
External Liability Interest vs Profits
0
5
10
1520
25
30
3540
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
Profit remittances Interest payments
US$billion
*June 2011 (12 months)
General Overview
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32Source: BCB
Interventions and Exchange Rate
US$b
illion
R$/U
S$
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
-15
-10
-5
0
5
10
15
20
Jul02
Jan03
Jul03
Jan04
Jul04
Jan05
Jul05
Jan06
Jul06
Jan07
Jul07
Jan08
Jul08
Jan09
Jul09
Jan10
Jul10
Jan11
Jul11
interventions (LHS) exchange rate (RHS)up to August 5th
General Overview
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33Source: BCB
International Reserves
US$billion
8 4 5 12 12 7 7 9 10 10 9 24
32 3952
6052
45 36 33 36 3849 53 54
86
180194
239
289
351
0
50
100
150
200
250
300
350
400
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011*
*August 11th
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34Source: BCB
International Reserves
13.2
11.7
14.9
13.8
14.9
0
2
4
6
8
10
12
14
16
2007
2008
2009
2010
2011*
%G
D
P
*June 2011
General Overview
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35Sources: IMF / Thomson Datastream
International Reserves (% GDP)*
10.9
13.7
13.8
17.5
20.1
24.4
29.0
32.7
33.3
35.0
48.4
54.0
101.3
119.4
Mexico
Chile
Brazil
India
Japan
Denmark
Korea
Russia
Israel
Hungary
China
Thailand
Singapore
Hong Kong
*December 2010
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36Source: BCB
Net External Debt
64
7987 88 92
10310696 97
105108100 9988 92
101
131
182190190
163165151
136
101
75
-12
-28
-62
-51
-71
-100
-50
0
50
100
150
200
250
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011*
US$billion
*Estimate June 2011
General Overview
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37Source: BCB
External Debt Ratios
120.6%
63.4%
42.4%
21.9% 19.3%12.7%
0
20
40
60
80
100
120
140
Short term dbt/Intl.reserves
Debt services/Exports External debt/GDP
Dec 03 Estimate Jun 11
%
General Overview
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38Source: Bloomberg
Sovereign Risk (CDS)
July 2011113 b.p.
(average)
basispoints
0
500
1000
1500
2000
2500
3000
3500
4000
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
S&P: BBB- ( )Fitch: BBBMoodys: Baa2 ( )
General Overview
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39
Main Economic Indicators
2004 2005 2006 2007 2008 2009 2010 2011
Gross Domestic Product
GDP (USD bn) 663,8 882,4 1.088,8 1.366,5 1.650,7 1.598,4 2.089,8 2.334,8/1
GDP (USD per capita) 3.665,2 4.812,0 5.867,3 7.282,7 8.705,7 8.347,6 10.814,0 11.977,7/1
Real GDP (growth rate) 5,7 3,2 4,0 6,1 5,2 (0,6) 7,5 4,0/1
Price consumption 3,8 4,5 5,2 6,1 5,7 4,2 7,0 4,1/1
Gross fixed capital formation 9,1 3,6 9,8 13,9 13,6 (10,3) 21,9 6,4/1
Economic Activity
Unemployment rate (year average) 11,5 9,9 10,0 9,3 7,9 8,1 6,7 6,3/2
Real payroll (growth rate) 1,6 4,2 5,9 5,8 6,9 3,9 7,4 7,8/3
Industrial production (growth rate) 8,3 3,1 2,8 6,0 3,1 (7,4) 10,5 3,6/3
Consumer price index (% yoy) 7,6 5,7 3,1 4,5 5,9 4,3 5,9 6,9/4
Fiscal (consolidated public sector, %GDP)
Primary balance 3,7 3,8 3,2 3,3 3,4 2,0 2,8 3,3/3
Public sector net debt 50,6 48,4 47,3 45,5 38,5 42,8 40,2 39,7/5
Balance of payments
Exports (USD bn) 96,7 118,5 137,8 160,6 197,9 153,0 201,9 250,0/1
Imports (USD bn) (62,8) (73,6) (91,4) (120,6) (173,0) (127,7) (181,6) (230,0)/1
Current account (USD bn) 11,7 14,0 13,6 1,6 (28,2) (24,3) (47,4) (60,0)/1
Current account (%GDP) 1,8 1,6 1,3 0,1 (1,7) (1,5) (2,3) (2,6)/1
Foreign direct investment (USD bn) 18,1 15,1 18,8 34,6 45,1 25,9 48,4 55,0/1
Foreign direct investment (%GDP) 2,7 1,7 1,8 2,5 2,8 1,6 2,3 2,4/1
International reserves (USD bn) 52,9 53,8 85,8 180,3 193,8 238,5 288,6 351,0/6
/1 Central Bank forecast /4 12 months until July
/2 Average Jan-Jun /5 In Jun
/3 12 months until Jun /6 On Aug 11th
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40Source: BCB
Credit / GDP
25.8 26
24.6
25.7
28.3
30.9
35.2
40.5
44.4
46.4 47.2
0
5
10
15
20
25
30
35
40
45
50
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
%G
DP
*June 2011
General Overview
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41Source: BCB
Total Credit
0
10
20
30
40
50
Jan01
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
Individuals Corporations
%G
DP
data until June 2011
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42Source: BCB
Household Indebtedness
%monthlyincome
15
20
25
30
35
40
45
Jul06
Jan07
Jul07
Jan08
Jul08
Jan09
Jul09
Jan10
Jul10
Jan11
Debt Debt service
General Overview
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43Source: BCB
Credit Earmarked and Nonearmarked
June 2011
29.3%
70.7%
Individuals
Earmarked Nonearmarked
39.3%
60.7%
Corporations
Earmarked Nonearmarked
General Overview
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44Source: BCB
Earmarked / Total Credit
42.4
34.3
37.538.9
36.3
33.532.0
29.4 29.0
32.534.6 34.7
0
5
10
15
2025
30
35
40
45
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
%o
ftotal
credit
*June 2011
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GDP d IGeneral Overview
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46
2.71.2
5.7
3.2 4.06.1
5.2
-0.6
7.5
4.0
-5.2 -4.6
9.1
3.6
9.8
13.9 13.6
-10.3
21.8
6.4
-15
-10
-5
0
5
10
15
20
25
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011*
GDP Investment
Sources: IBGE / BCB
GDP and Investment
%rea
lgrowth
forecast*
*Forecast from Central Bank of Brazil (Inflation Report June 2011)
Fixed Capital Investment
Fi d C i l IGeneral Overview
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47Source: IBGE
Fixed Capital Investment
4Q 0315.3
4Q 04116.1
4Q 0515.9
4Q 0616.4
4Q 0717.4
4Q 0819.1
4Q 0916.9
4Q 1018.4 1Q 11
18.5
14
15
16
17
18
19
20
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
%GD
P
I P I dGeneral Overview
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48Source: BNDES
Investment Prospects - Industry
R$ billion Av. Annual
2006-2009 2011-2014 Growth %
Oil and gas 205 378 13.0
Mining 60 62 0.9
Steel 28 33 3.2Petrochemical 22 40 12.3
Automobile 25 33 5.6
Electric/Electronics 20 29 8.2
Pulp and paper 18 28 8.7
Textile 9 12 6.8
Total 387 614 9.7
Feb 2011
I t t P t I f t tGeneral Overview
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49Source: BNDES
Investment Prospects - Infrastructure
R$ billion Av. Annual
2006-2009 2011-2014 Growth %
Electricity 104 139 6.0
Telecommunication 62 72 2.8
Sanitation 26 41 9.4Logistics 55 129 18.6
Railways 20 60 24.7
Highways 30 51 11.4
Ports 5 18 26.6
Total 247 380 9.0
Feb 2011
B ili Oil RGeneral Overview
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50Source: Petrobras
Brazilian Oil Reserves
05
10
15
2025
30
35
4045
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
future*
deepwater offshore fields(pre-salt layer)
*estimated volume
Tupi and Iracema*(8 billion boe)
Franco* (4.5 billion boe)
Libra* (8 billion boe)
Iara* (4 billion boe)
Guara* (2 billion boe)
billion
barreloile
quivalent(BOE)
crude oil, NGL and natural gas
S i l D l tGeneral Overview
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Both macroeconomic and inclusionpolicies have led to marked improvementin living conditions.
A significant share of low income groupsjoined the middle class.
Social Development
Gi i C ffi i tGeneral Overview
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52Source: IBGE
Gini Coefficient
0.63
0.60
0.520.50
0.52
0.54
0.56
0.58
0.60
0.62
0.64
0.66
1981
1983
1984
1985
1986
1987
1988
1989
1990
1992
1993
1995
1996
1997
1998
1999
2001
2002
2003
2004
2005
2006
2007
2008
2009
S i l M bilitGeneral Overview
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53Source: FGV
Social Mobility
4926
16
47
3940
66102 113
1323
31
0
50
100
150
200
250
2003 2011 2014*
E D C A/B
millionofpeople
Social Classes
*FGV forecast
Soci l MobilitGeneral Overview
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54Source: FGV
Social Mobility
Social Classes (% Composition)
2003 2009 2014*
A/B 7.6 10.6 15.5C 37.6 50.4 56.5
D 26.7 23.6 20.0
E 28.1 15.3 8.0
Total 100.0 100.0 100.0
* FGV forecast
Years of Schooling*General Overview
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55Source: IBGE
Years of Schooling*
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1992
1993
1995
1996
1997
1998
1999
2001
2002
2003
2004
2005
2006
2007
2008
2009
years
*people older than 24 years-old
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Recent Economic
Indicators
Industrial ProductionRecent Economic Indicators
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57Source: IBGE
Industrial Production
2007=100
80
85
90
95
100
105
110
115
120
125
130
Jan
07
Jul07
Jan
08
Jul08
Jan
09
Jul09
Jan
10
Jul10
Jan
11
Industrial production Capital goods
Jun 11 / May 11-1.6%
Jun 11 / May 11-1.9%
Seasonallyadjusted
Retail SalesRecent Economic Indicators
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58Source: IBGE
Retail Sales
90
100
110
120
130
140
150
Jan
07
Jul07
Jan
08
Jul08
Jan
09
Jul09
Jan
10
Jul10
Jan
11
Retail sales Retail Sales (including automobiles and construction materials)
Jun 11 / May 11+0.2%
Jun 11 / May 11
+0.5%
2007=100
Seasonally
adjusted
Industrial Production vs Retail SalesRecent Economic Indicators
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59Source: IBGE
Industrial Production vs. Retail Sales
2007
=100
80
90
100
110
120
130
140
150
Jan
07
Jul07
Jan
08
Jul08
Jan
09
Jul09
Jan
10
Jul10
Jan
11
Industrial ProductionExpanded Retail Sales (including automobiles and construction
Jun 11 / May 11-1.6%
Jun 11 / May 11+0.5%
Seasonally
adjusted
Consumer ConfidenceRecent Economic Indicators
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60Source: FGV
Consumer Confidence
Sep05
=100
90
95
100
105
110
115
120
125
Jan
07
Jul07
Jan
08
Jul08
Jan
09
Jul09
Jan
10
Jul10
Jan
11
Jul11
historicalaverage
Jul 11121.0
Seasonally adjusted
Industrial Capacity UtilizationRecent Economic Indicators
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61Source: FGV
Industrial Capacity Utilization
%
76
78
80
82
84
86
88
Jan
07
Jul07
Jan
08
Jul08
Jan
09
Jul09
Jan
10
Jul10
Jan
11
Jul11
historicalaverage
Jul 1184.1
Unemployment RateRecent Economic Indicators
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62Source: IBGE
Unemployment Rate
6.2
4
5
6
7
8
9
10
11
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
2007 2008 2009 2010 2011
%
Unemployment RateRecent Economic Indicators
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63Source: IBGE
Unemployment Rate
11.6
13.0
11.7
9.4
10.4
9.7
7.98.1
7.0
6.2
4
6
8
10
12
14
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
%
Unemployment ratein June
Leading IndicatorRecent Economic Indicators
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64Source: BCB
Leading Indicator
IBC-Br: Brazilian Economic Activity Index
2002=100(season
nallyadjusted)
115
120
125
130
135
140
145
150
Jan
07
Jul07
Jan
08
Jul08
Jan
09
Jul09
Jan
10
Jul10
Jan
11
May 11/Apr 11
0.2%
Contribution to GDPRecent Economic Indicators
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65Sources: IBGE / BCB
Contribution to GDP
Accumulated in four quarters
-2.5-4
-2
0
2
4
6
8
10
12
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
External Sector Domestic Demand
8.8
%
FX Inflows (monthly data)Recent Economic Indicators
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66Source: BCB
FX Inflows (monthly data)
-5
0
5
10
15
20
Jan
10
Feb
10
Mar10
Apr10
May10
Jun
10
Jul10
Aug
10
Sep
10
Oct10
Nov10
Dec10
Jan
11
Feb
11
Mar11
Apr11
May11
Jun
11
Jul11
Trade in Goods and Services Financial Total
US$b
illion
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The National Financial
System
The National Financial SystemThe National Financial System
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National Monetary Council (CMN)
- Composed by the Minister of Finance, the Minister of Planning, Budgetand Management and the Governor of the Central Bank of Brazil
- Establishes the inflation target for monetary policy, prudential rules andcredit policy
- The Central Bank of Brazil is the financial supervisory authority
Source: BCB
The National Financial System
NATIONALFINANCIAL SYSTEM
National Council ofPrivate Insurance-
CNSP
National MonetaryCouncil - CMN
Securities andExchange
Comission-CVM
Other financialintermediaries
Stock Exchange
Bovespa
Commoditiesand FuturesExchange
Central Bank ofBrazil - BCB
Other financialintermediaries
ExchangeBrokers
FinancialInstitutions
Management Councilof ComplementaryPension -CGPC
Central Bank of Brazil Main ActivitiesThe National Financial System
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Central Bank of Brazil Main Activities
Monetary
Policy
Financial
Regulation
FinancialSupervision
Wide scope of Central Banks authority helps
policy coordination
Number of Institutions by TypeThe National Financial System
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70
Number of Institutions by Type
Type 2007 2008 2009 2010
Multiple bank 135 140 139 137
Commercial bank 20 18 18 19
Development bank 4 4 4 4
Savings bank 1 1 1 1
Investment bank 17 17 16 15
Exchange bank 2
Consumer finance company 52 55 59 61
Security brokerage company 107 107 105 103
Exchange brokerage company 46 45 45 44
Security distribution company 135 135 125 125
Leasing company 38 36 33 32
Real estate credit company and savings and loan association 18 16 16 14
Mortgage company 6 6 6 7
Development agency 12 12 14 15
591 592 581 579
Credit cooperatives 1,465 1,453 1,405 1,370Micro-entrepreneur credit company 52 47 45 45
2,108 2,092 2,031 1,994
Consorcio company 329 317 308 300
Total 2,437 2,409 2,339 2,294
Top 10 Financial InstitutionsThe National Financial System
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71Source: BCB
Top 10 Financial Institutions
Name Ownership Totalassets
(R$ billion)
Creditoperations
(R$ billion)
Totaldeposits
(R$ billion)
Networth
(R$ billion)
Employees
(Thousand)
Branches
(#)
Baselcapitalratio(%)
Banco do Brasil Federal government owned 779 334 377 50 126 5,088 14.0
Ita Domestic private 720 234 215 62 121 3,767 15.5
Bradesco Domestic private 563 197 194 48 86 3,636 14.7
BNDES Federal government owned 521 177 22 66 3 1 19.7
Caixa Federal government owned 401 176 215 15 108 2,209 13.6
Santander Foreign controlled private 376 142 118 65 54 2,395 28.1
HSBC Foreign controlled private 125 40 77 8 30 866 13.4
Votorantim Domestic private 111 52 24 8 2 27 13.1
Safra Domestic private 76 31 15 6 6 100 14.0
Citibank Foreign controlled private 54 11 15 5 6 128 13.2
Others 624 240 216 86 64 1,619
Banking segment total 4,350 1,633 1,488 420 606 19,836
December 2010
Brazilian Banks - Capital Adequacy RatioThe National Financial System
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72Source: BCB
Brazilian Banks Capital Adequacy Ratio
13.8
14.8
16.6
19.0 18.5
17.4 17.8 17.3 17.7
18.8
16.9
0
5
10
15
20
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Brazilian banks capital ratio Basel minimum capital ratioRegulatory minimum capital ratio
%
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Prudential Regulation
and Supervision
General FeaturesPrudential Regulation and Supervision
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All FIs regulated and supervised
Financial regulation mostly infra-legal
Convergence to international standards (IFRS,
Basel II, IOSCO)
Participation in international forums (BCBS, G20,FSB)
Generally conservative financial regulation
General Features
Financial Supervision - Main FeaturesPrudential Regulation and Supervision
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75
Risk-based approach to supervision
On-site supervision
- frequent on-site examination
- rating of supervised institutions qualitative assessment of risk management and control
analysis of financial and economic indicators
identification of areas to be monitored
Includes contingency planning and assessmentof organizational structures dedicated to risks
Financial Supervision Main Features
Off-Site SupervisionPrudential Regulation and Supervision
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76
Directs on-site supervision towards the riskier
areas
Specific monitoring of market and liquidity risks
- uses information on assets and derivatives registered
in clearing houses
- conciliation with FIs accounting information
Monitoring of aggregate evolution of systemic
risk over time Periodic application of stress tests to FIs
statements
Off Site Supervision
Conservative Features - RegulationPrudential Regulation and Supervision
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Minimum capital ratio: 11% of RWA (above Basel
minimum of 8%) Capital requirement for credit risk on trading book
exposures (except stock)
Lower risk weights for residential property exposuresconditioned to loan-to-value
- LTV < 50% 35% risk weight
- 50% < LTV < 80% 50% risk weight
- 80% < LTV < 100% 75% (retail) or 100% (otherwise)
Higher multipliers for standardized market riskrequirement
Forward-looking provisioning rule
Conservative Features Regulation
Conservative Features - RegulationPrudential Regulation and Supervision
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78
Mandatory organizational structure for
management of each risk factor
- Credit, market and operational risks
- Board accountability on risk management
Limits on large exposures
Limits on foreign currency exposures
Mandatory registration of OTC derivatives
Mandatory internal controls
Conservative Features Regulation
Credit: Provisions vs. Non Performing LoansPrudential Regulation and Supervision
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79Source: BCB
g
%ratio
1.55
1.65
1.75
1.85
1.95
2.05
2.15
2.25
2.5
3.0
3.5
4.0
4.5
5.0
Jan
04
Jul04
Jan
05
Jul05
Jan
06
Jul06
Jan
07
Jul07
Jan
08
Jul08
Jan
09
Jul09
Jan
10
Jul10
Jan
11
NPLs (LHS) Provisions/ NPLs (RHS)data until June 2011
Recent Macroprudential MeasuresPrudential Regulation and Supervision
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80
Increased capital requirements for consumer loanexposures involving longer maturities and higher LTVs.
The risk weight for such exposures was increased from100 to 150%.
ece t ac op ude t a easu es
Operation Maturity and LTV Risk Weight
Vehicles (financingand leasing)
between 24 and 36 months and LTV > 80%
150%
between 36 and 48 months and LTV > 70%
between 48 and 60 months and LTV > 60%
more than 60 months and any LTV
Payroll-deducted loan more than 36 months
Personal loan more than 24 months
Other consumer loans 100%*
*Unchanged
Recent Macroprudential MeasuresPrudential Regulation and Supervision
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81
Increased bank reserve requirements on demand
and time deposits- Volume estimated: R$ 65 billion
Established unremunerated reserve requirement on
short spot FX positions above a limit- Limit: the lower of US$1 billion or the banks capital base
Minimum payment for credit card bill- 15% (June 2011)- 20% (December 2011)
p
Recent Macroprudential MeasuresPrudential Regulation and Supervision
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82
Established the Financial Stability Committee (Comef)
within the Central Bank, in order to coordinate the Bank'sefforts to monitor, evaluate, and mitigate systemic risk
- Membership: Governor and Deputy Governors
- Bimonthly meetings- Take over responsibility for the Banks biannual Financial
Stability Report
p
New Loans: VehiclesPrudential Regulation and Supervision
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83Source: BCB
R$billion
2
4
6
8
10
12
Jan09
Mar09
May09
Jul09
Sep09
Nov09
Jan10
Mar10
May10
Jul10
Sep10
Nov10
Jan11
Mar11
May11
data until June 2011
Dec 10
New Loans: Personal CreditPrudential Regulation and Supervision
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84Source: BCB
R$billion
8
10
12
14
16
Jan
09
Apr09
Jul09
Oct09
Jan
10
Apr10
Jul10
Oct10
Jan
11
Apr11
data until June 2011
Dec 10
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Access to Banking
Services
Access to Banking ServicesAccess to Banking Services
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86Source: BCB
g
2002 2009 PresentAccounts (for the bank sector) 55,708,468 83,308,800 90,682,450
Customers 87,630,527 151,102,765 161,767,320
Branches
For the banking sector 17,049 20,046 19,876
For all financial institutions 17,756 21,287 22,429
Posts of service (for the banking sector) 32,769 53,628 58,890
ATMs 129,913 165,567 165,479
Domestic correspondents 78,539 151,351 159,504
Municipalities
Without banking services 222 - -
With banking services 5,358 5,566 5,566
Municipalities banking services coverage 96% 100% 100%
Bank CorrespondentsAccess to Banking Services
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Definition: non-financial firms hired by FIs to
render basic banking services on their behalf Main correspondent chains are post offices,
lottery outlets, supermarket
Over 150,000 points of sale, compared to 20,000branches of FIs (Feb. 2010)
Allows banking system to cover all 5,566
municipalities Due diligence and anti-money laundering rules
apply to correspondents
p
Bank CorrespondentsAccess to Banking Services
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Main services are handling basic account
transactions and receiving loan applications,processing payments, and transferring funds
Bank-based model: financial institution (licensed,
supervised) takes full responsibility for theservices
Correspondent may not charge additional fees to
the public for its services Main activity of the correspondent has to be
commercial, non-related to financial services
p
Synergies in Correspondent BankingAccess to Banking Services
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Benefits for the bank
- Broadens client base
- Smaller overhead and direct costs
- Informal environment: more inviting for lower-incomecustomers
- Flexible hours of operation
Benefits for the correspondent
- Transaction fees from the bank
- Use of spare capacity- Increased flow of customers
- Links the firm to a renowned brand
y g p g
Simplified AccountsAccess to Banking Services
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90
For individuals only
No check books (only cards)
Depositor is precluded from having any otheraccounts
Account balance limit of R$2,000 (around US$1,210 as of Mar 2010)
No maintenance fees Simplified identification requirements
p
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Fostering Competition
in the Banking Sector
Fostering Competition on Two FrontsFostering Competition in the Banking Sector
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Portability
- Mandatory availability of personal data
- Simplified transfer of loans
- Salary transfer to other banks, free of charge
Transparency
- Implementation of credit bureau
- Standardized disclosure of service fees and cost of loans
- Information on fees, rates and complaints on Central Bankswebsite
Credit Bureau System (SCR)Fostering Competition in the Banking Sector
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Created in 1997
Exposures over R$ 5,000 have to be informedon an individual basis
Dual objective
- Provision of information on clients bank debt to FIs- Large database for supervisory use
All financial institutions required to send
information Access of banks to a particular clients
information must be authorized by client
Glossary
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BCB Brazilian Central Bank
BNDES National Bank of Economic and Social DevelopmentCMN Brazilian National Monetary Council
CVM Brazilian Securities Commission
FAO Food and Agriculture Organization
FGV Getulio Vargas Foundation
IBGE Brazilian Institute of Geography and Statistics
IMF International Monetary Fund
IPEA Institute for Applied Economic Research
MDIC Ministry of Development, Industry and Foreign Trade
UM United Nations