Brazilian Economic Outlook for 2011

Minister of FinanceGuido Mantega

2011 Brazil Summit

New York, April 18, 2011

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• The world economic recovery slowly continues• World divided between:• Slow growth, high unemployment and big fiscal deficits

in advanced countries• Fast growth, strong job creation and inflation in

emerging markets

• Advanced countries have not recovered from crisis yet.

• Good news: Brazil belongs to the second group (countries with high growth and employment rates).

Source: IMFProduced by: Ministry of Finance

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New global economic scenario after 2008 crisisGDP annual average growth, in % YoY

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2011: various recovery pacesGDP forecasts, in % YoY

Source: The EconomistProduced by: Ministry of Finance

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Brazil: Sustainable Growth Strong domestic market

Increasing investment rate Adjustments for post-crisis period:

Economic growth slowdown Inflation control

Fiscal results strengthening

No macroeconomic imbalances

Source: IBGEProduced by: Ministry of Finance

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GDP growth led by domestic demandIn %, YoY

* Ministry of Finance forecasts

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Investments reached record levels in 2010In % YoY

Source: IBGEProduced by: Ministry of Finance

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* PAC – Growth Acceleration Program Source: Ministry of Planning, Budget and Management

Produced by: Ministry of Finance

Brazilian investment plan – PAC 1 improved GDP growth In US$ billion

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Brazilian investment plan – PAC 2 supports future growthIn US$ billion

Source: Ministry of Planning, Budget and Management

Produced by: Ministry of Finance

* PAC – Growth Acceleration Program

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Brazilian investment growth rate above other EMsIn % GDP

Source: IMF and Crédit SuisseProduced by: Ministry of Finance

(Investment rate: 48,1% of GDP)

Source: Economatica Financial Consulting Produced by: Ministry of Finance

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Brazil: outstanding results for the non-financial sector168 non-financial companies balance, in US$ billions

Source: Bankscope, in: IIF Capital Markets Monitor, January 2011Produced by: Ministry of Finance

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Banking sector growing fast in BRICSAssets of major 5 domestic banks, by country, in US$ trillions

Source: BM&F BovespaProduced by: Ministry of Finance

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Brazilian stock market widensBrazilian stock market trade, in R$ billion

* Accumulated in 12 months, by March 2011

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Brazilian economy has been adjusted to the 2011 scenarioMaintenance of countercyclical policy in a context of economic recovery

Reversal of 2009-2010 economic stimulus R$ 50 billion cut in public spending Spending efficiency Minimum wage at R$ 545 Ensuring fiscal soundness Ensuring inflation control

Source: Brazilian Central BankProduced by: Ministry of Finance

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Robust primary surplus reduces nominal deficitIn % of GDP

* Ministry of Finance forecasts

Public Sector primary resultIn % GDP, accumulated in 12 months

Source: National TreasuryProduced by: Ministry of Finance

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Source: Ministry of FinanceProduced by: Ministry of Finance

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Job formalization reduces social security deficitSocial security annual deficit, in % of GDP, accumulated in 12 months

Source: Ministry of FinanceProduced by: Ministry of Finance

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Payroll remains stable compared to GDPIn % of GDP

* Ministry of Finance forecasts

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Sound fiscal situation compared to other countriesBudget balance forecasts for 2011, in % GDP

Source: The EconomistProduced by: Ministry of Finance

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Inflation: a global issueInflation forecasts for 2011, in % YoY

Source: The Economist and Brazilian Central BankProduced by: Ministry of Finance

Source: Thomson ReutersProduced by: Ministry of Finance

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Commodity-Price index- CRBCommodity-price index, 1967=100

* In March 31st, 2011

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Oil price historic highsIn US$, nominal price per barrel (Brent), average monthly and deflated by the U.S.A inflation.

Source: BloombergProduced by: Ministry of Finance

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Measures to moderate growth and contain inflationCommodity inflation: depends on international markets Stimulus to increase the supply of commodities Government measures and objectives:• Stimulus to agricultural supply increase• Compulsory requirements increase• Brazilian Central Bank’s macroprudential measures• SELIC interest rate rise• Reduction of activity level and public expenditure• 1.5% IOF tax increase in credit operations for households

Source: IBGE and Brazilian Central BankProduced by: Ministry of Finance

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Inflation within the bounds set by the targeting regime. Consumer Price Index (IPCA), in % YoY

*Brazilian Central Bank forecasts

Source: IBGEProduced by: Ministry of Finance

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Inflation under controlIn % change from preceding month

Source: IBGEProduced by: Ministry of Finance

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Public transportation and fuels pressurized prices in MarchIn % change from preceding month

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Foreign Exchange MarketIn US$ million

Source: Brazilian Central BankProduced by: Ministry of Finance

* In April 1st, 2011.

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Brazilian Real appreciation in relation to selected currenciesIndex (January 2005 = 100), exchange rate deflated by inflation differentials

Source: FED St. Louis and Brazilian Central BankProduced by: Ministry of Finance

* Position for real changes in February, 2010

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Brazilian Real appreciation in relation to selected currenciesIndex (January 2009 = 100), exchange rate deflated by inflation differentials

Source: FED St. Louis and Brazilian Central BankProduced by: Ministry of Finance

* Position for real changes in February, 2010

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Brazilian Real appreciation in relation to selected currenciesIndex (May 2010 = 100), exchange rate deflated by inflation differentials

Source: FED St. Louis and Brazilian Central BankProduced by: Ministry of Finance