p130309 Brazil World Crisis

7/30/2019 p130309 Brazil World Crisis

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BRAZIL AND THE

WORLD CRISIS

Minister of Finance

Guido Mantega

March 2009


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Worsening of World Crisis

No solution to the financial crisis

Strong deterioration of economic conditions

Brazil has one of the most favorable conditions to

face the crisis

Government measures smooth the impacts of

the crisis and allow an easier recovery

Brazil was one of the last countries hit by the

crisis and can be one of the first to come out


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Source: JP Morgan -GDW Elaborated by: MF/SPE

Real GDPReal GDPReal GDPReal GDP(% over previous period)(% over previous period)(% over previous period)(% over previous period)

-15

-10

-5

0

5

10

1Q08 2Q08 3Q08 4Q08 1Q09

1Q08 0.9 1.1 2 2.7 2.8 5.2 6.7 6.8 8.22Q08 2.8 0 -1.8 -0.7 -3.7 -1.7 6.5 7.4 -5.5

3Q08 -0.5 -2.8 -2.2 -1.0 -2.3 -2.2 6.9 -0.2 -2.8

4Q08 -6.2 -6.0 -7.1 -5.7 -12.7 -8.2 -13.6 -4.0 -7.8

1Q09 -5.5 -5.0 -5.0 -5.0 -12.0 -5.0 -0.5 -4.0 -7.0

United

States

United

KingdomItaly Euro area Japan Germany Brazil Chile Hong Kong


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World Crisis Smoother Impact on Brazilian

Internal Auto Market (tsd units)Country Jan/09 Jan/08 Change %

USA

(Light vehicles)655.2 1.039.1 - 36.9%

Japan 301.7 376.6 - 19.9%

Germany

(Automobiles)189.4 220.4 - 14.1%

France

(Automobiles and light

commercials)

178.1 199.6 - 10.8%

Italy

(Automobiles)157.4 233.7 - 32.6%

Spain

(Automobiles)59.4 101.6 - 41.6%

Argentina 33.7 55.2 - 38.9%

Mexico(Light vehicles)

69.7 96.8 - 28.0%

Brazil 197 215 - 8.1%

Sources: VDA. CCFA. Anfac. Adefa. Amia. Wards AutoInfoBank. AutoNews Reuters/Japan AutomobileDealers Association


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Employment Level*

(Difference between employees hired and dismissed %)

*7.200 enterprises from 36 countries, of which 150 are from Brazil.Source: Grant Thorton International Elaborated by: MF/SPE.

71

27

33

54

31

20

33

20

(12) (9)

8

(21)

4

(4)

n.a.0

-40

-20

0

20

40

60

80

Brazil EU NAFTA Latin

America

Asia

(Pacific)

Nordic

Countries

Asia (East) World

Average

2008

2009

Employment situation better that in the rest of the world


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The worsening of the economic

situation leads to:Higher interest rates

Higher public debt

Higher primary surplus

Lower investments

Fall of product, unemployment

increase, economic fragility

Brazil: In former crisis proBrazil: In former crisis proBrazil: In former crisis proBrazil: In former crisis pro

cyclical measurescyclical measurescyclical measurescyclical measures


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Due to macroeconomic soundness, Brazilcan soften the impact of the crisis:

Active monetary policyExpand creditReduction of interest rate

Compensatory fiscal measures

Tax exemptions

Increase of public investments

Countercyclical measuresCountercyclical measuresCountercyclical measuresCountercyclical measures


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Measures to fight the CrisisMonetary Policy and Credit

Reduction of banking reserves requirements and

interest rate

Credit for Agriculture and Car Industrie

Expansion of State-Owned Bank credit and

capitalization of BNDES US$ 42,5 billions.

Increase of pre-shipment export financing (ACC) Increase of credit lines to finance private

external debt


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Fiscal Policy

Tax reduction in IVA (IPI) transport

Tax reduction in credit

Tax reduction in personal income taxbrackets

Infrastructure investment increase (PAC)

New Housing Program 1 million units

Measures to fight the Crisis


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Why is Brazil in betterconditions than most to

solve the crisis?


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World Financial CrisisWorld Financial CrisisWorld Financial CrisisWorld Financial Crisis

WORLDRECESSION

NEGATIVEGDP

EXTERNAL TRADE

DECREASES


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Source: IBGE Elaborated: MF/SPE

INVESTMENT % GDP

16,8%17,0%

16,4%

15,3%

16,1%15,9%

16,4%

17,5%

19,0%

12%

13%

14%

15%

16%

17%

18%

19%

20%

2000 2001 2002 2003 2004 2005 2006 2007 2008


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Sales VolumeSales VolumeSales VolumeSales Volume ---- RetailRetailRetailRetail(%(%(%(% yoyyoyyoyyoy))))

6.0

2.8

-10

-5

0

5

10

15

20

Jan

07

Mar

07

May

07

Jul

07

Sep

07

Nov

07

Jan

08

Mar

08

May

08

Jul

08

Sep

08

Nov

08

Jan

09

PMC

PMC expanded*

(*) includes vehicles, motorcycles, spare parts and housing construction materials.Source: IBGE. Elaborated by: MF/SPE

PMC = Monthly Trade Inquiry


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Sovereig Wealth Fund

Fiscal Saving of 0,5% GDPin 2008

Bigger one primary surplusin 2008


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Better Fiscal PerformanceBetter Fiscal PerformanceBetter Fiscal PerformanceBetter Fiscal Performance(Deficit as % GDP)(Deficit as % GDP)(Deficit as % GDP)(Deficit as % GDP)

0.0%

0.8%

4.0%

-3.3%

-6.5%

-4.7%

-2.5%

-2.7%

-2.8%

-3.0%

-3.8%

-6.7%

-8.8%

-11.1%

-0.4%

-0.5%

-1.5%

-3.8%

-16.9%

-4.1%

Mexico

Brazil

China

Germany

S.Africa

Japan

Russia

UK

India

US

2008 2009

Source: Standard & Poors Elaborated by: MF/STN


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World Financial CrisisWorld Financial CrisisWorld Financial CrisisWorld Financial Crisis


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Unleveraged Housing Market

(% GDP)

111

8573

5346

2013 10 9 8 6 2 2

166

249

156

137125

141

63

46

17

33 2837 41

Netherlands

US

England

Ireland

Spain

S.A

frica

Chile

Hungary

Mexico

Cz.Rep.

Poland

India

Brazil

Housing Credit Total Credit

Sources: Global Property Guide, Central Banks Elaborated by: MF/STN


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4,4

10,8

19,0

28,9 28,6

32,8

22,5

16,6

10,1

18,115,1

18,8

34,6

45,1

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Foreign Direct InvestmentsForeign Direct InvestmentsForeign Direct InvestmentsForeign Direct Investments(US$ bi)(US$ bi)(US$ bi)(US$ bi)

Source: BCB


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Trade to GDP RatioTrade to GDP RatioTrade to GDP RatioTrade to GDP Ratio(2005(2005(2005(2005----2007)2007)2007)2007)

Source: WTO (October 2008) Elaborated by: MF/SPE

25,8

0

20

40

60

80

100

120

Brazil

USA

Japan

Colom

bia

Argentina

Australia

India

Peru

Turkey

Russia

France

Italy

UK

Spain

Uruguay

M

exico

Ecuador

Bolivia

Portugal

China

Canada

Chile

Germ

any

South

Korea

Philippines

Switzerland

Paraguay


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EntrepreneursEntrepreneursEntrepreneursEntrepreneursConfidenceConfidenceConfidenceConfidence

Source: FGV Elaborated by: MF/SPE

INDUSTRY CONFIDENCE INDEX

70

80

90

100

110

120

130

Feb

07

May

07

Aug

07

Nov

07

Feb

08

May

08

Aug

08

Nov

08

Feb

09

ici - seasonally adjusted

Documents

p130309 Brazil World Crisis