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Brazil:
Sustainable
Growth
Min. Guido Mantega
April 2010
2
Brazil: one of the fastest growing economies in 2010
GDP growth forecast – selected countries – in % of GDP
* The Economist forecast
** Government forecast
Source: The Economist
Produced by: Ministry of Finance
3
New social and economic paradigms
•
•
•
•
•
Emphasis on a more robust growth
Employment generation
Social inclusion and income distribution
Investment enhancement
Government encourages and promotes
growth
• Efficient stimulus programs
4
Robust employment generation and more formal jobs
Net employment generation – in thousands of workers
* Government forecast of 1.8 million for 2010, of which 657,259
comprised within the accumulated year period up to Mar-2010
Source: CAGED /MTE
Produced by: Ministry of Finance
2010: the smallest unemployment rate in a time series
Unemployment rate – in % of economically active population
Source: PME/IBGE
Produced by: Ministry of Finance
New middle class and Brazilian unification
Social class distribution - in % of population
Source: MDS, MTE and CPS/FGV
Produced by: Ministry of Finance
Social classes diversify consumption
% change in the purchased value (food, beverages, hygiene and cleaning)
* Average monthly household income is specified below
* Class D/E: from R$ 0 to R$ 1,115
Class C: from R$ 1,115 to R$ 4,807
Class A/B: from R$ 4,807 and on
Source: Kantar World Panel
Produced by: Ministry of Finance
8
Highest employment rate in the world
Net employment generation forecast for Q2 2010*
Gap within companies that expect job raising (43%) as opposed to the ones which expect a
reduction (5%) in Q2 2010 (% between Q1:2010 and Q4:2009)
* Expected employment generation from Manpower Consulting research
8for the Q2 2010 based on interviews with 850 companies in Brazil
Source: Manpower Consulting
Produced by: Ministry of Finance
9
Purchasing power of minimum wage
Today’s minimum wage buys more products – in numbers of staple food baskets
Source: DIEESE
Produced by: Ministry of Finance
10
Dinamycs of Brazilian domestic demand
Retail sales – selected countries - % change from 2008 to 2009
Fontes: IDV
Produced by: Ministry of Finance
11
Retail Sales - PMC
% change from preceding every 12-month period
* Including automobiles, motorcycles, parts and pieces, and
construction materials
Source: IBGE
Produced by: Ministry of Finance
12
Government action is essential
• Infrastructure stimulus: PAC
• PAC is a strategic investment program with
management and infrastructure planned
actions
• Industrial sector policy
• Income distribution
• Acting and efficient State-owned companies
(BNDES, BB, CAIXA, BNB, Petrobras)
13
Investment enhancement
% change from preceding year
13
* Ministry of Finance Forecasts
Source: IBGE
Produced by: Ministry of Finance
14
Federal Government and State-Owned Companies
Investment
Cash basis - % of GDP
14
* Ministry of Finance Forecasts
Source: Ministry of Finance
Produced by: Ministry of Finance
15
Industry investment volume
Industry resource distribution - realized and planned by sector of activity
15
Source: BNDES
Produced by: Ministry of Finance
Decade of infrastructure to come
Investments in R$ billions
16
Source: Exame Infrastructure Yearbook 2009-2010
Produced by: Ministry of Finance
17
Construction growth in Brazil
Average number of contracts by presidential terms
Source: Abecip and CAIXA
Produced by: Ministry of Finance
18
2010: Sustainable and quality growth
• Growth is sustainable because it doesn’t
create macroeconomic imbalances
• Inflation under control – efficient inflation
targeting regime
• Robust fiscal rules – primary surplus target of
3.3 % of GDP in 2010 and continuous
reduction in net public debt
• Low external vulnerability
19
Evolution of inflation index, target and expectations%
% change from every 12-month period
* Market Forecasts FOCUS Report from April 9th, 2010
Fontes: IBGE and Brazilian Central Bank
Produced by: Ministry of Finance
Decomposition of Monthly Inflation (% change)
0.9
0.8
0.7
Remaining itens
Fuel (ethanol and gasolines)
Tranport (tickets and fares)
Food (in house)
0.6
0.5
0.4
0.3
0.2
0.1
0.0
-0.1
-0.2
Source: IBGE.
20
Elaborated by: MF/SPE
20
21
Sustainable PAC: reduction of public debt
Fiscal results – primary surplus and nominal deficit/surplus - in % of GDP
**
* Ministry of Finance Forecasts
Source: Brazilian Central Bank and The Economist
Produced by: Ministry of Finance
5.0
Jan/03
Apr/03
Jul/03
Oct/03
Jan/04
Apr/04
Jul/04
Oct/04
Jan/05
Apr/05
Jul/05
Oct/05
Jan/06
Apr/06
Jul/06
Oct/06
Jan/07
Apr/07
Jul/07
Oct/07
Jan/08
Apr/08
Jul/08
Oct/08
Jan/09
Apr/09
Jul/09
Oct/09
Jan/10
Apr/10
25.0
Nominal Growth rate (% YOY)
20.0
15.0
10.0
Net primary revenue
Primary expenditure
GDP
-
(5.0)
23
Sustainable nominal deficit: reduction of public debt
Nominal deficit - in % of GDP
* Ministry of Finance Forecasts in February, 2010
** G-20 nominal deficit average refers to Apr 15th, 2010 ed.
Source: The Economist
Produced by: Ministry of Finance
24
Sustainable PAC: reduction in public debt
Public Sector Net Public Debt - in % of GDP
* Ministry of Finance Forecasts in February, 2010
Source: Brazilian Central Bank
Produced by: Ministry of Finance
40
35
30
25
20
15
10
5
0
Brazil
South Korea
Philippines
Indonesia
Mexico
Turkey
Peru
South Africa
Chile
Hungary
Poland
Paquistan
Thailand
Lebanon
Bulgaria
Colombia
Romania
Malaysia
Costa Rica
Croatia
Egypt
Ukraine
Uruguay
Venezuela
Vietnam
Belize
Tunisia
Ecuador
Russia
China
Morocco
Dominican…
25
IIF Ranking on Investors Relation and Data
Transparency
38
37
35
34 34
33
32
31
30
29
24
21 21
20
18
16 16
12
11 11 11 11
10 10
9
6
6
4
4
3
3
2
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Deficit in Current Account does not bind growth, nor increase
external vulnerability
Current Account – in US$ billions and % do PIB
* Government Forecasts
26
Source: Brazilian Central Bank
Produced by: Ministry of Finance
27
Lower external vulnerability
International reserves and external debt - in % of GDP and index
Source: Brazilian Central Bank
Produced by: Ministry of Finance
28
From supporting to leading country
• Brazil is respected and highly regarded.
• Change: from debtor to creditor and new
protagonist position.
• The myth that “Brazil is a second-class
country” has fallen apart.
• Brazil could became one of the most
dynamic countries in this decade.