Brazil – Norway Outlook of the Brazilian Economy

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Brazil – NorwayBrazil – Norway

Outlook of the Brazilian Outlook of the Brazilian EconomyEconomy

Ambassador Sérgio Eduardo Moreira Lima

MIB Forum, NHH, Bergen, 24 October 2007

50% of South America’s territory 50% of South America’s territory (70% of MERCOSUL) 8.5 million Km(70% of MERCOSUL) 8.5 million Km22

50% of South America’s 50% of South America’s population population (71.3 % of (71.3 % of MERCOSUL) 190 million peopleMERCOSUL) 190 million people

50% of South America’s GDP50% of South America’s GDPUS$ 1.1 trillion (2006)US$ 1.1 trillion (2006)

SurinameVenezuelaFrench Guyana

Guyana

Colombia

Ecuador

PeruBolivia

Brazil

Uruguay

Paraguay

Argentina

LOCATIONLOCATION

World Largest EconomiesWorld Largest Economies GDP (real exchange rates) - US$ BillionGDP (real exchange rates) - US$ Billion

1. USA 13.001.0002. Japan 4.340.0003. Germany 2.906.0004. China 2.668.0005. U.K. 2.345.0006. France 2.230.0007. Italy 1.844.0008. Canada 1.251.0009. Brazil 1.068.000

Sources: Bloomberg / IMF / International Herald Tribune (Oct.15th 2007)

POLITICAL

The 80s was a decade of

consolidation of democracy.

AS BRAZIL OVERCOMES ITS AS BRAZIL OVERCOMES ITS CHALLENGESCHALLENGES

…….BUSINESS OPPORTUNITIES .BUSINESS OPPORTUNITIES KEEP OPENING UP.KEEP OPENING UP.

ECONOMIC

The 90s was marked by overcoming

inflation and bringing currency stability.

BRAZIL MOVES TOWARDS A BRAZIL MOVES TOWARDS A SUSTAINABLE PATHSUSTAINABLE PATH

2000-2010 : A DECADE OF SOCIAL CHANGES

economic growth

reduction of inequality

market expansion

BRAZIL: a New Growth CycleBRAZIL: a New Growth Cycle

Sustainability

Income distribution

Social inclusion

Decrease in PovertyDecrease in Poverty

28,8 29,028,5

27,628,2

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

% population

Source: FGV/PNAD/IBGE.

Reduction in Income InequalityReduction in Income InequalityGini coefficient Household incomeGini coefficient Household income

Source: PNAD/IBGE.

0,5680,567

1995 1996 1997 1998 1999 2001 2002 2003 2004 2005 2006

Fundamentals for growthFundamentals for growth

Reduction of external vulnerability

Monetary stability

Fiscal responsibility

Brazil Trade SurplusesBrazil Trade Surpluses(US$ billions)(US$ billions)

4855 58 60

4956 56

47 4863

Exports Imports

* Up to September: Exports = 116 B Imports = 85 B

INTERNATIONAL RESERVES

*/ Position at 06/Sep/2007.Source: Central Bank of Brazil

mar/0659,8

set/07*162,6

Increase: 102,8 billions

Liquidation of Foreign Debt to IMF

(US$ billions)(US$ billions)

CURRENT ACCOUNT, FOREIGN DIRECT INVESTMENT AND EXTERNAL FINANCING

REQUIREMENT (US$ billions, 12 months accum. basis)

External Financing Requirement Current Account Foreign Direct Investment

9 13 In the last 12 months up to October 2007 FDI reached a record of US$ 37.5 billions

REDUCTION IN THE SOVEREIGN REDUCTION IN THE SOVEREIGN RISKRISK

basis pointsbasis points

EMBI+ Brazil

EMBI+ excluding Brazil and Argentina

Oct.2007:

161 points

NOMINAL EXCHANGE RATENOMINAL EXCHANGE RATE(R$/US$)(R$/US$)

Oct.2007:

1 US$ = 1,80 R$

11222221122222215

INFLATION: REDUCTION AND INFLATION: REDUCTION AND CONTROLCONTROL

Consumer Price Index (IPCA): Effectiveness, Expectations and Inflation Targeting

(% Var. Accum. in 12 months)

3.14 3.02 3.9 3.8

PUBLIC SECTOR’PUBLIC SECTOR’ss NET DEBT REDUCTION NET DEBT REDUCTION (% of GDP)(% of GDP)

30.731.8

44.545.5

48.450.5

47.0 46.544.9

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

RATINGS

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Moddy´s S&P Fitch

Ba3 BB-

M S&P; F

Ba2 BB

CAPITAL MARKET (US$ billions)(US$ billions) )

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Shares Debentures Other

August 2007::

Over US$ 65 billions

CAPITAL MARKET – IBOVESPA INDEXCAPITAL MARKET – IBOVESPA INDEX(points)(points)

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Oct. 2007:

Over 63.000 points

“A new middle class is emerging almost overnight in Brazil .

During 2000 and 2005, the number of families with annual income between US$ 5.900 and US$ 22.000 has grown 50%, from 14,5 million to 22,3 million, while the number of those who received less than US$ 3.000/year has been abruptly reduced to 1,3 million .”

The Economist, edition of August 18 – 24, 2007

A New Middle Class

“Brazil is the clearest example of financial

stability in Latin America”

The Economist, edition of 25- 31, August 2007

Trust in Brazil

BRAZIL-NORWAY RELATIONSBRAZIL-NORWAY RELATIONS 2007: a historical year2007: a historical year

State Visit of President LulaVisit of Foreign Minister Amorim14 governmental delegations High level political & business contactsAgreements between companies and

business federations

Brazilian Embassy and Brazilian Embassy and Brazilian-Norwegian Chamber of CommerceBrazilian-Norwegian Chamber of Commerce

State Visit of President Lula Business Seminar, Sept. 14th, 2007

www.brazilchamber.no

Brazil-Norway Business CooperationBrazil-Norway Business Cooperation

A Memorandum of Understanding between

NHO and CNI (Confederation of Brazilian

Industries) was signed during President Lula´s

State Visit.

EMBRAEREMBRAER

One of the three main exporters in Brazil. Third largest yearly delivery of commercial aircraft (behind Boeing and Airbus).

Embraer has maintenance and commercial sites in the USA and commercial offices in France, Singapore and China.

Has a workforce of over 23,000 people.

Trade Balance Brazil – NorwayTrade Balance Brazil – Norway (US$ millions)(US$ millions)

Year Exports Imports Total

2002 170.9 214.5 385.5

2003 280.4 265.5 545.9

2004 320.6 340.5 661.2

2005 444.2 295.2 739.4

2006 583,7 348,6 932,4

2007 (Sept.)

463,1 261,4 724,5

Norway became in 2006 the main Norway became in 2006 the main market for Brazilian Exports to the market for Brazilian Exports to the

Nordic countriesNordic countriesBrazilian Exports in 2006 - USD Millions

496458

Norway Sweden Finland Denmark

Norwegian Investment in BrazilNorwegian Investment in Brazil

Scandinavian FDI to Brazil

8360 54

2001 2002 2003 2004 2005 2006

Norway

Sweden

Finland

Denmark

PAC – Program for Accelerated GrowthPAC – Program for Accelerated Growth

• In January the Government announced a new 4-year programme for economic growth

• The “Programa de Aceleração do Crescimento” (PAC) is based on investments of US$ 236 billion in infrastructure

• Priorities: roads, electricity, water, sanitation and housing.

• Reduction of regional and social inequalities

Key Areas for Business and CooperationKey Areas for Business and Cooperation

Aircraft Production and avionics

• medium-sized (50-110 passangers) jet planes• military training aircraft• Embraer is a global competitor in its category

Biofuels

• Bioethanol and flex-fuel cars78.1% of sales of passenger cars in 2006

• Biodiesel• Scientific and technological cooperation in biofuels

MOU Statoil Petrobras

Key Areas for Business and Key Areas for Business and CooperationCooperation

Shipbuilding (19 new and 23 future contracts: platforms, oil and gas transportation by Petrobras/Transpetro and general cargo)

Small and mid-size hydroelectric plants

Environmental technology (cleaner production, residue treatment)

Fisheries and aquaculture of native species

Tropical fruits (development of market and conditioning processes)

Tourism

Norwegian companies doing business in BrazilNorwegian companies doing business in Brazil

Over 120 Norwegian companies are doing business in Brazil

Oil sector: StatoilHydro Mining: Norsk Hydro Paper and pulp: Norske Skog Maritime services: Det Norske Veritas Shipbuilding: Aker Promar Offshore: DOF,Sevan Marine, Norskan Banking: DnB NOR, Nordea Fertilizers: Yara Telecommunications: Nera Paints: Jotun

””During my visit to Brazil in 2003, Norwegian During my visit to Brazil in 2003, Norwegian businessmen declared that Norwegian investments in businessmen declared that Norwegian investments in Brazil would reach 5 billion US$ in the next 5 years. Brazil would reach 5 billion US$ in the next 5 years.

Today I can confirm that we are reaching this investment Today I can confirm that we are reaching this investment level”level”

King Harald V King Harald V (Sept 13, 2007)(Sept 13, 2007)

”I come to Norway convinced that the present moment ”I come to Norway convinced that the present moment opens up new and important opportunities. One of them opens up new and important opportunities. One of them

results from a lasting cycle of sustainable growth in results from a lasting cycle of sustainable growth in Brazil”Brazil”

President Luiz Inácio Lula da SilvaPresident Luiz Inácio Lula da Silva

((Sept 13, 2007)Sept 13, 2007)

Brazil – Norway Outlook of the Brazilian Economy

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