An Overview of Brazils Economy February 1 st

An Overview of Brazil’s Economy February 1 st, 2012 Team Itaú: Shivani Arora Colleen Butts Lakshmi Gupta Spencer Jones

AGENDA • • • Overview Major Economic Sectors Economic History Strengths and Weaknesses Political Influences Outlook

CURRENT SNAPSHOT The worlds seventh wealthiest economy Current President - Dilma Rousseff GDP = $2. 1 trillion GDP per capita (PPP, 2010): US $11, 127 Literacy Rate, adult total - 90% Labor Participation Rate – 65% Unemployment = 4. 7% Population: 190. 7 million Inflation = 6. 5%

PRIMARY EXPORTS Value = $199. 7 billion • Transport Equipment • Iron Ore • Soybeans • Coffee • Footwear Major Export Partners Germany; 4. 05% Netherlands; 5. 39% China; 12. 49% Argentina; 8. 40% US; 10. 50% *Based on 2010

PRIMARY IMPORTS • • Value = $187. 7 billion Major Import Partners Japan; 4. 30% Machinery Electrical and Transport Germany; US; 16. 12% 7. 65% Equipment Chemical Products Argentina; 8. 77% Oil China; 12. 61% *Based on 2010

AGRICULTURAL SECTOR • GDP: 6. 1%, Labor Force: 20% • Sugarcane, Coffee, Soybeans • Cattle: 1. 1 Million Tons (2011), $4. 8 Billion Revenue • Issues: Greenhouse Gas Emissions, Deforestation and Water Pollution

INDUSTRIAL SECTOR • GDP: 28%, Labor Force: 14% • Manufacturing: Steel, Machinery, Automobile Parts, Aircrafts, Chemicals, Consumer Durables • Mining: Nickel, Tin, Zinc • Mineral Resources: Iron and Manganese • Hydroelectric Power: 69%, 77, 000 megawatts • Biofuel Production and the United States

SERVICE INDUSTRY • GDP: 67. 5%, Labor Force: 66% • Banking: Itaú Unibanco, Banco Bradesco, Bank of Brazil • Telecommunications, Energy Commerce, Computing

BRAZIL‘S ECONOMIC TIMELINE Sweeping changes • • • Spectacular Growth Political & Economic 1930 revolution: Old Republic abolished New State dictatorship 1950 s • • • GDP growth rate jumped to 11% External trade expansion 1973 Oil shock 1960 s Stagnation & Industrialization • • • Hyperinflation to Stabilization Import substitution of consumer goods Rapid growth for manufacturing post 1964 GDPgrowth rate down to 4% 1970 s • • Bankruptcy leading to a stabilization plan Political instability 1980 s Stagnation, Inflation and Crisis • • • More oil-shocks Economic decline: IMF control: inflation at 5000% Termed “lost decade” 1990 s 2000 s - Now Economic powerhouse • • End of inflation Rise of consumerism Growth of 7. 5% in 2010 Lula Silva’s rise to power

PLANO REAL • Measures Taken to Stabilize Economy in 1994: • New Fiscal Strategy – privatization of State companies • Monetary Reform – created an index URV, and plural reasis became new currency • Opened up economy to international investors

STRENGTHS • • • Largest Recipient of FDI in Latin America Global Leader in Science and Technology Advanced Industrial Sector Exports: Natural Resources, Agriculture No longer dependent on foreign oil

WEAKNESSES • Poverty • Domestic Debt • Inequality

CURRENT ECONOMIC ISSUES • External Shocks • FDI and over-speculation could cause bubbles • Interest rate adjustments – Risk of “bad equilibrium” • Exchange rates and the appreciated real • Corruption

SECTOR-SPECIFIC ECONOMICSs • Industry vs. Emissions • Agriculture and Energy vs. Deforestation • Meeting Brazil’s energy demands

OUTLOOK • Tighter monetary and fiscal policy • Inflation continues to be an issue • Strong economic recovery following global recession

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