BRAZIL’S FORGE TRENDS

GDP

0.88
0.84
0.87
0.64
0.55
0.5
0.55
0.66
0.88
1.09
1.37
1.65
1.62
2.14
2.45
2.25
2.05
2.09
0
0,5
1
1,5
2
2,5
3
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
U
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• The GDP grew consistently until 2011 in dollars
• Low growth in the last 3 years comparing to other developing countries
• 7th biggest economy in the world (at the moment)

GDP growth (%)
2007 2008 2009 2010 2011 2012 2013 2014
6.1% 5.2% -0.3% 7.5% 2.7% 0.9% 2.3% 1.8%
Inflation and Interest Rate
Inflation (%)
2007 2008 2009 2010 2011 2012 2013 2014
4.5% 5.9% 4.3% 5.9% 6.5% 5.8% 5.9% 6.4%
Interest Rate (%)
2007 2008 2009 2010 2011 2012 2013 2014
11.2 13.7 8.7 10.7 10.9 7.1 9.9 11.5
• Historically, Brazil has had a high rate of inflation, and the government tries to
control it by increasing interest rates

• A lot of volatile money coming into the country

• Forging parts are expensive to export

• Brazil is importing many manufactured goods because of the strong currency
(Real)



International Reserves
51
43
36
33 35 37
49
52 53
85
180
193
238
288
352
373 358
340
0
50
100
150
200
250
300
350
400
U
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• Twelve (12) years ago, the international reserves were USD 30 billion

• In 2012, international reserves hit a record of USD 373 billion. Now they are
lowering due to the end of the trade balance surplus

• Three (3) years ago, Brazil was self-sufficient in oil, but the government is subsiding
gasoline to lower the rate of inflation
The Brazilian Government
Hostile business environment:

• 83 different taxes – each company spends 2,700 working hours per year on taxes

• Taxes are 36% of the GDP – much higher, if you compare to the United States (26%) and
Mexico (14%)

• too much bureaucracy – it takes 150 days to open a company

• Lack of confidence – The government does not respect contracts

• The government has been unable to complete several infrastructure projects:
- Public transport – São Paulo has 20 million inhabitants and only 70 km of underground
lines
- Roads – 1 ton of soya beans costs 200 dollars to reach the harbor
- Electricity – all projects are at least one year delayed


All these factors bring low investments into the country – only 19% of the GPD


The Brazilian Government
• There have been strong public demonstrations against:
- the government
- the Congress
- rises in public transport fares
- violence
- corruption
- the 2014 FIFA World Cup – USD 13 billion were spent on the event
- the low quality of public education

• The Government has been losing popularity since 2012, falling from 70% to 40%

• After the presidential elections in November 2014, several strong economic
adjustments are expected

• The government net debt is low compared to other economies




Government Net Debt Compared to the GPD
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
50.0% 48.0% 46.0% 45.0% 38.0% 41.0% 39.0% 36.0% 35.0% 33.0% 32.0%
People
181
184
186
188
189
191
193
195
196
198
201
203
170
180
190
200
210
P
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Population
3,040
3,607
4,739
5,788
7,194
8,623
8,373
10,980
12,580
11,340
10,199 10,300
-
2.000
4.000
6.000
8.000
10.000
12.000
14.000
G
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P

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GDP per capita
• Population of 203 million in 2014 – small growth trend
• More than half are in the middle class
• Two income sources per family trend
Work Force
• A 5.5% unemployment rate in Brazil is regarded as full employment. The
salaries and costs with salaries are high compared to other developing
countries

• Companies pay 100% of benefits on salaries. For example, if a worker
has USD 1000 in wages, the company spends USD 2000 on that worker

9,9
9,3
7,8
8,1
6,7
6,0
5,5 5,4 5,5
0,0
2,0
4,0
6,0
8,0
10,0
12,0
U
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m
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m
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t

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%
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Unemployment
Vehicle Production
2069
1573
1350
1681
1817 1791
1827
2317
2530
2611
2977
3215
3182
3381 3407
3342
3740
3700
446 457
304
339
235
159 169
260
319
432
544
597
512
716
828
764 791
700
0
500
1000
1500
2000
2500
3000
3500
4000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014e
V
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• Brazil’s 2013 close-to-record vehicle production will not happen again this
year:

- increase in vehicle taxes

- exports to Argentina will decrease 40%

- 2014 FIFA World Cup holidays

- Over a 2-month vehicle inventory stored

Brazil
Argentina
Vehicle Production
• 28 automotive industries

• 19 brands

• 90% of cars are bi-fueled (alcohol or gasoline) – Taxis are tri-fuel (alcohol
or gasoline or gas)

• 50% of the production are small-sized cars

• 6th biggest automotive industry in the world

Since 2012: Euro-5 trucks

850,000 Cars + Trucks Imports
600,000 Cars + Trucks Exports


» Brazilian Forging Production (thousand metric tons)








» Argentina and other South American countries
(Metric tons)






2008 2009 2010 2011 2012 2013 2014
Drop forging,
press, upset
forging , and
cold forging
384 305 370 400 354 425 360
Open-die
forging, and
ring rolling
66 52 63 68 63 75 65
TOTAL 450 357 433 468 417 500 425
TOTAL 93 74 90 97 90 80
• 45 forging plants

• 26 Sindiforja associates

• 18,000 employees

• 50% idle

• High electricity prices: 0.15 USD per
0.15 KWh

• High steel prices – 20 to 30% more
expensive than international prices

• Labor is 28% of the cost





2011 2012 2013 2014e
272 173 220 180
 Brazilian Trucks and Buses (thousands)
The Forge Industry
Autoparts Production - 2012
335
295
216
103
73
67
42
28
23 22
190
0
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400
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• 2/3 of the Brazilian forged autoparts are imported

• Strength of the Brazilian currency (Real (R$)) – Less competitiveness

• Sindiforja Associates
- 1992 – 57 forge industry associates and 4 steel makers
- 2014 – 26 forge industry associates and 2 steel makers
Silvia Ribeiro de Aquino
silvia@onixmetal.com.br

Sindiforja – Brazilian Forging Association
http://www.sindiforja.org.br/home.asp