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edition March 2010

Ministry of Finance

Brazilian Economy Outlook

Summary
Economic Activity Mass Consumer Market Inflation Interest Rates and Credit International Overview Reduction of External Vulnerability Highlight: Current Account Fiscal Policy Glossary 5 27 35 43 57 71

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March 2010

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Economic Activity Ministry of Finance .

7% 0.0 0.5% Average rate (1998-2002) Average rate (2003-2008) Average rate (2009-2014) Data: % change from preceding year * Government Forecasts March 2010 -0.2 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011* 2012* 2013* 2014* Source: IBGE Produced by: Ministry of Finance 6 6 .7 1.0 3.2 6. it is expected that the Brazilian economy will get back to a new development cycle under an average growth rate estimated at 5.1 Average 4. However.Economic Activity A new economic and social policy Brazilian economy recorded -0.5% per annum.3 Average 1. GDP Growth in the Mid-Term (% yoy) Ministry of Finance PAC 1 PAC 2 5.3 2.3 4.0% drop last year. In the coming years.2% Average 5.0% to 3.2% of GDP growth in 2009.2 5.1 5.7 4. policy measures undertaken to cope with the international financial crisis restrained the economy to face a 2.

9 0.6 Exports 11. investments have led GDP growth (6.6 1. seasonally adjusted figures Source: IBGE Produced by: Ministry of Finance 7 March 2010 Gross Fixed Household Capital Formation Consumption 7 . Exports could also be considered as a driving force to growth with a 3.6% rise. Ministry of Finance Composition of GDP Growth (4Q 2009/3Q 2009) 2.Economic Activity Investments drive growth in the 4th quarter of 2009 Compared to the previous quarter.6 Government Spending 3.4% growth rate in the last quarter of 2009 was intensified by a 6.0 GDP 6.6% investment growth rate. the annualized 8.4 Imports Data: % change from preceding quarter. For the second quarter consecutively.5% in the third quarter against the second one in 2009).

8 4.1 5.1 -9. it is expected a 18% investment rise for 2010.2 17.9 -0.2 Investiment GDP Data: % change from preceding year * Ministry of Finance Forecasts March 2010 2002 2003 2004 2005 2006 2007 2008 2009 2010* Source: IBGE Produced by: Ministry of Finance 8 8 .1 13.0 13.1 9. Ministry of Finance Investment and GDP Growth (% yoy) 2.2 9.2 -4.4 5. Based on Government measures taken from the second quarter of 2009 (such as capital injection in BNDES) and the expectations for higher economic growth for the following years. which caused the Brazilian GDP drop in 2009. are also the segments which have led economic recovery from the fourth quarter of 2009 on.4 5.7 3.7 -5.9 6.Economic Activity Investments are about to increase threefold to GDP Manufacturing industry and investments.6 1.6 3.

growth in Latin America is about to be consolidated because domestic demand is fairly vigorous.5 1.2 -0.1 7. Assistant Director of the IMF Research Department (World Economic Outlook). according to IMF According to Jörg Decressin.4 5.0 6. Composition of Mass Market (% yoy) Ministry of Finance 5.3 2008 -2.7 0. mainly due to the dynamics of domestic demand.5 5.2 2009 2010* 9 -2.1 1.2 2.1 9 .3 5. while in many emerging economies “we’re seeing a more vigorous recovery”.3 2.1 0.5 2002 2003 2004 7.Economic Activity Solid domestic demand growth in Brazil helps Latin American economy.4 2005 2006 -1. once the recovery in the developed countries is not as fast as during previous recession periods.2 Domestic Demand Net External Demand GDP Data: % change from preceding year * Government Forecasts Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 0.0 5.7 -0.5 -1. The IMF estimates that the world economic recovery will happen in two different paces.7 3.4 2007 -0.7 0.7 2.2 4.1 7.

5 19. One of the main results achieved was increasing investment rate from 16.3 20.Ministry of Finance Data: % change from preceding year * Ministry of Finance Forecasts Source: IBGE Produced by: Ministry of Finance 10 March 2010 10 .Economic Activity PAC 2 forecasts more than R$ 950 billions of investments up to 2014 PAC is a strategic investment program with management and infrastructure actions.9% in the same period.7% of GDP from 2006 to 2008.9 16.9 21.7 18. Ministry of Finance Investiment Rate (% yoy) PAC 1 PAC 2 Average = 20.4 17.4% to 18.9 16.5 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011* 2012* 2013* 2014* Current figures Forecasts .7 16.5 Average= 15. Government investments from Federal budget and State-owned companies also raised its GDP share: from 1.1 15.0 20.4 Average = 17.4 15.3 16.6% to 2.4 18.

7 75. After a fourteenth consecutive rise.4 113.0 90. 1995.6 107.5 Data: points Source: FGV Produced by: Ministry of Finance Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09 Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 11 11 .6 113.0 82.6 95.6 115.1 76.7 100.Economic Activity Industry confidence in March is the second highest since 1995 The ICI .9 points).6 87.8 116.5 points.recorded a rise in March reaching 116.2 78. standing after only the November 2007 rate (116. initiated in April.Industry Confidence Index . industry confidence index has reached the second highest level of the time series.0 109. Ministry of Finance Industry Confidence Index (points) Optimistic view Pessimistic view March 2010 75.2 103.

0 Data: % change from preceding year -7.1 2. sustained growth for industry is expected in 2010. With strong investment resumption from the third quarter of 2009 on.8 3. electric materials.1 3. iron metallurgy. metallurgy.6 4.7 1.2 2.1 8. transformation industry shrank 7% and the main decline happened in areas related to investment. Industrial Output (% yoy) Ministry of Finance 8. like machines and equipments.6 0.Economic Activity Industry can grow 8% this year without pressuring installed capacity In 2009. communication equipments and trucks.6 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* March 2010 * Forecasts Source: IBGE and Ministry of Finance Produced by: Ministry of Finance 12 12 .3 6.

2%. Industrial Output Index (Jan07 = 100) Ministry of Finance 115 110 105 100 95 90 85 80 111. Also. while the former.Economic Activity Industrial output grew 18. as opposed to last year February. Compared to January.7%.7% and production of durable goods raised 0.8 March 2010 Data: index-number. the latter rose 26. 25. seasonally adjusted (Jan07 = 100) 09 No v0 9 Ja n 10 Fe b 10 Se p 07 No v0 7 Ja n 08 M ar 08 M ay 08 08 No v0 8 Ja n 09 M ar 09 M ay 09 Se Se Source: IBGE Produced by: Ministry of Finance 7 8 l0 p l0 p Ju l 09 13 13 Ju Ju . production of capital goods increased 1.4% in February on a yearly basis Non-seasonally adjusted industrial output increased 1.5% from January to February 2010.2 88.8 108.2%.

6 2005 12. Ministry of Finance Annual Forecast for Industry Installed Capacity Expansion (% yoy) March 2010 8.2 2004 10.6 2008 11.4 2009 14.4 2002 9.0 2007 13.6 2010 Data: % change from preceding year Source: FGV Produced by: Ministry of Finance 14 14 . as well new hirings and productive reorganization able to promote its potential output by 14.6% on average terms. It will be the greatest increase of the last eight years. Brazilian industry investment plans.2 2006 12.Economic Activity Industry expects a record expansion in installed capacity this year According to Getulio Vargas Foundation.6 2003 10.

7 Data: % change from preceding three-year period Source: FGV Produced by: Ministry of Finance 15 2006/2008 2007/2009 2008/2010 2009/2011 2010/2012 15 . Ministry of Finance Expansion of Installed Capacity (% per three-year period) Consumption Goods Capital Goods Intermediary Goods March 2010 22.0 23.increased in its supply capacity.1% growth.1 17.1 19.5 27.1% for 2010-2012 The main category to put pressure on prices .0 19. that is.9 27.9 21.2% per year.Economic Activity Consumption goods: expansion of installed capacity at 27.8 23.0 26.consumption goods .6 19. an average of 7. the forecast is a 27.1 25. From 2010 to 2012.9 21.8 26.0 26.

Economic Activity Domestic demand and profit expectations raise corporate investment levels In 2010. Ministry of Finance Survey on Influential Elements for Investments (% of companies surveyed) 81. In the current year.0 32.0 Data: % of companies surveyed March 2010 Pro t Expectations Domestic Demand External Demand Finance Conditions Interest Rates Source: FGV Produced by: Ministry of Finance 16 16 .0 80. investments are mainly driven by domestic demand. Concerning the 2009 results. the number of companies that expect domestic demand to be a positive drive to capacity expansion increased to 80%.0 31.0 40. 64% of the companies considered domestic demand was a positive influence for investments.

7 308. 826.4 300.7 thousand. In the first three months of 2010.4 247.1 251.5 293.0 258.Economic Activity Car sales increased 60% in March and surpassed previous record Brazilian market auto output surpassed its own record level reaching 353.3 221.9% of total sales. 87.2 271. accumulated sales totaled 788 thousand units and the production.0 March 2010 234. Total Automobile Licences (thousand of units) Ministry of Finance 353. Cars and light commercial dual fuel vehicles (flex) sales amounted to 296.4 thousand units in March.7 285.4 199.7 thousand units.4 Data: thousand of units Ap r0 ay 0 No v0 Source: Anfavea Produced by: Ministry of Finance 9 09 10 9 9 9 9 9 09 10 Fe b 09 09 g0 Fe b c0 t0 l0 ar n Ju n ar p 10 9 Au M M M 17 17 Ju Oc De Se Ja .0 294.7 213.

The sector shall explore new technologies for the great public by investing R$ 21 billion up to 2013.5% du s To try ta l Cellulos 4% Ele 4% 156 295 89.2013 Change between periods above Data: R$ billions and % share Source: BNDES Produced by: Ministry of Finance 18 March 2010 57. another segment related to domestic demand.1% s in er al C an ell d ulo Pa se pe r M ec In 18 M Ch El .8% 2005 . Industry Resource Distribution (R$ billions and % share) Ministry of Finance Vehicle 6% Petro Chemicals 7% Iron Metallurgy 9% Minerals 10% 311 499 60. Good perspectives for electro-electronics. According to the study.9% et al Iro lu n rg y 28 44 19 36 89.5% em Pet ica ro ls 23 32 39.1% el a Ga nd s Fu 53 52 -1. investments in the sectors related to domestic demand will increase at an annual rate of 9.1% icl e Ve h 15 21 40.Economic Activity Industry will invest R$ 500 billion in 4 years BNDES estimates that nearly R$ 500 billion will be invested in the whole industry in the next four years.0% ics tr on 17 19 11.2008 2010 .4% up to 2013.

6 95. while among upper income classes (above R$ 9.5 111.5 Data: points Source: FGV Produced by: Ministry of Finance 19 10 No v0 8 De c0 8 Ja n 09 Fe b 09 M ar 09 Ap r0 9 M ay 09 Ju n 09 Ju l0 9 Au g0 9 Se p 09 Oc t0 9 No v0 9 De c0 9 Fe b 10 Ja ar n 10 19 M .0 113.9 100. there was a slight decrease of 0. moderate optimism is the consumers’ evaluation over their own economic situation as well as the whole economy.600 per month).6 97.1 111.9 113.100 per month).2 110. Among lower income households (up to R$ 2.3 108.5 111.5 95.4 103. According to FGV.Economic Activity Consumer confidence rises in March After a period of purchase anticipations.9 March 2010 96.7 110.3 114.5%. confidence index raised 1.5%. lower income households drove consumer confidence index up in March. Consumer Confidence Index (points) Ministry of Finance 96.1 112.

Parts and Pieces.Economic Activity Retail sales grew 1. 2010. and construction materials March 2010 6.6% in February 2010 compared to January 2010 The main contribution came from the Furniture and Household Devices. motorcycles. with a 22.3 PMC (Monthly Survey of Trade) Broad PMC * Data: % change from each 12-month period * Including automobiles. Retail trade. parts and pieces. grew 11. Motocycles.9% in volume of sales since January. Ministry of Finance Sales Volume in Retail Trade (% yoy) 15 10 8. which includes other segments like Vehicles. and Construction Material.2% increase compared to February 2009.9 5 0 Ap 8 r0 M 8 ay 08 Ju n 08 Ju l0 Au 8 g0 Se 8 p 08 Oc t0 No 8 v0 De 8 c0 8 Ja n 09 Fe b 0 M 9 ar 0 Ap 9 r0 M 9 ay 09 Ju n 09 Ju l0 Au 9 g0 Se 9 p 09 Oc t0 No 9 v0 De 9 c0 9 Ja n 10 Fe b 10 Fe b M ar 08 0 Source: IBGE Produced by: Ministry of Finance 20 20 .

8 -2. computer and communication supplies Books. clothing and footwear Hyper/Supermarkets.6 1.9 3.3 4. motorcycles. Real Retail Sales (% mom) Weight 100 56.2% expansion in February.0 15. food. On the same nominal basis.8 2.9 5.3 1.2 2.0 -0.6 Ministry of Finance Activity Broad Retail Trade Retail Trade Pharmaceutical.6 3. medical.3% compared to February 2009.5 38. newspapers.Economic Activity Retail Sales: positive results in the economic activities It’s worth mentioning the increase in the Automobiles.4 3.2 3.1 1.2 26. Nominal revenue for trade sales had a 2.0 2. beverages and tobacco Construction material Automobiles. as compared to the prior month. Motorcycles. Parts and Pieces.2 Textile.6 0. parts and pieces Other articles of personal and domestic use Furniture and household devices Fuels and lubricants Office. magazines and stationery articles Data: % change from preceding month Source: IBGE Produced by: Ministry of Finance 21 March 2010 21 .5 1. trade revenue was up 15. orthopedic and perfumery articles Feb 10 / Jan 10 2.5 2.2 1. and Construction Material segments has been induced by federal discretionary fiscal measures in order to face the crisis.

2 March 2010 Data: % change Source: IBGE Produced by: Ministry of Finance 22 22 .2 2.1 -1.2 11.1 11.1 -3. motorcycles.Economic Activity Monthly Survey of Trade – IBGE Ministry of Finance Monthly Survey of Trade Basis: February.8 8.8 6. supermarkets.8 11.6 16.1 12.9 13. food.8 10.5 2.8 22.3 4. clothing and footwear Furniture and household devices Broad Retail Trade Automobiles.9 1.8 Before seasonal adjustment Preceding period of the previous year (%) February Yearly 12-month 2009 accumulated period 12.6 19.7 11. 2010 Retail Trade Fuels and lubricants Hipermarkets.3 4.2 6.4 1. parts and pieces Construction materials Seasonally adjusted (%) Preceding month: January.1 2.0 3. beverages and tobacco Textiles.0 3.0 15. 2010 1.3 13.6 1.2 9.2 4.2 13.

9 3.5 -0.5 2.9 0.2 -2.7 2.8 6.0 4.9 -0.0 5.3 4.7 -9.6 -4.6 11.3 4.3 7.4 -0.6 4.5 4. -5.0 1.6 2.2 -7.4 8.Economic Activity Composition of Gross Domestic Product Ministry of Finance Gross Domestic Product Seasonally adjusted change in the preceding quarter (%) 4 Q 2009 0.5 4-Quarter Accumulated -5.9 3.0 -6.4 2.7 -9.6 8.1 3.6 3.1 3.6 13.2 -5.6 4.6 -1.2 -5.4 Preceding period of the previous year (%) 4 Q 2008 -4.0 -6.4 4.1 5.0 0.5 -0.2 4.3 2.2 -2.1 3. Storage and Mail Information Services GDP (current prices) Household Consumption Consumption of Public Administration Gross Fixed Capital Formation Exports of Goods and Services Imports of Goods and Services (-) Data: % change Source: IBGE Produced by: Ministry of Finance 23 23 .1 4.4 Yearly Accum.6 -1.2 8.2 4.3 2.6 6.9 5.0 March 2010 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Farming Industry Mining Manufacturing Construction Services Trade Transportation.9 -10.9 -0.7 4.0 1.4 2009/ 2008 5.3 -11.2 4.6 18.1 7.3 -11.9 -10.7 4.2 -7.

1 1.8 -3.2 -2.7 3.1 25.3 76.3 20.4 Before seasonal adjustment Preceding period of the previous year (%) Quarterly Average 1.7 39.1 -16. 2010 1.4 0.5 8.Economic Activity Industrial Production Ministry of Finance Industrial Production Basis: February.6 18.4 25.0 3.8 32.2 30.6 1.0 25.0 26.4 1.4 Yearly February Accumulated 18.0 -1.2 -33.3 41.5 0.6 -7.4 19.2 11.4 17.2 10.7 2.0 12-month -2.6 -7.1 -6.3 -7.1 -24.4 51.4 17.5 31.8 -3.9 199.0 6.1 3.5 4.6 -32.6 -0.3 23.7 -22. 2010 General Industry   Mining industry   Manufacturing industry   Capital goods Industrial serials non-serial Agricultural Agricultural parts Construction Electricity sector Transportation equipment Mixed-use   Intermediate Goods   Durable Consumer Goods   Consumer Durable and Non-Semi Seasonally adjusted (%) Preceding month: January.6 -12.4 -32.4 -10.5 0.7 -20.2 20.3 17.4 20.0 196.0 March 2010 Data: % change Source: IBGE Produced by: Ministry of Finance 24 24 .6 -3.2 19.9 32.

3 8.8 1.1 12.5 Jan 10 -0.intermediate goods (quantum) Exports .Total Vehicle Production ABCR .6 Yearly Accum.1 Mar 10 13.7 -0.5 7.6 16.7 -3.8 54.0 5.7 8.2 12-month period 5.2 0.9 1.0 Feb 10 22.0 13.6 52.0 Feb 10 15.3 11.0 1.3 Coincident Indicators of Industrial Output Seasonally adjusted Before seasonal adjustment Preceding month Preceding year (%) Anfavea .8 Dec 09 1.0 25.Heavy Vehicles Flow on the Highways ABPO .9 53.intermediate goods (quantum) Energy Consumption (GWh) Jan 10 -6.2 Dec 09 160.9 19.3 5.Shipping Paper Imports .6 1.2 53.6 March 2010 Data: % change Source: FGV.1 12.0 11. Anfavea.9 18.2 Feb 10 11.6 1. 14.2 19.0 10.3 12.3 -3.6 Feb 10 2.8 17. ABPO and ABCR Produced by: Ministry of Finance 25 25 .2 -10.Economic Activity Consumer Survey and Indicators of Industrial Output Ministry of Finance Consumer Survey (FGV) Mar 10 Jan 10 Consumer Confidence Index Intention of Durable Goods Purchases Situation of the Local Economy at the Moment Family Financial Situation at the Moment 16.9 3.0 Jan 10 7.4 10.2 13.9 Mar 10 6.3 Jan 10 33.8 Feb 10 -0.1 4.8 11.0 7.6 53.4 Dec 09 8.

5 4.7 22.1 -1.1 Preceding period of the previous year (%) Feb 10 39.7 March 2010 Data: % change Source: CNI.7 Quarterly Average 3.9 February 20.7 12-month -1.9 35.Economic Activity Industry Sales Industrial Sales (CNI) February.0 51.0 81.6 24.6 83.6 Yearly Accumulated 10.1 4.3 1.2 82.1 -8.0 41.4 Yearly Accumulated 19.2 4. ABPO.7 63.2 Quarterly Average 3.8 5.4 17.6 59.1 Yearly Accumulated 24.7 Ministry of Finance Automobiles (Anfavea) March-10 Automobile production Automobile licensing (domestic and imported) Automobile exports Survey of Manufacturing Industry (FGV) Mar 10 Jan 10  Expected production     Level of employment provided  Domestic demand  External demand Inventories     Capacity utilization level 47.4 49.3 5.1 Mar 10 25.7 Quarterly Average -2.4 47.4 20.3 -5.8 20.2 31.3 12-month 8.5 Yearly Accumulated 36.3 17.5 34.5 2.8 12-month 4.3 30.7 Preceding month 6.0 59.3 66.0 6.2 83.7 February 11.3 14.3 71.0 Preceding month 1.9 12-month 12. FGV and Anfavea Produced by: Ministry of Finance 26 26 .0 82.5 62.9 82.3 February 19.7 24.8 -14. 2010 Real revenues Hours worked in production Packages (ABPO) Feb 10 Wavy paper Dispatch Preceding month 3.

Mass Consumer Market Ministry of Finance .

8% to 53.5 4.1 2007 32 53 15 2009 28 .4 2003 2004 2005 2006 6. 2008 Source: FGV Produced by: Ministry of Finance March 2010 47 42 11 44 44 12 42 46 12 38 48 13 36 3.8% of the country’s population. class D (from R$ 804 to R$ 1. class C (from R$ 1.807) Data: % share of population * Prices in December.1 50 14 32 52 15 2008 7.115 to R$ 4.115). The poorest went on growing and class C share increased from 51. According to the study.115 to R$ 4. A New Class C (% of population) Increase of 26% Ministry of Finance Class D/E (until R$ 1.807).115) Class C (from R$ 1.807 on) (prices in December.807) Class A/B (from R$ 4. class A/B (from R$ 4. 2008). total household income considers the following wage ranges: class E (until R$ 804).Mass Consumer Market Middle class growth despite crisis Research from Getulio Vargas Foundation corroborates the argument that international financial crisis has not reached the majority of the Brazilian population.

523 1.452 995 1600.Mass Consumer Market Net employment generation has best results in March since 1992 In March 2010 there was an expansion of 266.8 million new jobs.254 1.143 657 658 591 762 645 1. net employment generation jobs has reached 657. In the first quarter of 2010.0 Jan-Mar.617 1.7 thousand new jobs.800 1. By the end of 2010.229 1.4 thousand formal jobs in Brazil. surpassing best record from January to March. 2008 (554 thousand). Brazil will have returned to the level of generating more than 1. 2010 generated jobs Data: thousands of jobs * Ministry of Finance Forecasts Source: Ministry of Labor and Employment Produced by: Ministry of Finance March 2010 -200 -271 -36 -582 -196 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 29 .5 million formal jobs 1. Ministry of Finance Net Job Generation (thousands of jobs) 10.

It's been estimated that almost 2 million jobs will be created in the category.834 274 387 995 657 88 75 Jan-Mar.000 1.8 million new job expansion from 2003 to 2010. since 2003 there has been created 12.831 1.8 million jobs 2. resulting in a 13.863 1. 2010 accomplished jobs Data: thousands of jobs * Ministry of Finance Forecasts Source: Ministry of Labor and Employment Produced by: Ministry of Finance March 2010 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 30 .343 1.235 1.452 502 961 861 1.494 1.917 2. Ministry of Finance Net Job Generation (thousands of jobs) 13.Mass Consumer Market Net employment generation: civil servants and formal jobs Considering civil servants and formally employed jobs.4 millions of new jobs.

4 p. Ministry of Finance Rate of Formalization (% formally employed over the occupied people) 50.5 46.5 50.7% in February.7 50.5 50.5 48. 2010.3 2008 2009 2010 Data: % formally employed over the occupied people Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec March 2010 Source: IBGE Produced by: Ministry of Finance 31 . has had an annual growth of 0.0 45.0 46. reaching 50.0 49.Mass Consumer Market Despite the crisis.0 48. defined as the proportion of the population formally employed over occupied population. formal employment rises and informal employment drops The rate of formalization.5 49.p.0 47.5 47.

In 2009. especially of minimum wage and Bolsa Família Program. the year of the crisis.Mass Consumer Market Greater poverty reduction in the poorest regions The increase in cash transfers in recent years. Ministry of Finance Poverty (% of population) 2003 48 33 North 61 42 24 13 23 13 South 26 13 2008 Data: % of population Source: IBGE and IPEA Produced by: Ministry of Finance March 2010 Northeast Southeast Mid-West 32 . has substantially and comprehensively reduced poverty levels in the country. poverty continued its downward trend due to the already mentioned reasons and the little crisis impact on job market.

6% of the Southeastern. Real income per capita Growth (% 2008/2003 average) Ministry of Finance Lower income Others 8.2 from the Mid-Western.3 5.2 9. 51.4 4. and 18. has ensured a significant income increase.Mass Consumer Market Social improvements and inflation control increase real income of lower classes The stronger growth of the economy.1 6.7 Mid-West Data: % change from 2008/2003 average period Source: IBGE and IPEA Produced by: Ministry of Finance March 2010 North Northeast Southeast South 33 .5 10.2 6. 17.6 9.1% of the Northern population.1 4.3% of the Northeastern. 17. which was 41.3 of the Southern. “Lower income” encompasses the population below the average poverty line.0 8. coupled with cash transfer programs and inflation control.

For example.38 staple food basket in June. one minimum wage used to buy only 1. From then on. Minimum Wage (number of staple food baskets) 2. minimum wage purchasing power has increased 29%.8 1.5% increase in minimum wage has allowed improvements in the purchasing power of the population over the last year. The improvements also consider a smoother rise in the essential products’ 12-month period rate. paper.95 34 . sugar) that are bought often and consumed routinely.78 1.38 Commodities price pressure erodes consumer purchasing power Data: number of staple food basket Staple food baskets are consumer goods (such as bread. like food & beverages.6 1.8 06 07 20 04 20 00 20 05 08 09 1 2 3 Ja n 1 Fe 0 b 10 20 0 20 0 20 0 20 20 20 20 Devaluation of Real against US dollar due to 2002 election increase the staple food basket cost The highest level of the decade Ministry of Finance 1.Mass Consumer Market Purchasing power is the largest in 14 years The 9.0 0.78 1. Staples offer little differentiation and usually compete on the basis of price Source: Dieese and LCA Consulting Produced by: Ministry of Finance March 2010 0.2 1.80 1.4 1. and a reduction in the staple food basket cost. 2008.0 1. milk.

Inflation Ministry of Finance .

we still tend to believe in an annual IPCA closer to 4.9 4.Inflation Ministry of Finance IPCA inflation index within the target The first quarter of 2010 was strongly influenced by inflationary pressures from price adjustments in education. sugar and alcohol. IPCA Inflation Index (% yoy) Inflation target Lower and upper bounds IPCA inflation index Data: % change from preceding year 12. public tariffs and in natura food.0 7.5% inflation target.9 6.5 4.7 3.3 5.8 4.5 March 2010 * Market Expectations FOCUS Report from April 9th.5 36 . Despite market expectations.3 4.5 5. 2010 Source: IBGE and Brazilian Central Bank Produced by: Ministry of Finance 8.6 5.3 7.5 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011* 2012* 2013* 2014* 4. On the latter sector.1 4. the increase in the rainfall volume has damaged products like fruits and vegetables.7 9.

2011.2 0. IPCA declined substantially. The rise in prices as of March was in the food index (from 0.96 percent to 1.56 0.8 0.5 0.9 0.31 0.29 0.1 10 Fe v1 0 M ar 10 Ab r1 0 M ai 10 Ju n 10 Ju l1 0 Ag o 10 Se t1 0 Ou t1 0 No v1 0 De z1 0 Ja n 11 Fe v1 1 M ar 11 Ab r1 1 M ai 11 Ju n 11 0. Market expectations express a 4.55 percent).30 0.52 percent in March Despite the delay to the end of rainfalls.Inflation IPCA inflation index falls to 0.44 0.0 Ja n 37 .78 Ministry of Finance Realized IPCA figures Monthly Average IPCA Data: % change from preceding month * Market Expectations FOCUS Report from April 9th.42 0.34 0.6 0.37 0. IPCA Inflation Index and its Expectations(% mom) 0. IPCA index declined in March.70 0. representing 0.7% change in the next 12 months until April.4 0.39 0.36 0. 2010 Source: IBGE and Brazilian Central Bank Produced by: Ministry of Finance March 2010 0.28 0.53 0.35 percentage points in the overall index.36 0.52 0.3 0.7 0.39 0.30 0.

A substantial reduction in the overall index is expected as the rain diminishes in intensity.Inflation Index for vegetables posted the largest increase in the 4-week CPI Persistence in tropical rainfalls has been crucial to the food index rises.5 percent in April after increasing 12.1 1.5 3.7 percent) are the two items with the highest changes among all prices in the index composition.7 percent in March. expanding 14.7 percent) and sweet potato (12. IPC-S Inflation Index .Food Group (% mom) 15 12 9 6 3 0 -3 -6 ja n 0 fe 8 b m 08 ar ap 08 r m 08 ay ju 08 n 0 ju 8 l0 au 8 g se 08 p 0 oc 8 t0 no 8 v de 08 c0 ja 8 n 0 fe 9 v0 m 9 ar ap 09 r m 09 ay ju 09 n 0 ju 9 l0 au 9 g se 09 p 0 oc 9 t0 no 9 v de 09 c0 ja 9 n 1 fe 0 b m 10 ar ap 10 r1 0 Ministry of Finance 14. The tomato (42. The index for vegetables posted the largest increase in the food group.0 Food General index Vegetables Data: % change from preceding month Source: FGV Produced by: Ministry of Finance March 2010 -9 38 .

Inflation IGP-M inflation index falls substantially The fall in the IGP-M index for the first one-third of April is a good sign for the next months of 2010.0 -0. housing and education. The components still pressuring on prices are UHT milk and beans.27 0.(% mom) 1.5 Abr 09 Mai 09 Jun 09 Jul 09 Ago 09 Set 09 Out 09 Nov 09 Dez 09 Jan 10 Fev 10 Mar 10 Abr 10 11 11 0 d a 21 -20d ys -3 ay 0 s da ys 11 11 0 d a 21 -20d ys -3 ay 0 s da ys 11 11 0 d a 21 -20d ys -3 ay 1 s da ys 11 11 0 d a 21 -20d ys -3 ay 1 s da ys 11 11 0 d a 21 -20d ys -3 ay 1 s da ys 11 11 0 d a 21 -20d ys -2 ay 8 s da ys da ys -1.5 1. Drop in the inflation was felt in transportation (especially alcohol and gas fuels).5 0. The index number was close to the estimates in the market. Ministry of Finance IGP-M Inflation Index .0 0.0 Data: % change from preceding month Source: FGV Produced by: Ministry of Finance March 2010 1- 10 39 .

0 * Seventh Survey April.9 millions of hectares.1 134.8 millions de tons. South of Brazil will be responsible for 60.0 15. the 2009/2010 grain crop shall reach the historical record of 145.4 44.7 27. The estimated crop shall occur in an area of 47.5 March 2010 9.0 13.1 39.0 65.0 12.Inflation 2009/2010 grain crop beats historical records According to IBGE. 2010 Source: CONAB Produced by: Ministry of Finance 4. The expected increase in the grain production is due to the recovery of productivity.7 123.3 50.4 40 .1 million of tons.0 7.0 21. mainly in the crops of corn and soy.0 58.3 131.0 122.5 2002 / 2003 2003 / 2004 2004 / 2005 2005 / 2006 2006 / 2007 2007 / 2008 2008 / 2009 2009 / 2010* 5.5 Pronaf Financing (R$ billions) Corporate Financing (R$ billions) Crop Quantum (millions of tons) Data: index-numbers (1990/91 = 100) 92.1 119.9 10.1 113. Brazilian Grain Crop 2009/2010* (1990/1991 = 100) Ministry of Finance 144.1 145.

16 0.24 -0.75 March/10 0.11 9.52 0.38 2.16 Accum.74 March/09 -0.05 0.23 0.01 7. 2007 4.77 0.37 0.10 12-Month 5.03 0.81 Accum.40 4.26 6.80 1.86 0.78 Forecast 2010* 5.07 -2.67 12.54 0.70 February/09 0.75 0.48 12-Month 2.40 March/09 -0.30 0.90 1.78 0.57 4.96 0.55 0.16 0.72 6.78 nd nd nd nd Forecast 2010* nd xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Health 0.66 -0.23 0.36 -0.74 February/09 1.15 4.20 March/09 0.63 1.00 0.69 5.46 10.DIEESE General Index Data: % change na = not available * Market Expectations FOCUS Report from April 9th.17 Accum.18 February/09 1.31 Forecast 2010* 5.79 0.93 5.90 9.94 March/10 0.46 1. 2008 6.54 0.M General Index IGP-DI General Index IPA IPA Agriculture IPA Industry IPC INCC ICV .02 6.07 3.71 March/10 0.26 1. 2008 9. 2008 6.86 Accum.FIPE General Index IGP .68 0. 2007 4.83 4.63 6.61 -0.40 Accum.52 1.25 0.71 5. 2010 Source: Ministry of Finance Produced by: Ministry of Finance March 2010 41 .01 4.24 6.31 0.96 1.69 Forecast 2010* 7.23 3.48 Accum.37 0.74 5.59 March/09 0.98 6.25 March/09 0.11 6.17 5.29 nd nd nd nd nd nd nd nd nd 5.07 0.75 Accum.36 February/09 0.98 12-Month 2.32 1.79 Accum.62 3. 2008 5.Inflation Inflation Index Table Inflation Index xxxxxxxxxxxxxxxx IPCA Food and Beverages Housing Home Supplies Clothing Transportation Ministry of Finance March/10 0.84 -1.76 -2.33 -0.35 0.61 6.47 6.94 0.57 5.48 0.16 Accum. 2007 4.78 2.09 0.05 3.20 0.77 1.47 February/10 0.08 0.37 -1.70 12-Month 5.30 12-Month 4. 2008 9.38 Accum.07 11.05 0.34 March/10 0.54 4.39 Forecast 2010* 7.46 -2.27 Personal Expenses Education Communication INPC IPC . 2007 7. 2007 7.08 4.83 8.48 3.53 0.70 -0.44 24.35 -0.

.

Interest Rates and Credit Ministry of Finance .

However. real interest rate presents an upward trend.83 08 09 09 Ja M n1 ar 0 10 7 06 04 05 02 03 03 04 07 5 6 l0 l0 n l0 l0 8 Ja n Ja n Ja n Ja n Ja n Ju l Ju l Ju l Ju l n Selic interest target rate Real ex-ante interest rate Data: % change from each 12-month period Sources: BM&F and Brazilian Central Bank Produced by: Ministry of Finance March 2010 Ja n 02 Ju Ju Ju Ja Ja Ju 44 .Interest Rates and Credit Interest rates Interes rates. signaling the compatibility between lower interest rates and inflation control in the Brazilian economy. reached their lowest historical levels in 2009. both nominal and real.75 5. SELIC rate and real ex-ante interest rate (% yoy) 30 25 20 15 10 5 0 Ministry of Finance Reduction in interest rates and inflation control 8.

Interest Rates and Credit Future expectations of interest rates The January 2011 and 2012 curves serve as a benchmark for pricing National Treasury bonds while rolling over the domestic fixed rate bond.5 11.5 11.5 10.5 12. As we can see.0 12.01 11.0 9.0 11.0 10.0 12.0 10.5 10.0 11.34 12.5 9.5 10. Future Contracts of DI* (% yoy) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 13.66 Ministry of Finance January 2013 January 2012 January 2011 Data: % change from each 12-month period * DI: One-day interbank deposit (future) Source: BMF&Bovespa Produced by: Ministry of Finance March 2010 20 2/ 09 2/ 20 2/ 09 3/ 20 09 2/ 4/ 20 4/ 09 5/ 20 09 2/ 6/ 20 09 2/ 7/ 20 09 3/ 8/ 20 09 2/ 9/ 20 09 2/ 10 /2 00 3/ 11 9 /2 00 2/ 9 12 /2 00 9 4/ 1/ 20 10 2/ 2/ 20 2/ 10 3/ 2 29 010 /3 /2 01 0 2/ 1/ 45 . future expectations have increased the cost of rolling over public debt as they are embedded in the financial market curve. from September 2009 on.0 13.5 12.

2 41.Interest Rates and Credit Credit concessions may reach 49% of GDP Forecasts of a 20% average credit growth in 2010 can increase available credit volume to a 49% of GDP record and fund the productive sectors as well as consumption. The increased credit level and employment generation place altogether the Brazilian domestic market as a driving force for the economic growth in the following years.5 28.0 49.0 24.0 24.7 34.1 30.3 45. Financial system loans (% of GDP) Ministry of Finance Current Forecast 22.0 Data: % of GDP * Ministry of Finance Forecasts Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 2002 2003 2004 2005 2006 2007 2008 2009 2010* 46 .

Interest Rates and Credit

Credit: non-earmarked resources expected to increase in 2010
The increase in credit supply to GDP ratio in 2009 compared to 2008 provided the Brazilian economy to overcome the economic crisis. For 2010, there is still an increasing trend of credit offerings, especially within the non-earmarked resource type.

Ministry of Finance

Credit operations with earmarked and non-earmarked resources (R$ billion and % of GDP)
45% 40% 41% 35% 31% 22%
147 146 241 Feb 03 362 872 472

25%
118 116 221 222 Feb 02

23%
163 162 255 259 Feb 04

25%
181 181 324 330 Feb 05

28%
203 405 413 Feb 06 203

279 667

472
Earmarked (R$ billion) Non-Earmarked (R$ billion) Totals (% of GDP)
963 Feb 10

957

237 501

362
867 Feb 09

279
Feb 07 511 237 680 Feb 08

March 2010

Data: R$ billion, current prices
Source: Brazilian Central Bank Produced by: Ministry of Finance

47

Interest Rates and Credit

Credit for individuals grows 24%
Bank credit supply for individuals grew 24% compared to the amount disbursed in September, 2008 when the economic crisis effectively began. There was a 19.8% increase, considering a change from each 12-month period.

Ministry of Finance

Credit transactions targeted to individuals* Sep 08 - R$ 384.3 billions Feb 10 - R$ 477.7 billions

Credit Card 6% Leasing and Acquisition of Goods 39%

Mortgages 1% Overdraft 4% Others 14% Credit Unions 4% Personal Credit 32%

Credit Card 6% Leasing and Acquisition of Goods 35%

Mortgages 1% Overdraft 4% Others 15% Credit Unions 5% Personal Credit 35%

Data: % share * Non-earmarked credit operation types
Source: Febraban and Brazilian Central Bank Produced by: Ministry of Finance
March 2010 48

Interest Rates and Credit

Corporate borrowing reacts
Regarding the pre-crisis period, loans to corporations have increased by 8.8%, led mainly by public banks. In the latest twelve months, it has increased 16.8%, signaling a corporate recovery in investments.

Ministry of Finance

Credit transactions for corporations* Sep 08 - R$ 384.3 billions Feb 10 - R$ 485.7 billions

Others 13,98% Hot Money 0,02% Rolling Capital 34%

Rural Financing 1%

Import Financing 4% Advances on Exchange Contract and Export Funding 15% Vendor 2% Leasing and Aquisition of Goods 16% Promissory Note Discount 3% Check Credit for Companies 11% Hot Money 0,1% Rolling Capital 45,3% Others 14%

Rural Financing 1%

Import Financing 3% Advances on Exchange Contract and Export Funding 9% Vendor 2% Leasing and Acquisition of Goods 14% Promissory Note Discount 3% Check Credit for Companies 9,9%

Data: % share * Non-earmarked credit operation types
Source: Febraban and Brazilian Central Bank Produced by: Ministry of Finance
March 2010 49

4% 3.4% increase by private banks and the 3.Interest Rates and Credit Post-crisis bank lending Public banks played an important role to unlock bank lending during the critical period of the crisis.0% 145 130 115 13.8% of the foreign ones.7%. From September 2008 to February 2010.index-number (Sep 08 = 100) 160 Ministry of Finance 52. Financial system credit transactions development.7% Public Financial Institution Foreign Financial Insitution Domestic Private Financial Institution Data: index-number (Sep 08 = 100) Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 100 t0 8 No v0 8 De c0 8 Ja n 09 Fe b 09 M ar 09 Ap r0 9 M ay 09 Ju n 09 Ju l0 9 Au g0 9 Se p 09 Oc t0 9 No v0 9 De c0 9 Ja n 10 Fe b 10 p Se Oc 08 50 . according to capital control . as opposed to 40.7% by foreign banks operating in Brazil. the amount disbursed by these institutions has grown 52%. Public banks market share has reached 41.5% of the private domestic banks and 17. well above 13.

9 25.9% yoy in February.9 14 11. for 2010. Banking spread for corporations (% yoy) Ministry of Finance 35 30.Interest Rates and Credit Interest rates for corporations Along with the drop in default rates and a more positive scenario towards employment and wage improvements. bank interest rates for corporations reached 25.9 SPREAD 28 21 Feb 09 19.0 Feb 10 16.9 7 9. the second lowest level of the historical time series.0 Funding Rate Lending Rate Spread between funding and lending rates Data: % change from each 12-month period Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 n 05 Ap r0 5 Au g0 5 5 6 8 r0 6 6 7 g0 7 c0 7 r0 8 c0 8 9 g0 9 Au De De De De Au Au Au De c0 9 Fe b 10 0 c0 g0 g0 c0 Ap r0 Ap Ap Ap Ja r0 51 . However. bank interest rates are expected to stop falling.

the lowest level since the beginning of the historical time series.Interest Rates and Credit Interest rate for individuals at the lowest level in 16 years The banking average loan rate for individuals decreased to 41.1 14 11.9 42 SPREAD Feb 09 41.9% yoy in February.4 28 Feb 10 30. The decrease occurred in spite of the raise in the cost of funding. Banking spread for individuals (%) Ministry of Finance 70 56 52.8 11.6 41.2 Funding Rate Lending Rate Spread between funding and lending rates Data: % change from each 12-month period March 2010 0 c0 Fe 9 b 10 Ap r0 Ap r0 Ap Ap De De De De De Ap Au Au Au Au Au De Source: Brazilian Central Bank Produced by: Ministry of Finance 4 5 5 5 6 6 6 7 8 7 7 8 8 9 r0 c0 g0 c0 r0 g0 c0 c0 r0 g0 g0 c0 g0 9 52 .

Such credit lines respond for one-third of total credit disbursed and are expected to increase 26% in 2010.3 billions. Along with the expectations of continued economic recovery. which include loans from BNDES. total disbursements from BNDES amounted to R$ 143. for the rural sector and for housing programs. a 53% increase compared to February 2009. amount from each 12-month period Source: BNDES Produced by: Ministry of Finance 53 . it’s estimated that bank credit shall be driven by earmarked resources. BNDES credit (R$ billion) Ministry of Finance Disbursements Approvals March 2010 91 121 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 137 169 10 13 18 19 19 23 18 20 23 28 25 27 37 41 34 40 40 38 47 54 51 74 65 99 Data: R$ billions.Interest Rates and Credit Bank loan offerings shall be driven by earmarked resources In the last 12 months up to February 2010.

5% Dec 54.5% Jan 51.1 p.9% Feb 50.9% for corporations.5% 43.8% 25.8% Feb 34.7% 25.1% 43.0% 26.4% Jan 35.1p.7% 25.9% 24.4% 159.1% 44.3% 41. Monthly Change -0.9% for individuals and 25.p.1% 44.8% Monthly Change -0.p.6 p.p.8 p.p.1% 159. Ministry of Finance March 2010 -1. -1.p.Interest Rates and Credit Banking interest rates drop to historical levels The reduction in default since November 2009 and the positive outlook for credit recovery caused yearly average banking interest rates decreases to historical levels: 41.1 p.8 p.0 p. -1.2% 161.9% 25. -1.p. Consumer credit cost Lending Costs Interest Rate Evolution Category General credit Credit for individuals Credit for corporations Individuals Loans for durable goods Loans for automobiles Overdraft check Private loans Dec 34.3% 42.p. -1. Data: % yoy Source: Brazilian Central Bank Produced by: Ministry of Finance 54 .

4 306.1 0.44 7.1 -0.66 0.2 95.4 Credit Market (US$ billion) Feb 10 Share (%) Change (%) compared to Dec 09 Change (%) compared to Feb 09 Financial System Credit   Total Credit Volume (balance at end of period)    Public Sector    Private Sector Industry Housing Rural Trade Individuals Other Services 1.8 1.41 0.41 2.32 1.78 17.2 2.4 6.48 3.77 March 2010 Data: % change Source: Brazilian Central Bank Produced by: Ministry of Finance 55 .435.73 1.35 14.0 137.2 60.54 0.1 -0.2 Ministry of Finance Change (np) compared to Feb 09 4.Interest Rates and Credit Credit Market Credit Market (% GDP) Feb 10 Share (%) Change (np) compared to Dec 09 Total Credit Volume   Earmarked Resources   Non-earmarked Resources xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 44.0 4.13 15.8 30.9 67.3 470.56 17.374.8 21.7 7.6 96.9 9.59 46.8 17.8 1.77 118.1 249.82 16.6 32.7 100.9 14.04 1.59 5.8 114.4 1.0 32.2 100.

2 79.03 2.35 5.66 23.49 18.6 30.61 36.9 24.07 March 2010 Data: % change Source: Brazilian Central Bank Produced by: Ministry of Finance 56 .69 0.8 92.9 20.2 5.2 7.09 18.15 -64.4 5.9 3.9 6.7 289.82 0.32 -76.1 2.1 33.03 2.Earmarked Resources Loan Operations Credit Market (US$ billion)   Total Credit Volume (balance at end of period)       BNDES       Rural (excluding leasing and financing.19 1.7 67.67 37.Free Segment   Total Credit Volume (balance at end of period)                    to Individuals                    the Corporations                             Domestic Resource                             External Resources Free Segment .8 429.8 29.25 10.8 4.58 2.32 -2.3 33.5 477.28 37.15 60.12 12.73 7.14 47.1 166.10 9.38 -0.New Credit Offers   Total Concession Volume                    to Individuals                             Personal Loan (including safekeeping/consigned transactions)                             Acquisition of Goods                             Credit Cards                    to Corporations                             Working capital                             Guaranteed Account                             Acquisition of Goods                             Advances on Exchange Contracts                             Foreign Onlendings (relending in connection to new money loans) Ministry of Finance Feb 10 471.25 20.3 9.2 Share Change Change Dec 09 32.91 8.31 4.1 1.44 -35.04 11.92 14.91 10.0 2.79 4.7 60.95 1.32 Feb 09 30.0 0.0 65.Interest Rates and Credit Credit Transactions .31 6.19 36.92 15.6 56.1 10.6 6.16 18.8 100.33 -1.8 18.7 0.0 17.44 38.7 485.23 -0.82 -2.8 14. and direct transfers from BNDES)       Housing (for individuals and housing cooperatives)       Other (development banks and fomenting agencies) Loan Operations .4 10.0 39.9 100.4 0.6 963.90 9.

International Overview Ministry of Finance .

on account of cyclical and corrective measures.0 3. they share 49% of world GDP.3 -4.7 9.4 -5.7 5. South Africa and Mexico.2 -5. Currently.International Overview G-20 Economic growth – 2009 and 2010 In general.9 1.6 1. emerging economies will take the world economic leadership position.5 4.2 2009 2010 Data: % change from preceding year * The Economist Forecasts March 2010 8.0 -2.0 China India Brazil Japan United States ** Government Forecasts Germany Russia Mexico Euro Zone Source: The Economist Produced by: Ministry of Finance 58 58 .7 5. In 2010.5 -7. Ministry of Finance GDP growth (% yoy) * 6.9 -6.0** 1.1 3.0 -0. Brazilian economic performance in 2009 has turned better than advanced economies and other emerging economies like Russia. emerging markets have been recovering well due to strong government intervention. Even though there was a decrease in the GDP.6 7.

0 3.4 9.International Overview The Brazilian GDP is one of the best performances among G-20 countries in 2009 Brazilian economy recorded -0.7 5.0 -1.2 0.4 8.6 7.8 2.0 10.5 Data: % change from the preceding quarter in an annualized basis in a Ru ss ia March 2010 y rm a Eu ny ro Ar ea Ko re Ki Un a ng it do ed m Fr an Sw c itz e er la So ut nd h Af ric Au a st ra lia Ja pa n Ca na da Un St ite at d Ar es ge nti na Br az i M l ex In ico do ne sia en In di a Source: Ministry of Finance Produced by: Ministry of Finance Sw ed Ita l Ge Ch 59 59 .8 5.7 1.2 -2. annualized) 0.4 3. Brazilian GDP growth in the last quarter is close to China's and India's performances.2 3.2 0.0 5.6 10.2% of GDP growth in 2009.0 -2.9 8. Ministry of Finance GDP Evolution in the 4Q/2009 (% qoq.

both while the global economy was going down. Ministry of Finance Retail Sales in the World (% yoy) .International Overview Dinamycs of Brazilian domestic demand Emerging-market economies performed surprisingly well on the upside.6 5. Figures from retail sales in the world show Brazil has a solid domestic demand growth below China.6 Data: % change from preceding year March 2010 Ki Un ng it do ed m Fr an ce Ge rm an y ly ro Unpea io n n ZoEuro ne an lia a il ile Au Eu Source: Ministry of Finance Produced by: Ministry of Finance U St nite at d es Br az in st ra Ch Ita Ja p Ch 60 60 .8 -1.7 -2.6 1.5 -1. but also now that it’s coming up.2009/2008 15.8 0.3 -5.0 -5.3 -1.9 5.7 -0.

5 8.8 3.8 11.9 2. according to Roland Berger Consulting. Ministry of Finance Automobile Market (thousands of units) Automobile sales Automobile production Data: thousands of units 13.2 million automobiles and light commercial vehicles.7 2.2 2.4 3.2 4. Brazil has become the 4th largest world market for automobiles. In 2010.7 2.2 4. US and Japan.8 13.6 1.4 6.3 2.1 1.8 3.9 March 2010 * Consulting Forecasts Source: Roland Berger Consulting Produced by: Ministry of Finance China United States Japan Brazil Germany France Italy India United Kingdom Russia 61 61 .3 2.1 2. right after China. a German firm.1 1.International Overview Brazil: 4th world market for automobiles In the first quarter of 2010. sales in the domestic market are estimated at 3. and have a potential to reach near 6 million units by 2015.

International Overview Mining and metal merger & acquisitions in world markets Brazil was one of the highlights in M&A in the mining and metal industries in 2009.022 6. a trend that willcontinue in 2010.347 4 2.653 13.008 4 2.400 1 900 1 853 1 514 1 496 Ernst & Young 470 Fonte: 1 1 400 1 386 1 339 4 3.000 54 213 3 0 11.881 12 355 299 1. Increasing investments from Asia and Middle East will happen.696 85 25 4.035 126.268 3 1.856 2 1.540 8.884 60.814 1.147 489 1.531 17.035 62 62 .847 18 14 12 10 10 4th 3rd 1st 5th 6th 21st 10th 2nd 36th 46th 7th 8th 51st 23rd 24th 12th 39th 31st 63rd - 15.5 27.278 6.134 6.672 20. Countries Australia United States Canada Brazil China South Africa Russia United Kingdom Colombia Venezuela Indonesia Kazakhstan Argentina India Germany Turkey Netherlands Zambia Mongolia Czech Republic Others 2009 Ranking US$ millions Share (%) Ministry of Finance 2008 Ranking US$ millions Share (%) 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th - 10.397 7.414 4 2.5 7 9 35 27 8 5 40 20 8 March 2010 Data: US$ millions and % share Source: Ernest & Young Produced by: Ministry of Finance Total 60.5 22. despite the expected volatility throughout the industry.856 12 14 24 10 5 0 1 16 0 0 4 1 0 0 0 1 0 0 0 0 9 5 7.821 30.474 4 2.970 3 1.

Japan. South Africa.International Overview Employment: highest rate in the world Manpower Consulting conducted a research over the expected employment generation in 2010 and placed Brazil at the forefront within a list of 14 countries (Brazil. England. Argentina. The survey interviewed 850 employers in Brazil. China. US. Ministry of Finance Expectations for Net Employment Generation (% qoq) 38 36 24 18 17 13 11 8 8 3 1 1 -9 -10 Ita l y Data: % change from preceding quarter Source: Manpower Consulting Produced by: Ministry of Finance March 2010 Un St ite at d es So Af uth ric Ge a rm an y or e Ar ge nti na di a ce n a il nd En g la Br az Ja pa na d in ga p Sin Ca Fr an Ch Sp ai In n a 63 63 . German. India. Canada. France. Spain and Italy). Singapore.

2 9.0 9.2 5.4 8.1 Data: % change from preceding year Source: Bloomberg.9 9.3 14.3 7. in turn. which.1 19.7 6.6 7.International Overview Unemployment: one the smallest in the world The strong recovery of the emerging economies around the world converts these markets in a stable and attractive investment environment. Their economically active population grows in an accelerated pace.1 9.6 8. Unemployment rate – Selected countries (% yoy) Ministry of Finance Unemployment rate 2009 Unemployment rate 2010 18. it’s expected Brazil will have the 5th smallest unemployment rate among developed and emerging economies.6 9. OCDE and Country's Statistics Offices Produced by: Ministry of Finance March 2010 Fr an ce ke y Ki Un ng ite do d Ge m rm an y ai n Un St ite at d Ar es ge nti na Ita ly ia il ex ico lia pa n Ja le Au So Ko uth re a Br az ss Ch i Tu r Ru M st ra Sp 64 64 .9 7.8 7.8 10.2 7.5 6.2 6. makes it possible an income increase and the insertion of even larger groups to the so called middle class.3 5.9 9.9 8.0 9.2 4. For 2010.7 6.6 15.4 5.6 3.3 5.

5 -1.International Overview The second best fiscal balance among G-20 countries in 2010 Brazil presented one of the least nominal deficits of the G-20 countries in 2009.6 -2.1 -3.6 -5.4 -6.5% of GDP well above the average achieved by G-20 economies.5 -1.3 -6.9 -3. Ministry of Finance Fiscal Result (% of GDP) – G-20 economies – 2009 1.2 -5.1 -2.1 -5.7 -4.0 -4.6 -7. For 2010.5 -5% average March 2010 Data: % of GDP S Ar aud ab i Ar ia ge nti na Br az il In di So a ut Af h ric a E Zo uro ne Ja pa n Fr an ce Un St ite at d es Ki Un ng ite do d m a na da Ru ss ia So ut Ko h re a Tu rk ey Ge rm an y ex ico ne si Au a st ra lia Ita ly Source: The Economist Produced by: Ministry of Finance Ch In do Ca M in 65 65 .0 -8. it is expected the fiscal result to decrease to around -1.7 -1.2 -8.6 -11.1 -13.

86 Data: % of GDP * Government Forecasts Source: Economist Intelligence Unit Produced by: Ministry of Finance March 2010 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 66 66 . among others.47 6.20 6.67 7.International Overview Interests share in government spending falls for the sixth consecutive year The continuous process of interest rate reduction in the Brazilian economy since 2005 resulted in less government spending on interest payments which fell to 5. health.24 4.98 8.4% of GDP in 2009. allowing some fiscal space for the government to expand spending on public investment.06 5. social programs and spending priorities on education.61 6.31 6.63 8.78 6.61 6.45 5.59 7. Evolution of interest Payments (% of GDP) Decrease of 36. public security.38 4.5% Ministry of Finance 6.79 5.

combined with price stability and fiscal responsibility.0 4.4 2.2 5. Brazil has experienced macroeconomic conditions to join the group of countries with lower interest rates.3 6.9 3.1 4.6 3.International Overview Interest rate burden in Brazil remains among the highest in the world In recent years.3 2. How much other countries spend in debt interests(% of GDP) – 2009 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Ministry of Finance Data: % of GDP 14.7 6.7 3.2 1.5 1.7 4.2 2. The reduction of external vulnerability.8 4. will enable the country to keep a falling interest rate trend.2 * EIU Forecasts Source: Economist Intelligence Unit Produced by: Ministry of Finance March 2010 em a Ar nha ge nti Au na st rá li Bé a lgi Co ca lô m b Es ia ta Un d id os o Fil s ip in a Fr s an ç Gr a éc Hu ia ng ria Ín di a Isr ae l Itá lia Ja m ai c M a al ás M ia éx ico Br as il Pe P ru Re ortu in ga o Un l Re ido pú Tc bli he ca ca Ta iw Tu an rq ui a Al 67 67 .3 3.1 2.2 4.0 2.0 1.5 4.6 2.

reaching an estimated 49% per GDP ratio. ) P (1 ola 2/ nd 08 ) (0 Bra 3/ z 10 il M ) (1 ex 2/ ico Ar 08) g (0 enti 9/ n 08 a ) 12 68 68 .International Overview Bank lending in Brazil still low when compared to other economies In recent years. which is similar to the financing levels of benchmarks in a large number of economies worldwide. Credit (% of GDP) . bank credit in Brazil has grown at rates exceeding 15% yoy. a rate compatible to its growth.2008 and 2010 Ministry of Finance 187 170 155 153 103 March 2010 Data: % of GDP Source: Ecowin and Moodys Produced by: Ministry of Finance 98 97 88 81 78 74 58 57 49 33 U S n (0 tat ited 3/ es 08 ) (0 Sp 3/ ain 08 En ) (0 gla 3/ nd 08 C ) (0 ana 3/ d 08 a ) Fr (0 an 3/ c 08 e ) Ja (0 p 3/ an 08 ) (0 It So 3/0 aly ut 8) h (1 Afr 2/ ic 0 a Hu 8) (1 ng 2/ ar 08 y ) (1 In 2/ di 08 a ) (1 Ch 2/ il Cz 08 e ec ) (1 h R 2/ ep 08 . It’s expected that in 2010 it will continue to grow at a sustainable pace.Selected Countries .

Brazilian Central Bank and World Bank Produced by: Ministry of Finance 69 69 March 2010 . The housing deficit in the country. Nevertheless. Mortgage credit (% of GDP) Brazil India China South Africa Japan Spain USA United Kingdom Australia Denmark Ministry of Finance 3% 5% 12% 34% 40% 59% 78% 83% 84% 100% Data: % of GDP Source: ABECIP. a record.International Overview Expansion in mortgages expected for 2010 Credit lending registered a 41. the 3% mortgage/GDP ratio is among the lowest in the world. 2010. around 8 million units. enables a market expansion with larger availability of credit lines and access by all segments of society.6% rise in the latest 12 months ended in February.

.

Reduction of External Vulnerability Ministry of Finance .

1 0.5 20.2 8. which enables the reduction of external vulnerability.0 0.0 52.8 17.0 0.8 238. we could mention avoiding sudden stops in the country’s current account.1 0.8 31.Reduction of External Vulnerability International liquidity .5 1.8 8.8 21.8 180.8 27.1 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 72 .2 0.5 241.0 Net Reserves (IMF loans off) IMF loans Data: R$ billion * Forecast Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 38.3 24.3 27.0 28.Central Bank reserves The country’s international liquidity is mainly the result of consecutive trade surpluses and direct foreign investment.7 60.6 51.0 0.8 85.1 39. Among the main benefits of reserves accumulation.0 28.0 4. Ministry of Finance Brazilian international Reserves and IMF Loans (US$ billion – Gross) 0.0 0.9 0.3 193.0 0.0 53.

6 6.1 8.0 15.8 13.Reduction of External Vulnerability Lower external vulnerability Brazil has consistently reduced its external debt and enlarged its volume of international reserves in the latest years.5 41.2 38.5 6.0 11.1 1.8 March 2010 Data: % of GDP Source: Brazilian Central Bank Produced by: Ministry of Finance 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 73 .8 5.0 6.4 8.0 15.7 14. Brazil is an international creditor with cash disbursements to the IMF nowadays.1 1.2 12.4 3.9 38.9 12. International Reserves and Foreign Debt (% of GDP and index) Ministry of Finance Reserves /GDP Foreign Debt / GDP Foreign Debt / Reserves (index) 6.9 0.5 37.2 3.8 4.8 7.4 5.6 6.1 33. The increase in international reserves and the reduction of debt has also enabled the country to overcome the worst crisis in years.9 2.2 5.0 30.1 19.6 8.

1 -28 -24 -42 -50 -1.5 -4.2 -24 -30 -33 -25 -24 -23 -8 -1.6 14 1.8 -3.0 -4. the increase in iron ore price and the improvement in the competitiveness of our products. we expect the deficit at around 2.2% of GDP in 2010.8 1.2 -3.Hi gh lig ht Reduction of External Vulnerability Current account deficit does not impact growth forecasts Differently from the past.2 14 2 0. current account deficit will not jeopardize growth trend in the coming years. With the world economic recovery.2 -2.5 -2.5 US$ billion % of GDP Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 74 .5 4 0.8 -4.8 12 1.8 -1. Ministry of Finance Current account (US$ billion and % of GDP) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011* 2 1 0 -1 -2 -3 -4 -5 -2.

current account is expected to improve its balance between March and November.Reduction of External Vulnerability Significant increases in exports are expected Exports are usually affected by seasonal aspects in the beginning of the year. Then. Ministry of Finance Trade Balance (US$ billion) 250 50 40 30 20 100 10 50 119 74 138 91 161 121 198 173 153 128 200 150 23 Exports Imports Trade balance Data: US$ billions accumulated in a 12-month period Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 0 161 138 44 33 47 50 48 53 53 60 51 58 48 49 55 56 58 56 60 47 73 48 97 63 0 -10 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Mar 10 75 .

benefited from the rise in commodity prices.Reduction of External Vulnerability Commodities share in total export increases From 2003 to 2008. have substantially increased their share in total exports. despite the strong appreciation in real exchange rate. moving from nearly 52% in 2005 to 61% in February. 2010. Brazilian total exports has shown a remarkable performance. Basic products exports. It has jumped from US$ 72 billion in 2003 to US$ 197 billion in 2008. Ministry of Finance Total Exports (% yoy) 65 60 61 58 55 50 51 52 45 40 39 Commodities Non-Commodities Data: % change from each 12-month period Source: Crédit Suisse Produced by: Ministry of Finance March 2010 35 Dec 90 Sep 93 Jun 96 Mar 99 Dec 01 Sep 04 Jun 07 Feb 10 76 .

% Exports .Feb 10 accumulated 12 months Ministry of Finance 2003 Feb 10 TOTAL Europe European Union Ásia (former Middle East) China Japan India USA and Canada Latin America Argentina Mexico Africa Middle East Oceania 100 30 27 16 6 3 1 25 21 6 4 4 4 0.5 100 27 25 2 26 14 3 2 12 24 9 2 6 5 0.Reduction of External Vulnerability China's share in Brazil exports increased China became one of the main destinies for Brazilian export since 2009. both expectations for 2nd quarter Source: MDIC and Crédit Suisse Produced by: Ministry of Finance 77 . Nearly 93% of the export to China is comprised of basic and semi manufactured products.4 32 3 8 Basic Goods Semimanufactured Manufactured 41 48 47 63 64 77 61 33 27 16 3 13 14 14 13 45 38 40 28 22 16 20 43 60 81 95 89 March 2010 Former USSR (Western Europe) 3 10 14 7 18 23 26 60 17 3 18 15 81 56 26 Data: % share and % change.

Reduction of External Vulnerability Growth in emerging economies reduces export to developed countries From 2008 on. Ministry of Finance Destiny of Brazilian Exports (% share) 1 1 1 1 1 1 1 1 1 2 2 2 1 1 2 1 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 1 2 2 2 2 2 2 26 30 36 39 38 39 39 42 42 37 37 39 38 41 44 48 49 49 51 56 57 73 69 63 60 61 60 60 57 57 61 61 59 61 58 54 51 49 49 47 42 42 Others Developing Countries Developed Countries Data: % share Source: Crédit Suisse Produced by: Ministry of Finance March 2010 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 Fe b 10 19 78 . emerging economies have started to buy more than half of the Brazilian export products due to the elevated growth of emerging economies. Another reason to this change is the market diversification strategy accomplished by the government in order to reduce the levels of dependence to developed nations.

Real Effective Exchange Rate (deflated by IPCA) 200 Ministry of Finance 150 100 80. exchange rate policies become increasingly intertwined with trade policies. Brazil has experienced considerable change in its export composition. characterized with a growing service share in GDP and increasing domestic content of manufactured exports. In general. with differential sectorial impacts on the domestic economy. from basic and agricultural products to manufactured ones.Reduction of External Vulnerability Exchange rate path Considering the exchange rate. as an economy develops.5 Real effective exchange rate (index) Index bases =100 Data: deflated by IPCA March 2010 50 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 10 * Index below 100 means an real appreciation of exchange rate Source: Brazilian Central Bank Produced by: Ministry of Finance 79 .

Hi gh tli gh t Reduction of External Vulnerability Foreign investments and domestic capital markets support deficit Differently from other countries.0 -0.5 -2.0 -1. Ministry of Finance Funding Sources of the Current Account (% of GDP) 3. From 2001 to 2009.5 3. while fixed income securities and loans have diminished from 55% to 27%.0 0 Ja 7 n 0 Fe 8 b 08 M ar 0 Ap 8 r0 M 8 ay 0 Ju 8 n 08 Ju l0 Au 8 g0 Se 8 p 0 Oc 8 t0 No 8 v0 De 8 c0 Ja 8 n 0 Fe 9 b 0 M 9 ar 0 Ap 9 r0 M 9 ay 0 Ju 9 n 09 Ju l0 Au 9 g0 Se 9 p 0 Oc 9 t0 No 9 v0 De 9 c0 Ja 9 n 1 Fe 0 b 10 De c 3. where the main source to finance their external liabilities is indebtedness.0 0.0 2.5 0.0 1. foreign direct investments (FDI) and stocks jumped from 43% to 72% share.5 1.0 1. Brazil has its own external liabilities mainly comprised of stocks and direct investments.5 -1.5 Foreign direct investment Foreign investment Current account Data: % of GDP Source: Brazilian Central Bank and Itau-Unibanco Produced by: Ministry of Finance March 2010 80 .5 -1.5 2.

5 2007 81 .4 2008 1.4 2003 2. February figures Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 2.0 2006 0.1 1.6 0.8%. In the current account balance.Hi gh lig ht Reduction of External Vulnerability Outlays of profits and dividends In February 2010.6 2010 Profits Dividends Data: % of GDP.5% in comparison to February 2009. net remittances of income abroad totaled US$1. total net outlays of profits and dividends amounted to US$1. while interest outlays decreased 17. for a 13. Profits and Dividends (% of GDP) Ministry of Finance 0.2 billion.4 1.5 2005 1.9 0. to US$584 million.6 2002 2.3 2000 2.8 billion in the month.7 2001 2.6 2.8% increase in the period.0 2004 1.0 1. compared to US$852 million in February 2009.1 0.5 1.3 billion. up 2. Net outflows of income on direct investments totaled US$1.0 1.6 2009 1.5 1.5 0.

000 -9. through issuances of new IPOs.000 9.000 12.000 -6. The expected increase in interest rate as well as the uncertainties surrounding the principal economies worldwide makes Brazil an attractive destiny to short-term investments.000 0 -3. will increase the high quality finance sources to Brazil’s current account deficit.854 8.Hi gh lig ht Reduction of External Vulnerability Foreign investment flow towards the domestic capital markets Although 2010 has started with lower level than 2009.000 3.000 Ja M n 10 ar 10 4 05 5 06 6 07 7 08 8 09 l0 l0 l0 l0 Ju l0 Ja n Ja n Ja n Ja n Ja n Ju l0 Ju Ju Ju Ju 9 2.000 6. Ministry of Finance Foreign investment 15.222 Intercompany loan Direct Brazilian investment capital share Direct Brazilian investment March 2010 Data: US$ billion Source: Brazilian Central Bank and Itau-Unibanco Produced by: Ministry of Finance 82 . domestic capital market.

a positive exchange rate within the period and the decline in the price of international assets after the advent of the financial crisis in 2008.190 Intercompany loan Brazilian direct investment capital share Brazilian direct investment Data: US$ billion Source: Brazilian Central Bank and Itau-Unibanco Produced by: Ministry of Finance March 2010 83 .000 250 -1.500 5.000 10 09 07 08 l0 l0 l0 n Ju Ju Ju Ja Ja Ja Ja M ar n n n 10 7 8 9 995 8.250 7.000 2.000 9.Hi gh lig ht Reduction of External Vulnerability Brazilian direct investments elevates deficit in the first two months of 2010 A great deal of the rise in the current account deficit in the beginning of 2010 is due to an increase in Brazilian direct investments which include intercompany loans.250 -5. Ministry of Finance Brazilian Direct Investments 9.250 -3.500 -1. This investment attitude is due to high profitability levels of the Brazilian companies.500 -3.750 3.500 3.000 7.250 5.750 2.000 -5.

5 4. According to market forecasts.5 in 2010.2 1.4 0.6 0. the international solvency index is expected to reach 10.2 March 2010 * Forecast Source: Brazilian Central Bank Produced by: Ministry of Finance 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 84 .2 1.2 0.3 1.9 5. Ministry of Finance External Solvency Index (% of Foreign Debt) Short Term Total Data: % share of Foreign Debt 1.0 7.3 2.5 1.2 10.3 4.2 2. Brazil has consistently reduced the risks related to foreign financial flow reversals.2 0.6 0.8 1.3 0.9 0.8 0.Hi gh lig ht Reduction of External Vulnerability External Solvency: less risks to foreign financial flow reversals With increase in international reserves and reduction of external debt.2 2.4 0.2 1.

Hi gh lig ht Reduction of External Vulnerability Countries with higher external debt and lower international reserves are more vulnerable According to Crédit Suisse. countries with elevated external debt and small amount of international reserves. together with a fixed exchange rate regime. Growing deficits in current account force the markets to exchange rate adjustments. are more subject to reversals in the economic growth rates in moments of current account balance reversals. Ministry of Finance International Reserves and External Debt (% of GDP) 156 12 72 14 62 36 60 6 50 3 48 20 54 9 82 4 12 15 External Debt (1st year of current account deficit reversal) International Reserves (before current account deficit reversal) Data: % of GDP * Government Forecasts Source: Crédit Suisse Produced by: Ministry of Finance March 2010 1998-99 Indonesia 1997-98 Thailand 1998 Malasia 1995-96 Mexico 1983-84 Mexico 1999 Chile 2000-02 1989-90 Argentina Argentina 2010* Brazil Fixed Exchange Regime Flexible Exchange Regime 85 .

8 -6.3 March 2010 1974 First Oil Shock Impact 1982 External Debt Crisis 1987 External Debt Default 1998 Before Currency Devaluation 2010* Forecast 86 . the discovery of oil.1 31. government programs like PAC. reserve accumulation and flexible exchange rate present a very favorable situation.8 5. Events like the FIFA World Cup.0 -0.5 42.2 -4. it all will help the country in the next years.0 -6.2 4.9 2. lower external indebtedness.5 12.6 26. Ministry of Finance International Reserves and Foreign Debt (% of GDP) -2.5 15.5 1. Olympic Games.0 Foreign Debt International Reserves Current Account Data: % of GDP Source: Brazilian Central Bank Produced by: Ministry of Finance 18.Hi gh lig ht Reduction of External Vulnerability Brazil is more resilient to crises than in the past When compared to the past.

0 1997 0.7 -0.3 -2.1 -0.2 -3.7 -0.1 -2.1 -4.Hi gh lig ht Reduction of External Vulnerability Current Account deficits do not necessarily mean growth reduction The maintenance of elevated current account deficits does not mean instability.3 -1.7 -1.3 -1.3 -0. for instance.7 Goods Services Interests Total Data: % of GDP Source: Crédit Suisse Produced by: Ministry of Finance March 2010 87 .9 -4.1 -3.8 -3.3 -3.2 -2.2 -0.3 -3.2 -2.9 -5. mainly caused by remittance of dividends and profits to other countries.3 -2. Australia.9 -0.0 2005 0. Like Brazil.0 -2.1 -0.0 -0. Australia has also a reduced share of its external debt service in the current account deficit. Ministry of Finance Australia: Current account (% of GDP) 1995 1996 0.3 -0.2 -2.2 -2.1 -2.0 -4.5 -2.3 -0.2 -0.3 -2.8 -3.3 -0. according to a research published by Crédit Suisse.4 -3.1 -0.1 -1.1 -5. has faced elevated deficits in recent past decades.4 2002 2003 2004 0.6 -0.0 2006 2007 2008 3T2009 0.9 -0.3 -5.8 -1.4 -2.1 -0.1 -2.1 -1.3 1998 1999 2000 2001 0.8 -4.9 -3.6 -2.1 -2.8 -0.6 -2.

Ministry of Finance Australia: Investment and savings rate (% of GDP) 33 31 29 27 25 23 21 19 External Funding Investment Domestic Savings Data: % of GDP 1960 1968 1976 1984 1992 2000 2008 March 2010 Source: Crédit Suisse Produced by: Ministry of Finance 88 . Australia had excellent economic growth performances in recent years. the country has received big investment flows in the last decade.Hi gh lig ht Reduction of External Vulnerability Investments financed by foreign investment Despite of having a low domestic saving rate to finance investments. Even being a great commodity exporter and presenting an elevated current account deficit.

8 9.1 1. Feb 10 / Feb 09 12 months 10.3 -10.0 -11.3 -10.0 21.0 -14.5 -2.6 -15.Exports and Imports (FUNCEX) Ministry of Finance EXPORTS xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Basic Semi-manufactured Manufactured IMPORTS Intermediate goods Fuels and lubricants Capital goods Durables Non-durables PRICE (% change from preceding year) Accum.0 53.8 -2.2 -8.1 -6.Reduction of External Vulnerability Price and Quantum Indexes .3 March 2010 Data: % change Source: FUNCEX Produced by: Ministry of Finance 89 .6 -9.2 -5.6 58.8 25.6 -1.3 110.0 53.3 -3.0 -1.9 21.5 4.4 -32.8 2.6 4.3 -9.4 7.0 -4.1 QUANTUM (% change from preceding year) Accum.0 -4. Feb 10 / Jan 09 12 months 15.4 49.5 22.6 -6.0 4.2 12.7 -17.0 -17.

0 160.5 -7.6 2.0 40.0 4.8 -8.0 -19.0 -25.1 6.0 -17.8 11.1 45.Uses and Sources Ministry of Finance 2007 Uses Current Account Balance of trade Exports Imports Services Net interest Profits and Dividends International Travel Other services Unrequited transfers Depreciation (Medium and long term) Public sector Private Sector -36.1 4.5 -45.1 -25.0 25.2 -33.7 16.5 40.1 -21.0 -23.2 -5.5 4.7 3.0 38.2 13.6 36.3 2008 50.6 13.8 2009 54.6 -126.8 31.0 -26.2 -11.1 9.1 2010* -70.2 -18.4 283.1 0.3 25.0 -66.5 2010* 70.5 1.6 -13.2 -11.0 46.1 3.8 8.6 -52.2 238.4 153.0 13.5 -24.8 34.4 -3.5 -6.8 -3.1 0.2 21.7 32.1 -57-.4 -26.6 39.3 -30.9 -5.6 1.9 -9.0 -25.9 193.7 37.2 -22.7 35.3 -7.2 -35.Reduction of External Vulnerability International Reserves .6 Sources Capital Account Foreign Direct Investments Portfolio Investments Stocks Fixed Income (Medium and long term) Disbursements (Medium and long term) Public sector Private Sector IMF loans Brazilian assets abroad Short term and other Gross International Reserves 2007 36.1 5.0 Data: US$ billion * Market Forecasts Source: Crédit Suisse Produced by: Ministry of Finance March 2010 90 .9 -173.7 27.0 38.5 36.4 -6.6 -28.0 -127.3 -22.0 39.6 1.2 24.8 26.3 0.4 -24.4 -4.6 0.5 1.7 186.0 3.4 29.3 180.8 2008 -50.3 -9.7 -170.8 197.1 2009 -54.2 38.2 0.1 26.6 -42.3 -7.

Fiscal Policy Ministry of Finance .

1 Net revenue from transfers to States and Municipalities Expenditures Data: % of GDP.6 18. The trend is expected throughout the year as Brazilian Government’s ongoing commitment to fiscal balance applies to 2010.Fiscal Policy Fiscal balance is guaranteed for 2010 Growth in revenues and deceleration in expenditures are important figures noticed in the first two months of the year. seasonally adjusted monthly measures Source: Ministry of Finance Produced by: Ministry of Finance March 2010 13 Ja 92 . Central Government’s Revenue and Expenditures (% of GDP) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 20 19 18 17 16 15 14 n 98 Ju l9 Ja 8 n 99 Ju l9 Ja 9 n 00 Ju l0 Ja 0 n 01 Ju l0 Ja 1 n 02 Ju l0 Ja 2 n 03 Ju l0 Ja 3 n 04 Ju l0 Ja 4 n 05 Ju l0 Ja 5 n 06 Ju l0 Ja 6 n 07 Ju l0 Ja 7 n 08 Ju l0 Ja 8 n 09 Ju l0 9 Fe b 10 Ministry of Finance 19.

8 billion (2.006 Total Revenue 23.8 4.775 January and February 2010 Revenues Transfers Net Revenue Expenditures Benefits Personnel Costs and Capital 17.627 Total Revenue 12.7% in the personnel expenses.Fiscal Policy Central Government budget The primary surplus of R$ 12.402 Net Revenue 94.5 March 2010 131.775 Primary Results Data: % change and R$ millions Source: Ministry of Finance Produced by: Ministry of Finance Primary Result / GDP 2.8% in revenues and a slower increase of 8.45% of GDP) in the first two months shows the government’s full commitment to the fiscal target in 2010.7 25.45% 93 . the positive trend of the primary result was the combination of an increase of 17.3 19.8% in expenditures.8 10.867 2010 12.8 7. Central Government’s budget results (12-month period) Re-strengthened cash Higher revenues and lower expenditures increase the surplus Ministry of Finance Primary result of the Central Government In million of reais Main Changes Jan-Feb 2010/Jan-Feb 2009 . highlighting a drop of 4.In % Total Revenue in January and February 2009 2.6 8.604 Transfers to states and municipalities 107. With no relevant inflationary risk.

4 3.3 3.2 3.3 3.3 0.9 3.0 -1. The strong fiscal result allows both nominal result and public debt to decrease while keeping inflation under control.1 0.3 Primary result Nominal result Data: % of GDP * Ministry of Finance Forecasts March 2010 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011* 2012* 2013* 2014* Source: Brazilian Central Bank Produced by: Ministry of Finance 94 . Ministry of Finance Public Sector’s Fiscal Result (% of GDP) 3.1 -1.9 -2.3 3.8 -3.Fiscal Policy Public Sector’s fiscal results Brazilian economy does not need additional stimulus in 2010.5 -2.4 -4.1 -3.4 3.8 3.4 -5.2 3.3 3.3 -0.5 2.5 -3.3 3.7 -1.

2 -4. taking in account the current level of primary surplus (3.Fiscal Policy Zero nominal deficit in 3 years Nominal deficit close to zero is expected for 2012.7 -1.5 -2. The direct benefits of a better fiscal result are the reduction of interest rates and the lower need of public sector’s financing.3% of the GDP Data: % of GDP * Ministry of Finance Forecasts 2002 2003 2004 2005 2006 2007 2008 2009 2010 * 2011 * 2012 * 2013 * 2014 * March 2010 Source: Brazilian Central Bank Produced by: Ministry of Finance 95 .3 -1.0 -3.4 -3.6 -3.0 -0.3 0.5 -4.1 -3.3% of GDP) and the continuous commitment towards country’s growth sustainability. Ministry of Finance Nominal Result (% of GDP) 0.4 1 0 -1 -2 -3 -4 -5 Primary surplus equivalent to 3.9 -1.

6 2007 3.8 2005 3.6 2008 2.2 2010* Data: % of GDP from January to December each year * Jan-Feb/10. Primary Result (% of GDP) Ministry of Finance 3. primary surplus target is assured in 2010.3 2003 3.6 2006 3. only Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 96 . Based on a positive scenario for macroeconomic indicators.Fiscal Policy Primary Result The strong expansion of domestic demand.3 2004 3.9 2009 2. industry output and household consumption are consistent with significant recovery of tax revenues and contributions.

3% of the GDP Data: % of GDP Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 53.8 52.2 47.6 33.3 45.1 35.7 48.2 44.7 48. It is worth considering the required primary surplus also stems from the convergence towards the inflation target.0 30.9 40.3 34.5 37. Ministry of Finance Public Sector Net Debt (% of GDP) Primary surplus equivalent to 3.9 50.3 41.6 54.Fiscal Policy Substantial reduction of public debt Positive growth outlook and significant drop in interest rates are the main factors for the stabilization of the public sector net debt to GDP ratio in the last and coming years.1 38.5 38.1 36.9 40.3% of GDP).4 42.2 30.9 19 8 19 4 8 19 5 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 93 19 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 0 20 8 20 09 1 20 0 * 1 20 1 * 1 20 2 * 1 20 3 * 14 * 28.8 32.3 50.7 38.9 47.7 97 .6 48. according to the current level of primary surplus (3.0 45.6 60.1 31.

2%) March 2010 Inflation rate linked 421.5 (1. FPD has increased in 2. The external and domestic demand for those bonds is a reflection of the trust deposited in the good performance of Brazilian economy and debt management.4(28. Brazilian National Treasury emphasized the issuance of long term bonds based on the dual objectives of minimizing its long-term costs and maintaining risks at prudent levels.0%) TR rate linked 16.2%) Data: % of GDP and R$ millions Source: Ministry of Finance Produced by: Ministry of Finance 98 .4 (35.5 (29.5% over January/10. In Feb/10.1%) Exchange rate linked 97.1 (6.Fiscal Policy Improvements on the Federal Public Debt profile Along with the continuous pursuit of improvements on the Federal Public Debt profile.Feb/10 (R$ millions and % of GDP) Ministry of Finance Fixed rate 433. Composition of Federal Public Debt .5%) Floating rate 526.

1 4.4 10 5.Fiscal Policy Public Finance improvements Historical data show the improvements in the Brazilian public finance along the last 15 years. higher Social Security benefits.6 5 0 4.8 18.0 4.1 6.2 15 13.8 7.2 15.8 4.9 16. The main achievements were the convergence of the debt-to-GDP ratio.9 13.5 Ministry of Finance 20 Central Government Revenues Total Expenditures Social Security Benefits Personnel (employed and retired civil servants) Data: market share Source: Ministry of Finance Produced by: Ministry of Finance March 2010 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 99 . the reversal of an increasing trend in the Social Security deficit. it has been accomplished a better expenditure profile aiming for good quality of public spending.7 23. Public Finance (market share) 25 18. a slightly flat personnel cost trend.8 5. All in all.7 21.

0 15. The ongoing fiscal policy during the last 18 months has reversed a fearful economic slowdown period.Fiscal Policy Countercyclical fiscal policy prevents even higher fall in GDP Brazil is one of the countries in the world which committed one of the smallest shares of its budget in responding crisis measures. Ministry of Finance Countercyclical fiscal policy (2009) Capital Injection in BNDES Compulsory Deposit Easing Tax Reductions MCMV Housing Program National Treasury Remittances to States and Municipalities Capitalization of CAIXA Removal of Petrobras of Primary Surplus Target Primary Fiscal Target Reduction Other measures to boost economic activity that have stimulated economic activity Minimum Wage Increase Civil Servants’ Wage Increase 20. placing Brazil in a new cycle of development along with more employment and output.0 100.0 15.0 1.0 24.6 2.0 TOTAL R$ 263.0 15.0 29.0 100.6 billions March 2010 Data: R$ billion Source: Ministry of Finance Produced by: Ministry of Finance 100 .0 6.

January and February (R$ millions) PAC 20.2% change.3% 47.704 millions in 2009 to R$ 5. to stimulate productivity and to reduce inequalities. have been possible in Brazil in order to overcome fragilities.340 2006 2007 2008 2009 2010 Source: Ministry of Finance Produced by: Ministry of Finance 101 . Considering only the first two months.704 Data: R$ millions and % change. From 2007 on. Indeed. such as economic growth.441 1.2% 13.375 2.Fiscal Policy Public investment boosts as PAC advances There has been substantial increase in public investment since 2004. the total spent amount has reached R$ 90.0% 45. a 101. public investment has raised from R$ 2.9% Ministry of Finance 5.974 390 2004 2.Growth Acceleration Program March 2010 568 2005 1.6% 101. infrastructure reorganization. employment generation and social inclusion. for every Jan-Feb of each month PAC .441 millions in 2010. Public Investment . relevant changes.0 billions.2% 136.

0 8.5 2007 2008 2009 1.0 9. it is possible to divide primary expenditures into Social Protection Net and Public Operating System.3 2002 2003 2004 1.7 Data: % of GDP Source: Ministry of Finance Produced by: Ministry of Finance 102 .3 1.7 1.5 9.Fiscal Policy Developments in the Primary Expenditure framework In the Brazilian public expenditure framework.6 1.3 9.5 11.3 March 2010 10.5 1. while Public Operating System has kept up a flat path along recent years. considering all current expenses employed in operating general services.3 2005 2006 1.5 1. Social Protection Net has consolidated an essential role in the current government policy.3 10. Ministry of Finance Primary Expenditure (% of GDP) Social Protection Net Public Operating System 10.

1% of GDP March 2010 Social Security 7.3% of GDP Education 0. Social Assistance. composed by Social Security.0% of GDP in 2009 Health 1. Ministry of Finance Social Protection Net . Health and Education. These measures focused primary spending on the Social Protection Net.4% of GDP Social Assistance 2. measures have been adopted to grant the poor and those segments of the population more vulnerable to shocks during the crisis period.11.Fiscal Policy Quality of public spending In 2009.2% of GDP Data: % of GDP Source: Ministry of Finance Produced by: Ministry of Finance 103 .

Fiscal Policy

Reversal of Social Security’s trend
Social Security deficit has declined to 1.3% of GDP. The reversal of an increasing trend is a result of more formalization in the job market and Government revenues. In addition, the decreasing path reflects the good management in the Social Security System concentrated in measures such as retirement rules, criteria for medical inspection to grant health insurance and abonnement for later retirement.
Social Security (% of GDP)
8 2,0 1,6

Ministry of Finance

7

1,3
1,2 6 0,8 5 0,4 0,0
Source: Ministry of Finance Produced by: Ministry of Finance
00 01 02 03 04 05 06 07 08 09 n n n n n n n n n n Fe b Ja Ja Ja Ja Ja Ja Ja Ja Ja 10

Deficit Revenue Benefits Data: % of GDP

March 2010

4

Ja

104

Fiscal Policy

Total tax burden
Total tax burden increased a 2.34 percentage points of GDP among 2003 and 2009. It is composed by 0.71 pp charged by States and Municipalities, while 1.63 pp is due to Federal Government, representing 69% of total tax burden change. The amount is a result of growing economic activity in the last years and a rise of formalization in the job market.
Tax Burden (% of GDP)
33.4 33.5 33.9 34.5 33.8 10.6

Ministry of Finance

10.1

9.1

8.8

8.9

8.6

8.6

9.4

9.7

9.8

10.0

9.8

10.1

10.3

10.5

27.2 26.5 26.9 27.5

28.5

32.0 31.4 32.2 29.9 30.9

Total Federal State and municipalities Data: % of GDP
18.1 17.6 18.0 18.9 19.9 20.5 21.3 22.2 21.6 22.3 23.2 23.3 23.8 24.0 23.2
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

March 2010

Source: Federal Revenue / Ministry of Finance Produced by: Ministry of Finance

105

Fiscal Policy

Federal Tax Revenue
Revenue increase is due to taxes directly related to expansion of economic activity. The more formalization in the job market and more profitability of enterprises, along with increases in the industry output and sales, have contributed towards a larger raise in IRPJ/CSLL, Social Security, IOF and PIS/Cofins.

Ministry of Finance

Federal Tax Revenue (%)
24.4

16.7 14.2

19.0

17.4 17.4

12.3 12.0
9.6 7.5 4.1 1.1 -2.1 -4.6 -1.0 -6.5 -6.0 -11.1 5.0 7.4 7.3 6.1

3.1
-0.7 -1.3 -6.5 -0.8 -5.7 -3.0 -2.9 -2.9

2.9

5.0

% change from preceding month % change from each 12-month period Data: % change
Source: Federal Revenue / Ministry of Finance Produced by: Ministry of Finance
March 2010

-7.4

-7.0

-7.0

-7.6

-11.5

09

r0 9 M ay 09 Ju n 09 Ju l0 9 Au g0 9

No v0 9 De c0 9

t0 9

10

10 Fe b M

t0 8 No v0 8 De c0 8

09

09

08

09

ar

n

Se p

Fe b

Oc

Ap

Oc

Se

Ja

M

Ja

ar

p

n

10

106

862 926.2 -2.1 % of Public Sector Net Debt 2008 58.34 2009 42.6 -23.2 -3.81 0.Fiscal Policy Ministry of Finance Public Sector Net Debt .3 -17.02 12.200. Exchange rate linked IV.9 27. States and Municipalities 373.828 408.9 -29.24 13.2 2009 62.5 -22.0 32.631 728.20 Feb 10 42.69 14.808 8. Internal Debt IV.2 4.345.26 1.954 10.2.39 24.5 -0.3 32.2 35.2 31.8 29.327 414. Floating rate II.2 38.3 -0.1 Feb 10 67.2 Data: R$ million and % of GDP * Balances at the end of each period Source: Brazilian Central Bank Produced by: Ministry of Finance March 2010 107 . Public sector 1.153. Others 47.41 2008 38.9 -24.February 2010 * Public Sector Net Debt 2007 I.0 35.07 29.795 R$ million 2008 1.681 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx I.4 -17.226 2007 45.325 932.343. Inflation rate linked IV.80 29.93 0.2 -26.3.12 30.6 -30.2.323 I.03 0. State-Owned Enterprises 10.4 4.1.80 0. Foreign debt V.385 Composition of Public Sector Net Debt 2007 I. Central Government 816.351 % of GDP 2009 Feb 10 1.6 -4.404 6.535 406.1.799 I. Fixed rate III.7 -2.67 12.

604 17.389 34.20 20.24 0.08 2010 25.98 13.246 36.33 0.Above the line .283 23. Social Security       VI.1.207 12.943 113 -1.55 0.18 0.316 163 3. TRANSFERS TO STATES AND MUNICIPALITIES      II.160 % of GDP 12-month 2009 23.599 629.638 2.48 4.61 2. Constitutional transfers (IPI.273 1.12 0.01 0.723 29.03 0.2.25 5.389 102.74 0.1.1.209 49.169 458 4.37 0.87 -1.48 0.12 12.2. METHODOLOGICAL ADJUSTS Ministry of Finance R$ million Yearly Accum.978 1.53 -1.489 22 155 % of GDP 12-month 759.87 4. Other Cost Expenses  FAT (excluding SA and UI)  Government Credit Operations and Liabilities Reordering  Subsidies for Regional Funds  IV.83 4.06 1.02 0.01 0.02 0.781 30 0 I.3 Other Cost and Capital Expenses  V.59 18.12 0. TOTAL EXPENDITURE  IV.567 6. Paid Investment  IV.83 19.02 0. Others  III.18 0.03 2010 23.04 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx March 2010 Data: R$ million and % of GDP Source: Ministry of Finance Produced by: Ministry of Finance 108 .44 0.71 4.30 -0.41 3.54 3.1 Cost Expenses  IV.19 0.42 0.12 0.85 0.13 0. LC 87/96 and Exports Compensation Fund      II.25 3.71 7.07 3.04 0.64 0.13 13. Payroll  Personnel and charges  Social Security benefits .26 -0.221 150.87 19.10 0.140 18.33 0.098 443.988 1.900 15.08 0.04 1.118 573.397 3.523 19.006 12.25 0.45 15.68 0.1.1.48 2.85 -1.708 81 1.2.027 186. TRANSFERS FROM TREASURY TO CENTRAL BANK  VI.04 Yearly Accum.11 14. TOTAL NET REVENUE  IV.94 5.47 5.006 101.92 0.577 5.26 0.306 192 12.09 0.38 0.43 0. IR and others)      II. 2009 23. Central Bank  VII.72 5.54 2.117 26.52 3.338 227.88 2.088 504 2.091 129.242 -7.70 18.86 0. Treasury revenues     I.00 0.725 36.773 3.659 -3. TOTAL REVENUE     I.309 437.432 -611 1.900 28.90 13.50 -1.60 0.362 36.154 45.08 3.12 0.19 0.05 18.23 16.2.07 0.04 2.77 17.Fiscal Policy Central Government Results .61 0.825 72.135 12.16 13.64 18.742 1.52 6.657 27.61 4.87 7.88 0.953 9.86 3.69 0.1.775 20.22 0.474 44.February 2010 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Central Government Results Feb 10 57. National Treasury       VI.09 1.496 4.56 18.577 2. 131.RGPS  Disabled and retired special benefits .2.90 19.62 0.89 0.627 73.08 19.45 3.05 0.3.092 2.62 0.16 5.896 97.124 91.80 5.98 0.36 0.2 Capital Expenses  IV.400 1.222 580.3.04 2.1.005 325 6.159 720 58 398 263 2.947 34.144 2.02 0.168 -41.35 4.05 7.565 3.274 107.107 41.496 16.05 14. Social Security revenues  II.LOAS / RMV  Salary Allowance (SA) and Unemployment Insurance (UI)  Bolsa Familia Allowance  IV.02 0.08 1. CENTRAL GOVERNMENT PRIMARY RESULT       VI.402 94.

2.38 -3.1.12 Data: R$ million and % of GDP * No exchage devaluation Source: Brazilian Central Bank Produced by: Ministry of Finance 109 March 2010 .01 -5.122 -11.35 0.282 230 -171. Primary Result I.304 Yearly Accum.05 1.15 -0.Under the line .67 0.345 770 -55 -28.21 1.585 -2.985 -101.10 0.08 0.138 -13.12 0.704 3.55 0.26 2.292 -192 -3.3.18 -0.Central Government I.38 -3.044 12.03 -0.33 2010 2.Fiscal Policy Public Sector Results .1.05 % of GDP 12-month 2009 2.681 49.08 -0.630 -2. 2009 2.3 State-Owned Enterprises I.581 21.21 1.31 -0.01 -5.3. Nominal Interest *  III.46 1.3. Nominal Result * 2010 3. 17.145 -1.078 12-month 70. Federal I.2. Municipal  II.279 R$ million Yearly Accum.837 -1.45 0.38 -2.00 -5.67 -0.01 -0.36 -3.31 1.06 0. State I.002 426 -9 -14.11 0.3.12 -0. States and Municipalities I.837 5.February 2010 Ministry of Finance Public Sector Results Feb 10 859 -701 3.01 -5.03 0.17 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx I.

Industry and Foreign trade Ministry of Planning.Glossary – Companies Accenture ACSP ABECIP Abimaq ABRACICLO Abramat ACSP Anfavea ANP Bacen BCE BEA BID Bird BLS BM&F Bovespa BNDES BNDESPar Accenture Economic Consulting São Paulo Trade Association Brazilian Association of Savings and Mortgage Credit Entities Brazilian Association of the Machines and Equipment Industry Brazilian Association of Manufacturers of Motorcycles.A. Bikes and Similar products Brazilian Association of the Industry of Construction Materials São Paulo Commercial Association National Association of Automotive Vehicle Manufacturers National Petroleum Agency Brazilian Central Bank European Central Bank U. CAIXA CAN Capea/Esalq CNI Conab Copom CVM DIEESE EIU Fed FEF FGV FGV-CPS FIPE IMF FOMC FSE Funcex IBGE Caixa Econômica Federal National Agriculture Confederation Center for Advanced Studies in Applied Economics/ Luiz Queiroz High School of Agriculture National Industry Confederation National Supply Company Monetary Policy Committee Securities Commission Inter-union Department of Socioeconomic Statistics and Studies Economist Intelligence Unit Federal Reserve Fiscal Stabilization Fund Getulio Vargas Foundation Social Policies Center at the Getulio Vargas Foundation Institute of Economic Research Foundation International Monetary Fund Federal Open-Market Committee IIF ILO INSS IPEA LCA MDIC MPOG MTE OECD S&P 500 SECEX SOF RFB STN Institute of International Finance International Labor Organization National Social Security Institute Institute for Applied Economic Research Strategic Solutions in Economics Ministry of Development. Bureau of Economic Analysis Inter-American Development Bank International Bank for Reconstruction and Development Bureau of Labor Statistics Bovespa Stock and Future Markets Exchange and São Paulo Stock Exchange Index National Bank of Economic and Social Development BNDES Participações S.S. Budget and Management Ministry of Labor and Employment Organization for Economic Cooperation and Development Standard and Poor"s 500 Foreign Trade Secretariat Federal Budget Secretariat Federal Revenue Secretariat National Treasury Secretariat March 2010 Emergency Social Fund Foreign Trade Studies Center Foundation Brazilian Institute of Geography and Statistics 110 .

Glossary – Terms ACC Cadip Caged CCR Cide CNAE CNI Cofig Cofins Cofins Import CPI DI DRU FAT FBCF FCVS FGC Icei ICMS Advances on Exchange Contracts System of Registration of Credit Operations with the Public Sector General File of the Employed and Unemployed Reciprocal Credit and Payment Agreement Contribution on Intervention in the Economic Domain National File of Economic Activities National Confederation of Industry Export Financing and Guarantee Committee Contribution to Social Security Financing Contribution to Social Security Financing due by the Importer of Goods and Services Consumer Price Index Interbank Deposits Release of Federal Government Entitlements Worker Suport Fund Gross Fixed Capital Formation Wage Variation Compensation Fund Credit Guarantee Fund Industry Businessman Confidence Index Tax on the Circulation of Goods and Services IED IGP IGP-DI IGP-M Inec INPC IPA IPA-DI IPA-Industrial IPA-M IPA-OG-PI IPC IPCA IPCA-PI IPC-Br IPI IRPF ITR LFT LRF LSPA Direct Foreign Investment General Price Index / FGV General Price Index – Internal Supply / FGV General Price Index – Market / FGV Consumer Expectation National Index National Consumer Price Index / IBGE Wholesale Price Index / IBGE Wholesale Price Index – Internal Supply / FGV Wholesale Price Index – Industry Wholesale Price Index – Markets / FGV Wholesale Price Index – Overall Supply – Industrial Products Consumer Price Index / IBGE Broad National Consumer Price Index / IBGE Broad National Consumer Price Index – Industrial Products Consumer Price Index – Brazil Industrialized Products Tax Income Tax on Individual Persons Rural Land Tax Treasury Financing Bills Fiscal Responsibility Law Systematic Farm Production Survey LTN NTN NUCI PEA PF PIA-Empresa PIA-Produto PIB PIM PIMES PIM-PF PIS PMC PME PNAD RGPS Selic TJLP TR National Treasury Bills National Treasury Note Installed Capacity Rate Economically Active Population Individual Person Annual Industrial Survey – Company Annual Industrial Survey – Product Gross Domestic Product Monthly Industrial Survey / IBGE Monthly Industrial Survey of Employment and Wages / IBGE Monthly Industrial Survey – Physical Output Social Integration Program Monthly Trade Sector Survey / IBGE Monthly Employment Survey / IBGE National Survey by Household Sample / IBGE Social Security General System Special System for Settlement and Custody Long-Term Interest Rate March 2010 Reference Interest Rate 111 .

President of the Republic: Luiz Inácio Lula da Silva Minister of Finance: Guido Mantega Deputy Minister of Finance: Nelson Machado Production and Execution Special Advisor to the Minister: Marcelo Fiche Advisors to the Minister: Lígia Ourives.br Ministry of Finance .STN Emílio Garófalo Filho Ministry of Finance www.SPE International Affairs Secretariat . Alline Luz and Viviane Barros Technical Support Economic Policy Secretariat . Adriano Seabra and Marcus Pessoa Art Visual Project and Final Art: Viviane Barros Layout development: André Nóbrega.fazenda.SAIN National Treasury Secretariat .gov.