Brazil Overview

BRAZIL OVERVIEW

CONTENTS
Overview Economy Investments Main Sectors Agribusiness Auto Industry Civil Construction Consumer Goods Energy Financial Life Science Telecommunications Human Resources About Us 3 5 7 10 10 11 12 13 14 15 16 17 18 20

ABOUT THIS REPORT

Brazil Overview was prepared by Fesa as a current photograph of the
country. It gives a summary of the economy, the current scenario and forecasts for investments as well as an analysis of some of the leading sectors in the Brazilian market. In addition, there is a human resource analysis which includes topics on employment and the talent blackout.

BRAZIL OVERVIEW
Overview

Geography
Brazil is the fifth largest country in the world and has an area of 3,287,000 square miles (8,514,000 square kilometers). The coastline runs for more than 4,578 miles (7,367 kilometers), almost all of it along the South Atlantic . The country comprises 26 states and the Federal District, which includes the capital, Brasilia. Geographically, Brazil consists of five basic regions: North, Northeast, Midwest, Southeast and South So Paulo, Brazils biggest city, is located in the Southeast region, the latter representing about 56% of Brazilian GDP. The Northeast is an emergent region and has increased its share of GDP by almost 40% in the last few years, now accounting for 13% of overall GDP.
Amazonas

North Northeast Midwest

Braslia

Southeast
Rio de Janeiro So Paulo

South

Population
According to data published by the IBGE, the government statistics office, Brazils population was approximately 192 million in 2010 making it the fifth most populous nation on earth.

Language
The official language in Brazil is Portuguese. There are no significant local dialects or other derivations of the official language. English is the foreign language most used by the business community. The number of Spanish and French speakers has increased significantly in the last few years.

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Source: IBGE

BRAZIL OVERVIEW
Overview

Currency
The monetary unit is the Real (R$, plural Reais) which is divided into 100 units called centavos. According to the countrys central bank (Banco Central do Brasil), as of September, 22nd 2010, the exchange rates were: U$$ 1.00 1.00 1.00

R$ 1.7176 2.6903 2.2994

Religion
Religion in Brazil has a greater following among the population when compared to other Latin American countries, and is more diverse. The Constitution guarantees absolute freedom of religion. Over 70% of the population declared themselves Roman Catholic at the last census (2000). However, there are many other religious denominations such as Protestant, Pentecostal, Episcopal, Methodist, Lutheran, and Baptist. There are over a million and a half Spiritists or Kardecists, and small minorities of Jews, Muslims, Buddhists and numerous followers of Candomble and Umbanda.

Education
Education in Brazil is regulated by the Federal Government through the Ministry of Education, which defines the guiding principles for the organization of school curricula. Education is compulsory for a minimum of nine years although standards are often deficient. As a large middle-income country, Brazil still has several underdeveloped regions and as a result its education income system is plagued by shortcomings and economic and social disparities. In spite of the low percentage of students undertaking courses at a college level - around 8% of the population, the latest INEP/MEC IGC (General Course Index)ranking, published in 2009 shows 2,000 vocational courses in Brazil, 1678 be run by college faculties and institutes, 179 universities and a further 153 higher education courses.

Government
Brazil is a federal republic of twenty-six states together with the Federal District. Each state has its own six constitution with a governor and state legislature. The states are divided into municipalities, and these, in turn, are divided into districts. Municipalities enjoy a degree of autonomy. System of Government: Presidential Republic Head of State: Luiz Incio Lula da Silva, elected by direct vote, for the period January 1 2007 to Silva, December 31 2010

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Source: Banco Central do Brasil | IBGE | Wikipdia | Ipea Data | The Country of the Future CFA Magazine | Inep/MEC

BRAZIL OVERVIEW
Economy

Overview
Characterized by large and well-developed agricultural, mining, manufacturing, and service sectors and developed with an expanding presence in world markets, the Brazilian economy outweighs that of all other South American countries. Since 2003, macroeconomic stability has steadily improved and international reserves have grown, conversely reducing currency exposure by shifting the debt burden towards Real denominated and domestically held instruments as well as adopting an inflation targeting regime and a commitment to fiscal discipline. In 2008, Brazil became a net external creditor and in the same year, two credit rating agencies (Standard & Poor's and Fitch) assigned investment grade status to the countrys sovereign debt. After record growth in 2007 and 2008, the onset of the global financial crisis hit Brazil in September 2008. Brazil's currency and its stock market BM&FBovespa - saw large swings as foreign investors repatriated resources with two quarters of recession ensuing as global demand for commodity commodity-based exports dwindled and external credit dried up. However, Brazil was one of the first emerging markets to recover, experiencing one of the fastest rates of growth with controlled inflation since the economic miracle years of the seventies. At a time of lackluster economies in most developed countries, the Brazilian domestic market is becoming one of the most coveted in the world with a burgeoning middle class, the like of which has never been seen before. The supply of credit - a key source of expansion - has never been greater. After decades in a state of suspended animation, the real estate market is developing rapidly. Indigenous multinationals are multiplying, increasing a Brazilian footprint in the international arena. Productivity grows. New groups are formed and are driving a reinvigorated capitalism. At last, Brazil is stronger and more integrated with the rest of the world. By the second quarter 2009 consumer and investor confidence had revived, in May posting an expanded GDP of 9 percent from a year earlier, faster than any other Latin American economy. GDP grew 2.7 percent in the first quarter of 2010 compared with the previous quarter.

Evolution of growth rates of GDP (%)

GDP market prices chain-weight index (average 1995 = 100) - quarterly variation GDP market prices seasonally adjusted chain-weight index (average 1995 = 100) Source: IBGE - Created by Ipea/DIMAC/GAP

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Source: Business Week (Bloomberg); Exame Special Issue - Melhores & Maiores; Cia Central Intelligence Agent : The World Factbook | IPEA Instituto de Pesquisa Econmica Aplicada

BRAZIL OVERVIEW
Economy

Overview
The first quarter was the peak of the economic recovery, says Finance Minister Guido Mantega. In the second quarter, figures already show the economy is decelerating. According to Bank of Americas.
fixed income strategist, the deceleration process in the second quarter reflects the end of tax breaks for boosting demand during the global financial meltdown. Brazil is the second-fastest growing economy among the BRIC countries at 9%, behind China, which fastest expanded 11.9 percent in the first quarter and ahead of India, which grew 8.6 percent in the first three months of the year. Russia grew 2.9 percent. The Central Bank of Brazil says that economic activity has increased in all five regions of Brazil. In the most developed Southeast region (where a third of the country's industries is concentrated), growth is being driven largely by the recovery in the industrial sector. The Bank further states that industrial expansion in the Southeast can also be attributed to increasing domestic demand and an enhanced credit supply and higher employment. In the other four regions, rising demand and expanding credit have also led to increased economic activity, says the bank. Unemployment rates fell more than forecast in April 7.3 percent the lowest for that month since 2001 as the Brazilian economy heads toward its fastest growth in more than two decades. We can reach 6.8 percent by the end of the year, said Roberto Padovani, chief strategist at Banco WestLB do Brazil . The number of unemployed Brazilians remained stable at 1.7 million in April, the national statistics office said. After presenting weak growth rates in the eighties and nineties, IMF estimates show Brazil ending the current decade with an impressive 163% increase in average income per capita, expected to reach around R$ 10,000 in 2011. According to Central Bank governor, Henrique Meirelles, inflation will meet the 4.5% midpoint of the targeted inflation rate band this year.

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Source: Business Week (Bloomberg); Exame Special Issue - Melhores & Maiores; Cia Central Intelligence Agent : The World Factbook | IPEA Instituto de Pesquisa Econmica Aplicada

BRAZIL OVERVIEW
Economy

Trade Balance
In July 2010, the Brazilian trade balance registered a surplus of US$ 1.4 billion, with exports totaling US$ 17.7 billion and imports US$ 16.3 billion. In July exports posted a month on month increase of 3.4% (US$ 17.1 billion), and 25% year on year (US $ 14.1 billion). In July imports grew 10.1% (US$ 14.8 billion) and 45.3% (US$ 11.2 billion) for the same comparative periods. Differing growth rates in exports and imports therefore explain the decline in trade surplus in July 2010 compared with June (-40.4%) and with July 2009 (-53.3%), when the monthly surplus was averaging 53.3%), approximately US$ 3 billion.

Trade Balance (monthly)

(US$ millions) Balance

Trade Balance (2010/2009, July) Exports, Imports

(variation %)

Exports Balance Source: Secex- Created by Ipea/DIMAC/GAP Exports Imports

Imports

Balance

Source: Secex- Created by Ipea/DIMAC/GAP

Based on an aggregate 12-month period, exports and imports have reported a continuous recovery month trajectory since November 2009 (US$ 152.4 billion and US$ 126.9 billion, respectively) through to July 2010 (US$ 175.8 billion and US$ 158.1 billion, respectively)

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Source: Business Week (Bloomberg); Exame Special Issue - Melhores & Maiores; Cia Central Intelligence Agent : The World Factbook | IPEA Instituto de Pesquisa Econmica Aplicada

BRAZIL OVERVIEW
Investments

Foreign Investments in Brazil

With the end of the crisis, renewed interest in the Brazilian market has seen an inflow of US$ 38 billion in FDI following a year on year decline of 42% in 2009. Estimates for FDI for this year reveal that China is displacing countries such as Holland, USA, Spain and Germany and taking the lead among major investors with about US$ 10 billion. Brazil has overtaken the United States and Europe as an investment target and is already the third favorite destination among multinationals planning to invest through 2012.
BACK INTO THE GAME: Following a decline, due to the global crisis in 2009, foreign direct investment returned to growth this year
(billions of dollars)

Source: Special Edition: Exame Melhores e Maiores | 2010, July

The country is in the spotlight because of the growing interest in sourcing raw materials (commodities) as well as the increasing importance of the Brazilian domestic market. Based on a global growth of 3% in 2010 and 3.2% in 2011, the UN estimates that investment by multinationals should be US$ 1.2 trillion in 2010. These may reach US$ 1.5 trillion in 2011, rising to between US$ 1.6 trillion and US$ 2 trillion in 2012 with emerging market countries taking the lead due to interest in the primary sector. The arrival of new investors is changing the traditional origins of those multinationals already installed in the country for decades. And many have already increased their investment to accompany the rise of the domestic economy: "Today Brazil is one of the world's safest places to invest. (...) We want to grow with Brazil, says Sergio Marchionne, Fiat's Groups CEO, inaugurating a new Case New Holland plant in the country
WHERE DOES THE MONEY COME
United States and European countries have led foreign direct investment in Brazil in 2009

Source: Special Edition: Exame Melhores e Maiores | 2010, July

The arrival of the Chinese is the new element in the process of recovering FDI in Brazil with more traditional players such as Germany, South Korea, Britain and the US showing strong interest as well.

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Source: Exame Special Issue - Melhores & Maiores; Central Bank of Brasil, OESP

BRAZIL OVERVIEW
Investments

There are at least two clear reasons for Chinese interest: Brazil is considered a strategic partner complementing Asian economies and supplying natural resources to the construction industry and food to feed an increasingly affluent population of 1.4 billion. Brazil offers a strongly expanding market with growth potential in infrastructure and for the manufacture of many products from computers and home appliances to automobiles and tractors. Turnover in the retail trade has grown by 673% since 2003, supported by a real increase in incomes which are better distributed History In 2007, foreign capital inflow jumped by 84%, reaching almost US$ 35 billion and the following year by another 30% to US$ 45 million ranking Brazil ninth on the list of destinations for productive capital. The financial crisis dampened inflows with investment capital destined for emerging markets instead being used to address the needs of company headquarters in Europe, USA and Japan. This year, projections show a return to the level of US$ 45 billion although given continuing uncertainties in Europe, the Central Bank has conservatively revised its forecast down to US$ 38 billion.

Brazilian Investments Abroad With the pace of overseas acquisitions, Brazilian investments will reach US$ 15 billion in 2010, an increase of 250% over the previous year. The speed of globalization of Brazilian companies is astonishing - and a direct reflection of the countrys strengthening economy. For the first time, Brazil has a crop of companies that can rightly call themselves multinationals. The last few years of currency stability, stock exchange listings, an increasingly robust domestic market and the evolution in management skills were the drivers behind a group of companies seeking a global dimension and triggering a round of surprising overseas acquisitions. For the first five months of 2010, Brazilian direct overseas investment amounted to US$ 8 billion, representing investments mainly in the food, metallurgy, construction and services segments. Just in the first two months of 2010, Brazilian companies invested US$ 5.4 billion abroad - the highest value recorded in the period since Central Bank records for this item began in 1947.

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Source: Exame Special Issue Melhores & Maiores; Central Bank of Brasil

BRAZIL OVERVIEW
Main Sectors: AGRIBUSINESS

Overview
Currently, the agribusiness sector in Brazil represents 26% of GDP and 42% of Brazilian exports. The National Supply Council (Conab) is forecasting a record grain crop - 6.5% more than the 143 million tons in 2009. The IBGE reports agricultural GDP increasing by 2.1% in the second quarter versus the first quarter 2010 and 11.4% comparing second quarters 2009 and 2010. Agricultural growth reflects two factors: - increased productivity and performance of certain crops harvested in the second quarter 2010 such as soybeans (19.8%), coffee (13.2%), corn (4.4%) and cotton (202%). - the reduction in fertilizer and pesticide prices. Employed and Unemployed General Registry (CAGED) data shows increased formal employment in the agricultural sector rising from 128,874 in numbers of new hires in the first half of 2009 to 175,050 in June 2010. However, a shortage of qualified labor is a problem, and those who invest in their own professional development are rewarded with more attractive salaries. The initial remuneration in agriculture increased by 27% from January 1999 to June this year.

Highlight
As the largest producer and global exporter of sugar and ethanol, Brazil will report a 651.51 million ton crop in 2010, a year on year increase of 7.8% according to Ministry of Agriculture forecasts. Over half of the sugar cane crop this year (54.9%) is destined for the ethanol market, equivalent to 28.4 billion liters, while the remainder (45.1%) will be transformed into 38.1 million tons of sugar of which 11 million tons will be consumed domestically.

Fesa
The agribusiness sector business, represented by the Agriculture and Sugar and Alcohol subsectors, grew by 383% in revenue compared to the first half of 2009.

Point of View
The recovery of international commodities prices and the insertion in the economy The of a substantial number of new consumers have contributed to the growth of the agribusiness production chain.
Gino Oyamada Managing Partner gino@fesa.com.br

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Source: IBGE, Companhia de Abastecimento Nacional CONAB; Cadastro Geral de Empregados e Desempregados CAGED; Ministrio da Agricultura, Pecuria e Abastecimento MAPA; media: O Globo, Portal do Agronegcio, Valor Econmico.

BRAZIL OVERVIEW
Main Sectors: AUTO INDUSTRY

Overview
Currently Brazil is the fourth largest automotive market in the world with accumulated balance of 2,194 million vehicles sold in the first eight months of 2010, up 10% compared to the same period of 2009. August was the second best month in the history of the industry with sales of 312,800 new vehicles, including trucks and buses and behind only March, the last month when the IPI (Tax on Industrialized Products) tax break applied, with 353 700 units. In comparison with August last year, the increase was 21.1%. National Automobile Distributors Federation (Fenabrave) data indicates that the automotive market expects to generate over 250 thousand jobs this year. The sector ended July with an aggregate of 132,160 new jobs created including the agricultural machinery subsector - 10.5% up in relation to the same month last year Second quarter 2010 GDP for the automotive industry increased 1.9% year on year according to data released by the IBGE. In 2009, the sector accounted for 4.7% of Brazilian GDP. For this year, the industry is expected to grow to represent approximately 6.8% with a sales increase of 7.4% for light vehicles (cars and light commercial vehicles) and a 9% increase in unit output. In 2006 the average price paid per vehicle was R$ 29,200. In 2009 consumer investment in autos jumped to R$ 37,500 on average. "The Brazilians are seeking greater safety, comfort, efficiency and reduced emissions says Fords global chairman. Under such a scenario, the time is right for sector players to invest in development. According to Fords chairman, Brazil is currently the center of the world as one the fastest growing markets. Thanks to the tax breaks introduced by the Lula administration, sector sales were boosted enabling the country to recover from the crisis faster than would have otherwise been the case.

Fesa
First half accumulated revenue from automotive sector business reported the largest variation among all sectors in the company registering a growth of 611% compared to the same period last year.

Point of View
The strength of the domestic market and the election of Brazil as one of the key emerging market countries to establish and expand manufacturing and new product development platforms by global OEMs, decisively contributed to these significant results along the entire value chain.
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Source: IBGE (Instituto Brasileiro de Geografia e Estatstica); Fenabrave (Federao Nacional da Distribuio de Veculos Aut Automotores); Anfavea (Associao Nacional dos Fabricantes de Veculos Automotores) ; Portal Exame

Aline Zimmerman Managing Partner aline@fesa.com.br

BRAZIL OVERVIEW
Main Sectors: CIVIL CONSTRUCTION

Overview
Civil construction, an area of many and varied activities throughout the country, acts as an important engine of economic growth creating wealth and jobs. It is one of the main sectors of the economy representing about 16% of GDP, ranking second only to agribusiness. CBIC (Brazilian Chamber for the Construction Industry) estimates construction industry GDP growth at 9% for 2010. The investments for the Minha Casa, Minha Vida (my home, my life) lifehousing program and the PAC (Growth Acceleration Program), in addition to rising incomes and work on preparing for the 2014 World Soccer Tournament will ensure sector growth exceeds 6% per year through 2012. According to estimates, GDP in the construction industry will grow 6.7% in 2011 and 6% in 2012. The sector should be responsible for the creation of 180 thousand formal jobs in 2010. Brazilian Industrial Engineering and Construction Association data suggests that the sector will create 3.5 million jobs in the coming years thanks to the run up to the 2014 World Soccer Tournament.

Investments
Dieese (the Inter-Labor Union Statistics and Socio-Economic Studies Department) expects sector Economic investments in programs such and Minha Casa, Minha Vida housing and construction in readiness for the World Soccer Tournament in 2014 and the Rio Olympics in 2016 should ensure strong employment growth going forward. Sinduscon-SP data indicates that investments reaching 20% of GDP in 2010. SP Getlio Vargas Foundation (FGV) indicates that investments will grow from R$ 476 billion to R$ 625 billion in the current year. Investments in real estate should rise from R$ 170 (2009) to R$ 202 billion. The World Soccer Tournament alone will inject at least R$ 155.7 billion into the Brazilian economy.

Fesa
Company revenues from the Infrastructure and Civil Construction sectors recorded a growth of 148% in the period from January to July compared with the same period last year.

Point of View
Brazil's infrastructure boom is creating investment opportunities along the chain, currently making the country one of the hottest spots globally for investors as well as executives.
Aline Zimmerman Managing Partner aline@fesa.com.br

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Source: Departamento Intersindical de Estatstica e Estudos Socioeconmicos (Dieese); Cadastro Geral de Empregados e Desempre Desempregados (CAGED); Sindicato da Construo Paulista (Sinduscon-SP); Associao Brasileira de Engenharia Industrial; Cmara Brasileira da Indstria da ); Construo (CBIC); United Nations Conference on Trade and Development (Unctad)

BRAZIL OVERVIEW
Sectors: Main Sectors: CONSUMER GOODS

Overview
A growing middle class and easier access to credit have propelled domestic consumption to around 60 percent of GDP. The taming of hyperinflation has reduced interest rates making consumer credit more affordable. The purchase of televisions, refrigerators and other consumer durables on credit was almost impossible until recently but has now become a reality. The middle-class consumption theme will play out over many years and touch many sectors, notably class retail, food, over-the-counter medications, and consumer electronics. Demand for housing is kick counter kickstarting growth in construction, building materials and other construction construction-related industries. The introduction of the 30-year mortgage, a significant decline in interest rates in the past five years, and year government subsidies for low-cost housing have combined to produce lower monthly payments at a time cost when salaries are increasing. FGV research indicates that turnover in the consumer industry such as food and beverages will be 10.6% higher in 2010 than 2009, above the general average for industry. The Brazilian Food Industries Association (ABIA) forecasts that in 2010 exports will be at or near the figure for 2008 or approximately US$ 33.3 billion. In the first six months of this year the food industry reported a year on year increase in sales of 5.3%. The beverage industrys forecasts for consumption are even stronger thanks to stronger sales during the World Soccer Tournament in June-July 2010 Some examples to illustrate the growth of consumption in general: the electronics segment reported sales of 6.4 million TVs between January and June 2010, 75% more than the same period in 2009; Brazilians will purchase about14 million PCs in 2010, an all all-time record, in 2011 making Brazil the third largest computer market in the world, behind only the United States and China; smartphone sales grew 70% in the second quarter of the year; year-end holiday consumer goods sales are expected to report end turnover of about R$ 98 billion in 2010.

Fesa
The consumer goods sector, more particularly the Food & Beverages subsectors, representing respectively 42.47% and 14.6% of revenues of the total, grew by 79% in revenue compared to the first half of 2009.

Point of View
The so-called middle class in Brazil represents more than half of the population called ranking the country among the top 10 markets in the world for most of the segments. Irrespective of supplying lower income or luxury brands, global companies must have a foot in Brazil either through acquisitions (much still to be consolidated in the sector) or start start-ups.
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Source: CFA Magazine, Associao Brasileira das Indstrias da Alimentao (ABIA), Fundao Getlio Vargas (FGV), Isto

Denys Monteiro Managing Partner denys@fesa.com.br

BRAZIL OVERVIEW
Sectors: Main Sectors: ENERGY

Overview
After years of difficulties in planning and organizing the energy sector, Brazil moving towards a position where it is able to anticipate demand and create a more reliable and predictable system both for generation and distribution in Brazil. In the words of the chairman of the Energy Research Company (EPE), "Brazil is already an energy superpower, not only as a result of the pre-salt hydrocarbon reserves, but also the production of ethanol salt and the immense reserves of hydropower and other renewable energy sources. The EPE chairman adds that Brazil has two advantages giving it prominence in the world energy scene: the "renewability" of the energy matrix and the production of ethanol. Currently 47% of Brazils energy matrix is made up of renewable sources, thus ranking it well above world average of 14%. Data published by EPE indicates consumption in Brazil increasing at an annual rate of 7%. The Director DirectorGeneral of Itaipu Binacional says that this acceleration in consumption reflects the rise of the D and E classes which now have the disposable income to purchase home appliances, previously the privilege of A and B classes only. In the context of the energy sector, the oil and gas sub sub-sector is certainly the more prominent. According to an ONIP study on the development of the productive chain, in a worst case scenario the subsector is expected to generate approximately 400 thousand jobs over the next ten years. The EPE estimates that the Brazilian energy sector will receive investments of R$ 951 billion between 2010 and 2019 if it is to meet expected annual demand 5.4% in consumption. Of the total, R $ 214 billion will be invested in electricity supply infrastructure, of which R $ 175 billion in generation and $ 39 billion in transmission. The oil and natural gas will get another R $ 672 billion, the bulk of which, R $ 506 billion, going to exploration and production. A further R $ 151 billion will go to the oil products and others another $ 15 billion. Biofuels will receive $ 66 billion in investments between 2010 and 2019 and the Ethanol segment accounts for an estimated R$ 58 billion. Investments in pipeline infrastructure will absorb a further $ 7 billion and biodiesel, R$ 500 million.

Fesa
Energy sector sales, which include the Oil and Gas subsector, grew by 101% in revenue compared to the first half of 2009.

Point of View
The energy business has grown significantly mainly due to the pre The pre-salt discoveries and the development potential along the sectors entire value chain. Great optimism currently pervades the energy sector and prospects look very favorable.
Fernando Lohmann Managing Partner fal@fesa.com.br

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Source: Empresa de Pesquisa Energtica (EPE), Exame, Valor

BRAZIL OVERVIEW
Sectors: Main Sectors: FINANCIAL

Overview
The Brazilian financial system has been an example to the world in maintaining its robustness avoiding the need for government bail-outs, contrary to US and Europe where vast sums in public funds were outs, used to save their financial institutions. A study by a specialized consultancy shows that the banking sector was the most profitable in the second quarter among all sectors of the Brazilian economy. The 25 banks assessed grossed R$ 10.1 billion, equivalent to 22.6% of the total profits recorded in the market. The figure corresponds to an expansion of 18.4% over the second quarter of 2009. The data also shows that the net profit of the three major groups of the country - Banco do Brasil, Ita Unibanco and Bradesco, which together now account for a market share of almost 80% - jumped nearly , 420% in 15 years. Since 2003 the first year of the Lula administration - these institutions recorded aggregate profits of R$ 167.471 billion against R$ 32.262 billion during the previous Cardoso administration*. The Survey of Banking Employment conducted by CONTRAF CONTRAF-CUT and Dieese indicates that the Brazilian banking sector generated 9,048 jobs in the first half compared with the same period in 2009 when there was an absolute decline of 2,224 jobs (formal jobs). The significant growth occurred both because of the depreciated basis of comparison - in the first six months of last year, the country was still experiencing the impacts of the international financial crisis and also the high labor turnover promoted by the banking institutions. On the other hand, in spite of the increased labor turnover, the salaries of new hires was 38.04% lower than those whose contracts were terminated in the same period. The Southeast region reported the best performance in job creation with 6,713 new posts. Although the industry opened up new vacancies in the period, these represented just 0.61% of the total of 1.47 million of new employment positions created in the Brazilian economy as a whole.

Fesa
The financial sector is still recovering and in spite of posting the smallest growth rate in the company, showed an increase in sales of 28% compared to the same period last year.

Point of View
The unique moment experienced by the Brazilian economy is attracting the attention of the entire FS community which is investing locally regardless of its current situation overseas.
Renata Fabrini Managing Partner renata@fesa.com.br *values corrected by IPCA.

15 Source: Contraf-CUT (Confederao Nacional dos Trabalhadores do Ramo Financeiro da Central nica dos Trabalhadores), Dieese (Departamento Intersindical de Estatstica e Estudos Socioeconmicos), Consultoria Economtica; Veculos: AE Agncia Estado, O Globo, Dirio do Grande ABC

BRAZIL OVERVIEW
Sectors: Main Sectors: LIFE SCIENCE

Cosmetics
Currently, Brazil is the third largest market in the world for cosmetics and perfumery surpassed only by the US and Japan and ahead of European countries such as France, Germany and the UK. According to ABIHPEC (Brazilian Toiletry, Perfumery and Cosmetic Association),the sector is responsible for generating 3.6 million jobs in Brazil and generating sales revenues of R$ 24.97 billion in 2009 alone - a record growth of 14.7%. For the first six months of 2010, the sector reported new product launches equivalent to those for the whole of 2009. Unlike Brazil, which was unaffected by the crisis, the worldwide sector reported lackluster results. Ignoring economic difficulties elsewhere, the domestic industry is expected to report a growth of more than 30% in 2010. This reflects improved incomes and the consumption of new products by the C and D social groupings. The Brazilian cosmetics industry will also receive a boost with the arrival of strong new players to the market.

Pharmaceuticals
Sales revenue from the pharmaceutical sector in Brazil should grow 9.19% this year to R$36.74 billion, driven by a 2.22% expansion in sales volume, according to a study by Lafis consultancy. The survey shows that sales volume of pharmaceuticals will reach 1.81 billion units in 2010. Stability in the Brazilian economy has expanded access to healthcare plans and the purchase of pharmaceutical drugs. Moreover, the Brazilian market has also been driven by the prospect of the breaking drug patents. About 30 drugs are forecast to lose their legal protection by 2010. The end of patents will encourage the production of generics and estimates point to an explosion in turnover by an additional R$ 900 billion between 2010 and 2012 as patents on branded drugs either expire or are broken. In 2009, generics contributed 15% to total laboratory sales in Brazil compared with less than 10% five years ago. With the prospect of strong business expansion in coming years, national and foreign groups are competing to secure a larger share of the Brazilian pharmaceutical drug market. Forecasts are that the industry will invest more than R$ 3 billion this year, half of which directed to acquisitions alone.

Fesa
The Life Science sector, which includes the subsectors Cosmetic and Pharma, registered improved sales of 57% compared to the period January to July 2009.

Point of View
Brazil is among the top three countries in the cosmetics segment due to a huge door to door operation in Brazil and strong, well-established multinational brands. Although a mature established market the segment is expected to grow at double double-digit rates over the next five years at least. It is a market where there are excellent professionals to be found and salaries are on the increase. Most companies in the pharmaceutical business have reached global status due to the size of their operations in Brazil. There is substantial scope for consolidation (there are approximately 170 pharma companies operating) and very strong domestically domestically-owned companies compete in the generics market. In the devices areas there is a large inflow of new investments (new plants, newcomers, etc), also boosting competition for good talents.

Denys Monteiro Managing Partner denys@fesa.com.br

Source: ABIHPEC (Associao Brasileira da Indstria de Higiene Pessoal, Perfumaria e Cosmticos, Sindicato da Indstria de Pr Produtos Farmacuticos de So Paulo (Sindusfarma), Consultoria Lafis

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BRAZIL OVERVIEW
Main Sectors: TELECOMMUNICATIONS

Overview
The post privatization period was characterized by increased access to telecommunications services, market concentration on certain economic groups and the ranking of Brazil according to different indicators of industry development when compared with the rest of the world. In the first quarter of this year, gross operating revenue increased 4.8% to R$ 45.6 billion from R$ 43.5 billion in the same period last year. In 2009, gross annual operating revenue was R $ 179.9 billion, equivalent to 5.7% of GDP. The number of professionals employed in the telecoms sector peaked at 400,900 in the first quarter of 2010, 2.5% higher than in the same period last year, when 390,900 people were employed. Increasing by an annual rate of 50%, the Brazilian broadband internet market is one of the fastest growing in the world. The telecoms regulator, Anatel is forecasting that by 2018 there will be about 160 Anatel, million internet accesses via cellular and fixed networks, and the number of cell phones will have reached 272 million - currently estimated at 160 million.

Investments
IPEA (Applied Economic Research Institute) forecasts investments in telecommunications in Brazil to reach R$ 67 billion between 2010-2013, most of it to be invested in cellular network expansion and 3G 2013, broadband. This forecast is for the private sector only and excludes approximately R$ 13 billion to be invested up to 2014 by the federal government in implementing the National Broadband Plan. Investments by telecoms services sector from January to March this year in expansion, modernization and improvement in service quality totaled R$ 2.4 billion. From 1998 to 2009, total investments in the sector were R$ 177 billion.

Fesa
Ranked second among the sectors covered by the company reporting the fastest growth in the first half of the year, revenues from high tech business increased by about 481% over the same period in 2009.

Point of View
Telecoms companies are facing a challenging moment not only in the light of Telecoms Brazils current economic situation but also due to the continuous market s consolidation and aggressive competitiveness. This has forced them to take preventive measures to preserve market share by investing in infrastructure and reinforcing their teams in order to provide superior quality services.
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Source: IPEA Instituto de Pesquisa Econmica Aplicada; ANATEL Agncia Nacional de Telecomunicaes; SINTETEL SP Sindicato dos Trabalhadores em Telecomunicaes no Estado de So Paulo; Anurio Exame, O Desempenho do Setor de Telecomunicaes no Brasil - Sries Temporais - Associao Brasileira de Telecomunicaes (Telebrasil) in partnership with the consultancy, Teleco. )

Ana Luiza Segall Acting Partner Director analuiza.segall@fesa.com.br

BRAZIL OVERVIEW
Human Resources

Employment
Employment in Brazil was not affected by the financial crisis to the extent that it has been in the US where the 500 largest corporations destroyed 821 thousand jobs in 2009 alone, a record. By the end of 2009, sales in Brazil had started to pick up again and it at this point that it dawned on companies that they would have to do more with less. During 2009, nothing haunted Brazils economy more than the dire specter of unemployment. There were layoffs, but they were concentrated in certain sectors such as agribusiness which depends directly on the overseas market . The overall balance for employment in Brazil however, was positive. CAGED statistics show the creation of nearly one million formal jobs in 2009. Throughout the first half of the 2010, the Brazilian labor market continued to report good results, so contributing to economic performance. Some 1,473,320 jobs were created in the first six months according to the Ministry of Labor and Employment (MTE) and thus an increase of 4.5% over the same period of 2009. Over the past 12 months, the increase in jobs with a formal work contract has been 6.7%.

10.2% 5% 3.7%

construction: Infrastructure and civil construction: outstanding increase of 10.2% in new job creation due to the expansion in new housing and the Accelerated Growth Plan (PAC). industry: Manufacturing industry: good performance with a growth rate above 5%, reflecting the good performance of the footwear (11.7%) and metallurgy (7.3%) segments. sector: Service sector: growth rate of 3.7%, remains the largest segment in terms of job creation in absolute terms (490,000 new jobs in 2010), which means that out of every three new jobs in the economy, one was in the service sector

The expectation is for the trend in the labor market to stabilize in the second half of the year. While some slowdown in economic activity is expected in Brazil this should not be sufficient to detract from the current strong performance in job creation. By late 2010, Brazil will be close to achieving the landmark figure of 34 million formally registered workers. Ten years ago, this was little more than 20 million.

Salary

8.3% 2.6%

In the private sector wages increased by approximately 8,3%

There was a decreased in the Public sector, about 2,6%

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Source: Alfredo Assuno: The Brazilian economy , the blackout of talent and strategic hiring; Exame Special Issue -Melhores & Maiores | IPEA Instituto de Pesquisa Econmica Aplicada

BRAZIL OVERVIEW
Human Resources
Qualification and the Talent Blackout
By the second half of 2009 we were already able seeing that the crisis had left Brazil relatively unscathed. And the period when we felt some degree of impact gave us breathing space to prepare ourselves for 2010. Everybody believes in Brazil and wishes us well. At the end of this decade the economic matter of the moment investments in Brazil will continue into the next and there is no way in which it could be any investments different. Clearly, there is a lack of human infrastructure to support all these investments. No country can grow without adequate educational standards and Brazil has limits its sustainable growth rates. We lack leaders and human capital in the form of technical managers who will respond in the short and medium term to the demand that we have for products and services. We need to start investing in education now. With the creation of 2 to 2.5 million formal jobs in 2010, one question becomes increasingly critical to business: finding qualified people - or at least those with a basic education allowing them to learn what is needed in the workplace. According to the vice president of the So Paulo Industries Federation ( (Fiesp), "Brazil needs to do the same as South Korea did in the sixties: to accelerate technical training. To the next president will fall the responsibility of taking action to raise the level of education and expand the training of technicians, engineers and other skilled professionals to meet the increasing demand from Brazilian companies. Its time to invest heavily in education at all levels, from primary to higher education. In addition to existing ones, this includes the establishment of other top business schools for MBAs if we are to fully justify the further investments that will naturally arrive. Thus, the successful companies will be those able to retain, develop and motivate their existing talent and at the same time attract new talent in other local and international markets. Brazil has to fulfill its social role. There is no other way. Educate to survive. We are all dependent on the talent or skilled professional to solve other blackouts. To survive these modern times every company in Brazil will need to have an excellent team of people with a human capital plan that permits the replacement of any key player from its human resources. The command of the business world belongs to those who have the greatest competence in managing human capital. The best human capital will not be found in the databases of candidate compounds left over from previous selection processes or from spontaneously received rsums submitted to the company in search of employment. Nor are they found through placing ads in print or online. A good professional does not offer him/herself or answer ads. We need to know how to find him/her. Strategic partnerships with external consultants in executive search will be necessary if the company is to acquire in due time, the human capital to maintain or increase its profitability. If it does not take this route the likely result is losses, the company falling an easy prey to the mergers and acquisitions game as either the acquired or merged party. Along with many other bottlenecks, lack of skilled labor can quickly place a severe limit to the speed of growth in a country continuing to live the employment paradox: on the one hand, millions of job openings and on the other, workers seeking work but unsuited to take up the employment vacancies available. 19
Source: Alfredo Assuno: The Brazilian economy , the blackout of talent and strategic hiring | Exame Special Issue Melhores & Maiores | IPEA Instituto de Pesquisa Econmica Aplicada

BRAZIL OVERVIEW
About Us

Who We Are
Fesa was founded in 1995 as the first Brazilian executive search firm providing services exclusively for the financial sector. After a few years, its competitive advantages saw the company attain a leading position in the industry. Today Fesa provides services to all sectors of the economy through exclusive boutiques. This organization brings in-depth knowledge of clients and all their issues and concerns. depth Nowadays, Fesa is the largest Brazilian company in the industry and currently the leading executive search firm in the Brazilian market. In Brazil, Fesa's Head Office is in So Paulo with regional offices in Rio de Janeiro and Curitiba. Globally we operate through a partnership with IIC Partners, the eighth largest global search organization, with 61 offices in 41 countries.

The Group
The group owns three companies which operate in the executive search market.

Fesa is specialized in Executive Search for C Level positions;

Asap, created in 2009, operates in the market for Executive Recruitment , focused on middle management;

Doers consultancy, recently launched, offering services such as Market Evaluation, Executive Integration, Management Model, Conscious Leadership Development, Strategic Corporate Governance and Compensation

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BRAZIL OVERVIEW
About Us

Our Numbers
Increase of 1,500% in revenue in US$ , over 7 years thanks to the quality of our processes Around 85 executives placed in 22 countries; 800 senior management executives and more than 1700 middle management in Brazil. .

Fesa

Asap

CLevel

Projects by sector
2009 - 2010 (Jan - Aug)
7% 7% 18%

Job position
2009 - 2010 (Jan-Aug)
10%

3% 10%

12% 9% 2% 8% 24%

Life Sciences Consumer & Retail Professional Services 4% High-tech 2% Financial Services 7% Automotive Civil Construction / Engineering Energy Mining Other Industries

17%

36%

16% 6% 2%

Engineering Finance Legal Marketing Others Human Resources Supply Chain High-tech Sales

Senior Middle Management

Projects by sector
2009 - 2010 (Jan - Aug)
2% 5% 8% 7% 3% 26% 16% 13% 5% 15%

Job Position
2009 - 2010 (Jan-Aug) 9%

Life Sciences Consumer & Retail 17% Professional Services High-tech 7% Financial Services Automotive 8% Civil Construction / Engineering Energy 10% Mining 5% Other Industries

29%

3% 12%

Engineering Finance Legal Marketing Others Human Resources Supply Chain High-tech Sales

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