Brazilian Economy Outlook

th
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
91
March 2010
110
Economic Activity
Ministry of Finance
Economic Activity
A new economic and social policy

Brazilian economy recorded -0.2% of GDP growth in 2009. However, policy measures undertaken to cope with the international financial crisis restrained the economy to face a 2.0% to 3.0% drop last year. In the coming years, it is expected that the Brazilian economy will get back to a new development cycle under an average growth rate estimated at 5.5% per annum.
GDP Growth in the Mid-Term (% yoy)
Ministry of Finance
PAC 1
PAC 2
5.7 4.3 2.7 1.3 Average 1.7% 0.0 0.3 4.0 3.2
6.1 5.2 5.1 Average 4.2% Average 5.5%

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
Economic Activity
Investments drive growth in the 4th quarter of 2009

Compared to the previous quarter, the annualized 8.4% growth rate in the last quarter of 2009 was intensified by a 6.6% investment growth rate. For the second quarter consecutively, investments have led GDP growth (6.5% in the third quarter against the second one in 2009). 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)
2.0 GDP
6.6
1.9
0.6 Government Spending
3.6 Exports
11.4 Imports
Data: % change from preceding quarter, seasonally adjusted figures

7
March 2010
Gross Fixed Household Capital Formation Consumption
Economic Activity
Investments are about to increase threefold to GDP

Manufacturing industry and investments, which caused the Brazilian GDP drop in 2009, are also the segments which have led economic recovery from the fourth quarter of 2009 on. 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, it is expected a 18% investment rise for 2010.
Ministry of Finance
Investment and GDP Growth (% yoy)
2.7
-5.2 -4.6
1.1
9.1 5.7
3.6 3.2
9.8 4.0
13.9 6.1
13.4 5.1 -9.9 -0.2
17.4 5.2
Investiment GDP Data: % change from preceding year * Ministry of Finance Forecasts
March 2010
2002
2003
2004
2005
2006
2007
2008
2009
2010*
Economic Activity
Solid domestic demand growth in Brazil helps Latin American economy, according to IMF
According to Jrg Decressin, Assistant Director of the IMF Research Department (World Economic Outlook), growth in Latin America is about to be consolidated because domestic demand is fairly vigorous. The IMF estimates that the world economic recovery will happen in two different paces, once the recovery in the developed countries is not as fast as during previous recession periods, while in many emerging economies were seeing a more vigorous recovery, mainly due to the dynamics of domestic demand.
Composition of Mass Market (% yoy)
Ministry of Finance
5.0 5.7 0.2 2.7 2.5 1.1 1.7 -0.5

2002 2003 2004
7.5 5.3 2.7 3.2 4.0 6.1
7.4 5.1
7.3 5.2 Domestic Demand Net External Demand GDP Data: % change from preceding year * Government Forecasts
Source: Brazilian Central Bank Produced by: Ministry of Finance
March 2010
0.7
0.1 0.5 -1.4

2005 2006
-1.4
2007
-0.2 -0.3
2008
-2.2
2009
2010*
9
-2.1
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. One of the main results achieved was increasing investment rate from 16.4% to 18.7% of GDP from 2006 to 2008. Government investments from Federal budget and State-owned companies also raised its GDP share: from 1.6% to 2.9% in the same period.
Ministry of Finance
Investiment Rate (% yoy)
PAC 1
PAC 2
Average = 20.4
Average = 17.5
Average= 15.9
16.4 15.3 16.1 15.9 16.4 17.4 18.7 16.7 18.5 19.3 20.0 20.9 21.5
2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011* 2012* 2013* 2014*
Current figures Forecasts - Ministry of Finance Data: % change from preceding year * Ministry of Finance Forecasts
10
March 2010 10
Economic Activity
Industry confidence in March is the second highest since 1995

The ICI - Industry Confidence Index - recorded a rise in March reaching 116.5 points. After a fourteenth consecutive rise, industry confidence index has reached the second highest level of the time series, initiated in April, 1995, standing after only the November 2007 rate (116.9 points).
Ministry of Finance
Industry Confidence Index (points)
Optimistic view Pessimistic view
March 2010
75.7
75.1
76.2
78.0
82.6
87.0
90.6
95.7
100.2 103.6 107.0 109.6 113.4 113.6 115.8 116.5
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
Economic Activity
Industry can grow 8% this year without pressuring installed capacity

In 2009, transformation industry shrank 7% and the main decline happened in areas related to investment, like machines and equipments, metallurgy, iron metallurgy, electric materials, communication equipments and trucks. With strong investment resumption from the third quarter of 2009 on, sustained growth for industry is expected in 2010.
Industrial Output (% yoy)
Ministry of Finance
8.3 6.6 4.2 2.7 1.6 0.1 3.1 2.8 3.1
8.0
Data: % change from preceding year

-7.6
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
Economic Activity
Industrial output grew 18.4% in February on a yearly basis

Non-seasonally adjusted industrial output increased 1.5% from January to February 2010. Compared to January, production of capital goods increased 1.7% and production of durable goods raised 0.7%. Also, the latter rose 26.2%, as opposed to last year February, while the former, 25.2%.
Industrial Output Index (Jan07 = 100)
Ministry of Finance
115 110 105 100 95 90 85 80
111.8 108.2
88.8
March 2010
Data: index-number, 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
l0
l0
Ju l
09
13
13
Ju
Ju
Economic Activity
Industry expects a record expansion in installed capacity this year

According to Getulio Vargas Foundation, Brazilian industry investment plans, 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.
Ministry of Finance
Annual Forecast for Industry Installed Capacity Expansion (% yoy)
March 2010
8.4
2002
9.6
2003
10.2
2004
10.6
2005
12.2
2006
12.0
2007
13.6
2008
11.4
2009
14.6
2010

14
14
Economic Activity
Consumption goods: expansion of installed capacity at 27.1% for 2010-2012

The main category to put pressure on prices - consumption goods - increased in its supply capacity. From 2010 to 2012, the forecast is a 27.1% growth, that is, an average of 7.2% per year.
Ministry of Finance
Expansion of Installed Capacity (% per three-year period)
Consumption Goods Capital Goods Intermediary Goods

March 2010
22.9 21.6 19.8 26.0 26.0 19.0 26.5 27.8 23.0 23.1 17.1 19.9 27.1 25.9 21.7
Data: % change from preceding three-year period

15
2006/2008
2007/2009
2008/2010
2009/2011
2010/2012
15
Economic Activity
Domestic demand and profit expectations raise corporate investment levels

In 2010, investments are mainly driven by domestic demand. Concerning the 2009 results, 64% of the companies considered domestic demand was a positive influence for investments. In the current year, the number of companies that expect domestic demand to be a positive drive to capacity expansion increased to 80%.
Ministry of Finance
Survey on Influential Elements for Investments (% of companies surveyed)
81.0
80.0
40.0
32.0
31.0 Data: % of companies surveyed
March 2010
Pro t Expectations Domestic Demand
External Demand
Finance Conditions
Interest Rates
16
16
Economic Activity
Car sales increased 60% in March and surpassed previous record

Brazilian market auto output surpassed its own record level reaching 353.7 thousand units. In the first three months of 2010, accumulated sales totaled 788 thousand units and the production, 826.7 thousand. Cars and light commercial dual fuel vehicles (flex) sales amounted to 296.4 thousand units in March, 87.9% of total sales.
Total Automobile Licences (thousand of units)
Ministry of Finance
353.7 308.7 285.4
300.2 271.4 247.0
294.5
293.0
258.1
251.7 213.3 221.0

March 2010
234.4 199.4
Data: thousand of units

Ap r0 ay 0 No v0
Source: Anfavea Produced by: Ministry of Finance
09
10
09
10 Fe b
09
09
g0
Fe b
c0
t0
l0
ar
Ju n
ar
10
Au
17
17
Ju
Oc
De
Se
Ja
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. According to the study, investments in the sectors related to domestic demand will increase at an annual rate of 9.4% up to 2013. Good perspectives for electro-electronics, another segment related to domestic demand. The sector shall explore new technologies for the great public by investing R$ 21 billion up to 2013.
Industry Resource Distribution (R$ billions and % share)
Ministry of Finance
Vehicle 6% Petro Chemicals 7% Iron Metallurgy 9% Minerals 10%

311 499 60.5%
du s To try ta l
Cellulos 4%
Ele 4%
156 295 89.1%

el a Ga nd s Fu
53 52 -1.9%
et al Iro lu n rg y
28
44
19 36 89.5%
em Pet ica ro ls
23 32 39.1%
icl e Ve h
15 21 40.0%
ics tr on
17 19 11.8%
2005 - 2008 2010 - 2013 Change between periods above Data: R$ billions and % share
Source: BNDES Produced by: Ministry of Finance
18
March 2010
57.1%
s in er al
C an ell d ulo Pa se pe r
ec
In
18
Ch
El
Economic Activity
Consumer confidence rises in March

After a period of purchase anticipations, lower income households drove consumer confidence index up in March. According to FGV, moderate optimism is the consumers evaluation over their own economic situation as well as the whole economy. Among lower income households (up to R$ 2,100 per month), confidence index raised 1.5%, while among upper income classes (above R$ 9,600 per month), there was a slight decrease of 0.5%.
Consumer Confidence Index (points)
Ministry of Finance
96.6
97.9
100.4
103.3
108.5
111.5
111.1
111.0
113.3
114.9
113.1
112.7
110.2
110.9
March 2010
96.5
95.6
95.5
Data: points
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
10
19
Economic Activity
Retail sales grew 1.6% in February 2010 compared to January 2010

The main contribution came from the Furniture and Household Devices, with a 22.2% increase compared to February 2009. Retail trade, which includes other segments like Vehicles, Motocycles, Parts and Pieces, and Construction Material, grew 11.9% in volume of sales since January, 2010.
Ministry of Finance
Sales Volume in Retail Trade (% yoy)

15
10
8.3
PMC (Monthly Survey of Trade) Broad PMC * Data: % change from each 12-month period * Including automobiles, motorcycles, parts and pieces, and construction materials
March 2010
6.9
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
ar
08
20
20
Economic Activity
Retail Sales: positive results in the economic activities

Its worth mentioning the increase in the Automobiles, Motorcycles, Parts and Pieces, and Construction Material segments has been induced by federal discretionary fiscal measures in order to face the crisis. Nominal revenue for trade sales had a 2.2% expansion in February, as compared to the prior month. On the same nominal basis, trade revenue was up 15.3% compared to February 2009.
Real Retail Sales (% mom)
Weight
100 56.3 4.2 3.2 26.9 5.5 38.2 2.0 15.5 2.3 1.6 0.6
Ministry of Finance
Activity
Broad Retail Trade Retail Trade
Pharmaceutical, medical, orthopedic and perfumery articles
Feb 10 / Jan 10
2.1 1.6 3.9 3.4 3.0 2.8 2.5 1.6 1.2 1.0 -0.8 -2.2
Textile, clothing and footwear Hyper/Supermarkets, food, beverages and tobacco Construction material Automobiles, motorcycles, parts and pieces Other articles of personal and domestic use Furniture and household devices Fuels and lubricants Oce, computer and communication supplies Books, newspapers, magazines and stationery articles
Data: % change from preceding month

21
March 2010 21
Economic Activity
Monthly Survey of Trade IBGE
Ministry of Finance
Monthly Survey of Trade

Basis: February, 2010 Retail Trade Fuels and lubricants Hipermarkets, supermarkets, food, beverages and tobacco Textiles, clothing and footwear Furniture and household devices Broad Retail Trade Automobiles, motorcycles, parts and pieces Construction materials
Seasonally adjusted (%)

Preceding month: January, 2010 1.6 1.0 3.0 3.4 1.2 2.1 2.5 2.8
Before seasonal adjustment Preceding period of the previous year (%)

February Yearly 12-month 2009 accumulated period 12.3 4.8 11.2 11.8 22.2 13.6 16.0 15.1 11.3 4.8 10.8 6.6 19.7 11.9 13.1 12.2 6.9 1.2 9.1 -1.2 4.8 8.3 13.1 -3.2
March 2010
Data: % change
22
22
Economic Activity
Composition of Gross Domestic Product
Ministry of Finance
Gross Domestic Product
Seasonally adjusted change in the preceding quarter (%) 4 Q 2009 0.0 4.0 0.6 2.0 1.9 0.6 6.6 3.6 11.4
Preceding period of the previous year (%)

4 Q 2008 -4.6 4.0 5.6 4.7 2.5 4.6 8.1 5.4 2.1 4.3 7.7 4.9 3.6 -4.5 2.5 4-Quarter Accumulated -5.2 -5.5 -0.2 -7.0 -6.3 2.6 -1.2 -2.3 4.9 -0.2 4.1 3.7 -9.9 -10.3 -11.4 Yearly Accum. -5.2 -5.5 -0.2 -7.0 -6.3 2.6 -1.2 -2.3 4.9 -0.2 4.1 3.7 -9.9 -10.3 -11.4 2009/ 2008 5.7 4.4 4.9 3.2 8.2 4.8 6.1 3.4 8.9 5.1 7.0 1.6 13.4 -0.6 18.0
March 2010
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Farming Industry Mining Manufacturing Construction Services Trade Transportation, 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
23
23
Economic Activity
Industrial Production
Ministry of Finance
Industrial Production Basis: February, 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, 2010 1.5 0.6 1.4 1.6 -0.4 0.7 2.4
Before seasonal adjustment Preceding period of the previous year (%)

Quarterly Average 1.7 3.1 3.0 6.4 Yearly February Accumulated 18.4 17.2 20.3 20.6 18.3 17.0 26.2 19.1 25.3 23.9 32.5 31.8 -3.1 -6.4 51.7 39.3 76.3 41.0 196.9 199.4 -10.1 -16.4 17.2 11.8 32.4 25.4 19.4 20.0 25.2 30.2 10.5 8.0 12-month -2.6 -3.2 -2.6 -12.7 -22.1 -24.6 -7.7 -20.2 -33.4 -32.6 -32.3 -7.6 -7.8 -3.1 1.5 0.5
4.0 -1.0 3.0
March 2010
Data: % change
24
24
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 16.1 12.6 52.0 5.0 Feb 10 15.3 8.8 54.0 7.1 Mar 10 13.2 13.2 53.9 3.6 Yearly Accum. 14.8 11.6 53.3 5.2 12-month period 5.8 1.8 17.2 0.3
Coincident Indicators of Industrial Output Seasonally adjusted Before seasonal adjustment Preceding month Preceding year (%)
Anfavea - Total Vehicle Production ABCR - Heavy Vehicles Flow on the Highways ABPO - Shipping Paper Imports - intermediate goods (quantum) Exports - intermediate goods (quantum) Energy Consumption (GWh) Jan 10 -6.8 Dec 09 1.1 4.4 10.5 7.7 -0.8 Feb 10 -0.5 Jan 10 -0.3 -3.7 -3.2 -10.9 1.9 Mar 10 6.6 Feb 10 2.6 1.7 8.0 13.6 1.2 Dec 09 160.4 Dec 09 8.0 25.1 12.3 12.0 10.3 Jan 10 33.0 Jan 10 7.9 18.2 19.0 1.0 11.0 Feb 10 22.2 Feb 10 11.9 19.9 53.6 16.3 11.6
March 2010
Data: % change
Source: FGV, Anfavea, ABPO and ABCR Produced by: Ministry of Finance
25
25
Economic Activity
Industry Sales
Industrial Sales (CNI) February. 2010
Real revenues Hours worked in production Packages (ABPO) Feb 10 Wavy paper Dispatch Preceding month 3.3 1.0 Preceding month 1.7 Preceding month 6.6 24.1 -1.2 Quarterly Average 3.5 2.7 Quarterly Average 3.7 Quarterly Average -2.0 6.7 24.7 February 11.3 5.3 February 19.9 February 20.3 30.3 66.6 Yearly Accumulated 10.1 4.4 Yearly Accumulated 19.1 Yearly Accumulated 24.4 17.9 82.7 12-month -1.3 -5.8 12-month 4.3 12-month 8.3 14.8 -14.7
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 71.2 31.7 22.2 82.1
Preceding period of the previous year (%)

Feb 10 39.6 59.5 62.5 34.4 20.2 83.1 Mar 10 25.4 47.0 59.0 41.3 17.6 83.5 Yearly Accumulated 36.0 51.7 63.9 35.8 20.0 82.9 12-month 12.8 5.5 4.1 -8.2 4.0 81.7
March 2010
Data: % change
Source: CNI, ABPO, FGV and Anfavea Produced by: Ministry of Finance
26
26
Mass Consumer Market
Ministry of Finance
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. The poorest went on growing and class C share increased from 51.8% to 53.8% of the countrys population. According to the study, total household income considers the following wage ranges: class E (until R$ 804), class D (from R$ 804 to R$ 1,115), class C (from R$ 1,115 to R$ 4,807), class A/B (from R$ 4,807 on) (prices in December, 2008).
A New Class C (% of population)
Increase of 26%
Ministry of Finance
Class D/E (until R$ 1,115) Class C (from R$ 1,115 to R$ 4,807) Class A/B (from R$ 4,807) Data: % share of population * Prices in December, 2008
March 2010
47 42 11
44 44 12
42 46 12
38 48 13
36 3.1
50 14
32 52 15
2008
7.5
4.4
2003
2004
2005
2006
6.1
2007
32 53 15
2009
28
Net employment generation has best results in March since 1992

In March 2010 there was an expansion of 266.4 thousand formal jobs in Brazil. In the first quarter of 2010, net employment generation jobs has reached 657.7 thousand new jobs, surpassing best record from January to March, 2008 (554 thousand). By the end of 2010, Brazil will have returned to the level of generating more than 1.8 million new jobs.
Ministry of Finance
Net Job Generation (thousands of jobs)
10.5 million formal jobs

1,800
1,143
657 658 591 762 645

1,523 1,254 1,229 1,617 1,452
995
1600,0
Jan-Mar, 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
Net employment generation: civil servants and formal jobs

Considering civil servants and formally employed jobs, since 2003 there has been created 12.4 millions of new jobs. It's been estimated that almost 2 million jobs will be created in the category, resulting in a 13.8 million new job expansion from 2003 to 2010.
Ministry of Finance
Net Job Generation (thousands of jobs)

13.8 million jobs
2,000
1,343
1,235
1,494
1,863
1,831
1,917
2,452
502
961
861
1,834
274
387
995
657
88
75
Jan-Mar, 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
Despite the crisis, formal employment rises and informal employment drops
The rate of formalization, defined as the proportion of the population formally employed over occupied population, has had an annual growth of 0.4 p.p. reaching 50.7% in February, 2010.
Ministry of Finance
Rate of Formalization (% formally employed over the occupied people)

50.7 50,5 50,0 49,5 49,0 48,5 48,0 47,5 47,0 46,5 46,0 45,5 50.3
2008 2009 2010 Data: % formally employed over the occupied people
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
March 2010
31
Greater poverty reduction in the poorest regions

The increase in cash transfers in recent years, especially of minimum wage and Bolsa Famlia Program, has substantially and comprehensively reduced poverty levels in the country. In 2009, the year of the crisis, poverty continued its downward trend due to the already mentioned reasons and the little crisis impact on job market.
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
Social improvements and inflation control increase real income of lower classes
The stronger growth of the economy, coupled with cash transfer programs and inflation control, has ensured a significant income increase. Lower income encompasses the population below the average poverty line, which was 41.1% of the Northern population, 51.3% of the Northeastern, 17.6% of the Southeastern, 17.3 of the Southern, and 18.2 from the Mid-Western.
Real income per capita Growth (% 2008/2003 average)
Ministry of Finance
Lower income Others
8.3
5.6
9.2
6.2
9.1
4.0
8.4
4.5
10.1 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
Purchasing power is the largest in 14 years

The 9.5% 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, like food & beverages, and a reduction in the staple food basket cost. For example, one minimum wage used to buy only 1.38 staple food basket in June, 2008. From then on, minimum wage purchasing power has increased 29%.
Minimum Wage (number of staple food baskets)
2.0 1.8 1.6 1.4 1.2 1.0 0.8
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
1.78
1.80 1.78
1.38
Commodities price pressure erodes consumer purchasing power
Data: number of staple food basket Staple food baskets are consumer goods (such as bread, milk, paper, sugar) that are bought often and consumed routinely. Staples offer little differentiation and usually compete on the basis of price
Source: Dieese and LCA Consulting Produced by: Ministry of Finance
March 2010
0.95
34
Inflation
Ministry of Finance
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, public tariffs and in natura food. On the latter sector, the increase in the rainfall volume has damaged products like fruits and vegetables. Despite market expectations, we still tend to believe in an annual IPCA closer to 4.5% inflation target.
IPCA Inflation Index (% yoy)
Inflation target Lower and upper bounds IPCA inflation index Data: % change from preceding year
12.5
March 2010
* Market Expectations FOCUS Report from April 9th, 2010

Source: IBGE and Brazilian Central Bank Produced by: Ministry of Finance
8.9
6.0
7.7
9.3
7.6
5.7
3.1
4.5
5.9
4.3
5.3
4.8
4.5
4.5
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011* 2012* 2013* 2014*
4.5
36
Inflation
IPCA inflation index falls to 0.52 percent in March

Despite the delay to the end of rainfalls, IPCA index declined in March. The rise in prices as of March was in the food index (from 0.96 percent to 1.55 percent), representing 0.35 percentage points in the overall index. IPCA declined substantially. Market expectations express a 4.7% change in the next 12 months until April, 2011.
IPCA Inflation Index and its Expectations(% mom)
0,9 0,8 0,7 0.70 0,6 0,5 0,4 0,3 0,2 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
0.52 0.44 0.36 0.29 0.28 0.31 0.30 0.36 0.39 0.42 0.39 0.37 0.34 0.30 0.53 0.56 0.78
Ministry of Finance
Realized IPCA figures Monthly Average IPCA Data: % change from preceding month * Market Expectations FOCUS Report from April 9th, 2010
Source: IBGE and Brazilian Central Bank Produced by: Ministry of Finance
March 2010
0,0
Ja
37
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. The index for vegetables posted the largest increase in the food group, expanding 14.5 percent in April after increasing 12.7 percent in March. The tomato (42.7 percent) and sweet potato (12.7 percent) are the two items with the highest changes among all prices in the index composition. A substantial reduction in the overall index is expected as the rain diminishes in intensity.
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
14,5
3,1 1,0
Food General index Vegetables Data: % change from preceding month
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. The index number was close to the estimates in the market. Drop in the inflation was felt in transportation (especially alcohol and gas fuels), housing and education. The components still pressuring on prices are UHT milk and beans.
Ministry of Finance
IGP-M Inflation Index - (% mom)

1.5
1.0
0.5
0.27
0.0
-0.5
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
-1.0
Data: % change from preceding month

March 2010
1-
10
39
Inflation
2009/2010 grain crop beats historical records

According to IBGE, the 2009/2010 grain crop shall reach the historical record of 145.1 million of tons. The expected increase in the grain production is due to the recovery of productivity, mainly in the crops of corn and soy. The estimated crop shall occur in an area of 47.9 millions of hectares. South of Brazil will be responsible for 60.8 millions de tons.
Brazilian Grain Crop 2009/2010* (1990/1991 = 100)
Ministry of Finance
144.1
145.1
134.3 131.7 123.1 119.1 113.9 10.0

12.0 13.0 15.0
122.5
Pronaf Financing (R$ billions) Corporate Financing (R$ billions) Crop Quantum (millions of tons) Data: index-numbers (1990/91 = 100)
92.5
March 2010
9.0
58.0
21.7
27.1
39.4
44.3
50.0
65.0
7.0
* Seventh Survey April, 2010

Source: CONAB Produced by: Ministry of Finance
4.5
2002 / 2003 2003 / 2004 2004 / 2005 2005 / 2006 2006 / 2007 2007 / 2008 2008 / 2009 2009 / 2010*
5.4
40
Inflation
Inflation Index Table

Inflation Index xxxxxxxxxxxxxxxx
IPCA Food and Beverages Housing Home Supplies Clothing Transportation
Ministry of Finance
March/10
0.52 1.55 0.32 1.00 0.66 -0.54 0.77 0.54 0.08 0.71 March/10 0.34 March/10 0.94 March/10 0.63 1.38 2.33 -0.05 0.86 0.75 March/10 0.47
February/10
0.78 0.96 0.31 0.36 -0.52 0.79 0.23 0.40 4.53 0.03 0.70 February/09 0.74 February/09 1.18 February/09 1.09 0.96 1.46 1.35 0.68 0.36 February/09 0.59
March/09
0.20 0.30 0.25 0.48 0.70 -0.07 0.37 0.35 -0.37 0.05 0.20 March/09 0.40 March/09 -0.74 March/09 -0.84 -1.46 -2.37 -1.16 0.61 -0.25 March/09 0.40
Accum. 2007
4.46 10.77 1.76 -2.48 3.78 2.08 4.47 6.54 4.16 0.69 5.16 Accum. 2007 4.38 Accum. 2007 7.75 Accum. 2007 7.90 9.44 24.83 4.01 4.61 6.16 Accum. 2007 4.79
Accum. 2008
5.90 1.23 3.07 -2.71 5.07 3.02 6.01 7.26 6.24 -0.24 6.48 Accum. 2008 6.17 Accum. 2008 9.81 Accum. 2008 9.11 9.80 1.67 12.98 6.07 11.86 Accum. 2008 6.10
12-Month
5.17 5.57 5.62 3.63 6.05 3.57 4.83 8.72 6.75 0.93 5.30 12-Month 4.98 12-Month 2.48 12-Month 2.26 1.23 0.94 0.74 5.15 4.70 12-Month 5.78
Forecast 2010*
5.29 nd nd nd nd nd nd nd nd nd 5.31 Forecast 2010* 5.39 Forecast 2010* 7.69 Forecast 2010* 7.11 6.78 nd nd nd nd Forecast 2010* nd
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Health 0.27

Personal Expenses Education Communication INPC IPC - FIPE General Index IGP - M General Index IGP-DI General Index IPA IPA Agriculture IPA Industry IPC INCC ICV - DIEESE General Index
Data: % change na = not available * Market Expectations FOCUS Report from April 9th, 2010
Source: Ministry of Finance Produced by: Ministry of Finance
March 2010 41
Interest Rates and Credit

Ministry of Finance
Interest rates
Interes rates, both nominal and real, reached their lowest historical levels in 2009, signaling the compatibility between lower interest rates and inflation control in the Brazilian economy. However, real interest rate presents an upward trend.
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

8.75 5.83
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
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. As we can see, from September 2009 on, future expectations have increased the cost of rolling over public debt as they are embedded in the financial market curve.
Future Contracts of DI* (% yoy) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
13,0 13.0 12,5 12.5 12,0 12.0 11,5 11.5 11,0 11.0 10,5 10.5 10,0 10.0 9,5 9.5
10.34 12.01 11.66
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
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.
Financial system loans (% of GDP)
Ministry of Finance
Current Forecast
22.0 24.0 24.5 28.1 30.7 34.2 41.3 45.0 49.0
Data: % of GDP * Ministry of Finance Forecasts

March 2010
2002
2003
2004
2005
2006
2007
2008
2009
2010*
46
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

47
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
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
Post-crisis bank lending

Public banks played an important role to unlock bank lending during the critical period of the crisis. From September 2008 to February 2010, the amount disbursed by these institutions has grown 52%, well above 13.4% increase by private banks and the 3.7% by foreign banks operating in Brazil. Public banks market share has reached 41.7%, as opposed to 40.5% of the private domestic banks and 17.8% of the foreign ones.
Financial system credit transactions development, according to capital control - index-number (Sep 08 = 100)
160
Ministry of Finance
52.0%
145
130
115
13.4% 3.7%
Public Financial Institution Foreign Financial Insitution Domestic Private Financial Institution Data: index-number (Sep 08 = 100)
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
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% yoy in February, the second lowest level of the historical time series. However, for 2010, bank interest rates are expected to stop falling.
Banking spread for corporations (% yoy)
Ministry of Finance
35 30.9 25.9
SPREAD
28
21
Feb 09 19.0
Feb 10 16.9
14 11.9 7 9.0
Funding Rate Lending Rate Spread between funding and lending rates Data: % change from each 12-month period
March 2010
n 05 Ap r0 5 Au g0 5
r0 6
g0 7
c0 7
r0 8
c0 8
g0 9 Au
De
De
De
De
Au
Au
Au
De
c0 9 Fe b 10
c0
g0
g0
c0
Ap
r0
Ap
Ap
Ap
Ja
r0
51
Interest rate for individuals at the lowest level in 16 years

The banking average loan rate for individuals decreased to 41.9% yoy in February, the lowest level since the beginning of the historical time series. The decrease occurred in spite of the raise in the cost of funding.
Banking spread for individuals (%)
Ministry of Finance
70
56
52.6 41.9
42
SPREAD
Feb 09 41.4
28
Feb 10 30.8 11.1
14
11.2
Funding Rate Lending Rate Spread between funding and lending rates Data: % change from each 12-month period
March 2010
c0 Fe 9 b 10
Ap r0
Ap r0
Ap
Ap
De
De
De
De
De
Ap
Au
Au
Au
Au
Au
De
9 r0
c0
g0
c0
r0
g0
c0
c0
r0
g0
g0
c0
g0
52
Bank loan offerings shall be driven by earmarked resources

In the last 12 months up to February 2010, total disbursements from BNDES amounted to R$ 143.3 billions, a 53% increase compared to February 2009. Along with the expectations of continued economic recovery, its estimated that bank credit shall be driven by earmarked resources, which include loans from BNDES, for the rural sector and for housing programs. Such credit lines respond for one-third of total credit disbursed and are expected to increase 26% in 2010.
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, amount from each 12-month period

Source: BNDES Produced by: Ministry of Finance
53
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: 41.9% for individuals and 25.9% for corporations.
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% 42.7% 25.5% Dec 54.8% 25.4% 159.1% 44.4% Jan 35.1% 43.0% 26.5% Jan 51.7% 25.2% 161.1% 44.8% Feb 34.3% 41.9% 25.9% Feb 50.9% 24.1% 159.5% 43.8% Monthly Change -0.8 p.p. -1.1p.p. -1.1 p.p. Monthly Change -0.8 p.p.
Ministry of Finance
March 2010
-1.1 p.p. -1.6 p.p. -1.0 p.p.
Data: % yoy
54
Credit Market
Credit Market (% GDP) Feb 10 Share (%) Change (np) compared to
Dec 09 Total Credit Volume Earmarked Resources Non-earmarked Resources xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 44.9 14.8 30.2 100.0 32.9 67.1 -0.1 0.1 -0.2
Ministry of Finance
Change (np) compared to

Feb 09 4.2 2.8 1.4
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 1,435.2 60.8 1,374.4 306.6 96.8 114.0 137.3 470.1 249.7 100.0 4.2 95.8 21.4 6.7 7.9 9.6 32.8 17.4 1.48 3.04 1.41 0.59 5.32 1.54 0.73 1.66 0.82 16.77 118.35 14.41 2.59 46.44 7.13 15.56 17.78 17.77
March 2010
Data: % change
55
Credit Transactions - Earmarked Resources

Loan Operations Credit Market (US$ billion)
Total Credit Volume (balance at end of period) BNDES Rural (excluding leasing and financing, and direct transfers from BNDES) Housing (for individuals and housing cooperatives) Other (development banks and fomenting agencies) Loan Operations - Free Segment Total Credit Volume (balance at end of period) to Individuals the Corporations Domestic Resource External Resources Free Segment - 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
471.7 289.2 79.8 92.1 10.6 963.5 477.7 485.8 429.6 56.1 166.0 65.12 12.3 9.0 17.8 100.9 24.6 30.0 2.9 6.7 0.2
Share Change Change

Dec 09 32.9 20.2 5.6 6.4 0.7 67.1 33.3 33.8 29.9 3.9 100.0 39.2 7.4 5.4 10.7 60.8 14.8 18.1 1.8 4.0 0.1 2.58 2.19 1.35 5.38 -0.82 0.95 1.69 0.23 -0.03 2.25 10.92 15.33 -1.10 9.61 36.91 8.25 20.31 6.73 7.67 37.32 -76.32 Feb 09 30.19 36.03 2.14 47.09 18.04 11.16 18.31 4.92 14.44 -35.90 9.49 18.66 23.15 60.44 38.79 4.28 37.32 -2.91 10.82 -2.15 -64.07
March 2010
Data: % change
56
International Overview
Ministry of Finance
G-20 Economic growth 2009 and 2010

In general, emerging markets have been recovering well due to strong government intervention. Currently, they share 49% of world GDP. In 2010, emerging economies will take the world economic leadership position, on account of cyclical and corrective measures. Even though there was a decrease in the GDP, Brazilian economic performance in 2009 has turned better than advanced economies and other emerging economies like Russia, South Africa and Mexico.
Ministry of Finance
GDP growth (% yoy) *
6.0**
1.9
1.6
1.2
2009 2010 Data: % change from preceding year * The Economist Forecasts
March 2010
8.7
9.7
5.6
7.7
5.0
3.1
3.5
-7.9
-6.5
4.3 -4.0
-0.2
-5.0
-2.4
-5.0
China
India
Brazil
Japan
United States
** Government Forecasts
Germany Russia Mexico Euro Zone
Source: The Economist Produced by: Ministry of Finance
58 58
The Brazilian GDP is one of the best performances among G-20 countries in 2009
Brazilian economy recorded -0.2% of GDP growth in 2009. Brazilian GDP growth in the last quarter is close to China's and India's performances.
Ministry of Finance
GDP Evolution in the 4Q/2009 (% qoq, annualized)
0.0 -2.2 -2.0 -1.2
0.2
0.7
1.8
2.4
3.0
3.2
3.7
5.8
5.0
5.6
7.9
8.4
8.4
9.6
10.0 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
Sw ed
Ita l
Ge
Ch
59 59
Dinamycs of Brazilian domestic demand

Emerging-market economies performed surprisingly well on the upside, both while the global economy was going down, but also now that its coming up. Figures from retail sales in the world show Brazil has a solid domestic demand growth below China.
Ministry of Finance
Retail Sales in the World (% yoy) - 2009/2008
15.6
5.9
5.6
1.8
0.7 -0.8 -1.3 -1.5 -1.7 -2.3 -5.0 -5.6

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
il
ile
Au
Eu
U St nite at d es
Br az
in
st ra
Ch
Ita
Ja p
Ch
60 60
Brazil: 4th world market for automobiles

In the first quarter of 2010, Brazil has become the 4th largest world market for automobiles, right after China, US and Japan. In 2010, according to Roland Berger Consulting, a German firm, sales in the domestic market are estimated at 3.2 million automobiles and light commercial vehicles, and have a potential to reach near 6 million units by 2015.
Ministry of Finance
Automobile Market (thousands of units)
Automobile sales Automobile production Data: thousands of units

13.8 13.8 11.5 8.2 4.4 6.8 3.2 4.7 2.8 3.3 2.4 3.1 2.3 2.7
2.2 2.1 1.9 2.1 1.6 1.9
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
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, a trend that willcontinue in 2010. Increasing investments from Asia and Middle East will happen, despite the expected volatility throughout the industry.
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 -
10,540 8,397 7,022 6,134 6,008 4 2,474 4 2,414 4 2,347 4 2,268 3 1,970 3 1,856 2 1,400 1 900 1 853 1 514 1 496 Ernst & Young 470 Fonte: 1 1 400 1 386 1 339 4 3,847
18 14 12 10 10
4th 3rd 1st
5th
6th 21st 10th 2nd 36th 46th 7th 8th 51st 23rd 24th 12th 39th 31st 63rd -
15,531 17,821 30,653 13,278 6,147 489 1,672 20,696 85 25 4,814 1,881 12 355 299 1,000 54 213 3 0 11,856
12 14 24 10 5 0 1 16 0 0 4 1 0 0 0 1 0 0 0 0 9
5 7,5 27,5 22,5
7 9 35 27
8 5 40 20
March 2010
Data: US$ millions and % share

Source: Ernest & Young Produced by: Ministry of Finance
Total
60,035
126,884
60,035
62 62
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, India, Singapore, Argentina, China, Japan, Canada, US, South Africa, German, France, England, Spain and Italy). The survey interviewed 850 employers in Brazil.
Ministry of Finance
Expectations for Net Employment Generation (% qoq)
38
36
24
18
17
13
11
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
il
nd En g la
Br az
Ja pa
na d
in
ga p
Sin
Ca
Fr an
Ch
Sp ai
In
63 63
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, which, in turn, makes it possible an income increase and the insertion of even larger groups to the so called middle class. For 2010, its expected Brazil will have the 5th smallest unemployment rate among developed and emerging economies.
Unemployment rate Selected countries (% yoy)
Ministry of Finance
Unemployment rate 2009 Unemployment rate 2010

18.1 19.3 14.6 15.2 7.8 10.0 9.1 9.9 9.2 9.9 7.9 9.6 7.6 8.5 6.4 8.9 8.0 9.3 7.6 9.2 6,8 7.4 5.7 6.3 5.7 6.3 5.2 5.6 3.2 4.1

Source: Bloomberg, 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
st ra
Sp
64 64
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. For 2010, it is expected the fiscal result to decrease to around -1.5% of GDP well above the average achieved by G-20 economies.
Ministry of Finance
Fiscal Result (% of GDP) G-20 economies 2009
1.7 -1.5 -1.5 -1.6 -2.1 -3.1 -2.9 -3.7 -4.0 -4.1 -5.2 -5.6 -5.3
-6.4 -6.6 -7.2 -8.0 -8.6 -11.1 -13.5
-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
in
65 65
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 5.4% of GDP in 2009, allowing some fiscal space for the government to expand spending on public investment, social programs and spending priorities on education, health, public security, among others.
Evolution of interest Payments (% of GDP)
Decrease of 36.5%
Ministry of Finance
6.79
5.24
4.61
6.98
8.20
6.61
6.67
7.63
8.47
6.59
7.31
6.78
6.06
5.45
5.38
4.86
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
Interest rate burden in Brazil remains among the highest in the world
In recent years, Brazil has experienced macroeconomic conditions to join the group of countries with lower interest rates. The reduction of external vulnerability, combined with price stability and fiscal responsibility, will enable the country to keep a falling interest rate trend.
How much other countries spend in debt interests(% of GDP) 2009 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Ministry of Finance
Data: % of GDP
14,6 3,0 2,2 2,8 4,0 1,5 4,1 2,3 6,7 6,7 3,0 4,7 4,6 2,3 2,2 5,4 2,9 3,3 3,1 4,2 4,5 1,2 1,2
* EIU Forecasts
Source: Economist Intelligence Unit Produced by: Ministry of Finance
March 2010
em a Ar nha ge nti Au na st r li B a lgi Co ca l m b Es ia ta Un d id os o Fil s ip in a Fr s an Gr a c Hu ia ng ria n di a Isr ae l It lia Ja m ai c M a al s M ia x ico Br as il Pe P ru Re ortu in ga o Un l Re ido p Tc bli he ca ca Ta iw Tu an rq ui a
Al
67 67
Bank lending in Brazil still low when compared to other economies

In recent years, bank credit in Brazil has grown at rates exceeding 15% yoy, a rate compatible to its growth. Its expected that in 2010 it will continue to grow at a sustainable pace, reaching an estimated 49% per GDP ratio, which is similar to the financing levels of benchmarks in a large number of economies worldwide.
Credit (% of GDP) - Selected Countries - 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 . ) 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
Expansion in mortgages expected for 2010

Credit lending registered a 41.6% rise in the latest 12 months ended in February, 2010, a record. Nevertheless, the 3% mortgage/GDP ratio is among the lowest in the world. The housing deficit in the country, around 8 million units, enables a market expansion with larger availability of credit lines and access by all segments of society.
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, Brazilian Central Bank and World Bank Produced by: Ministry of Finance
69 69
March 2010
Reduction of External Vulnerability

Ministry of Finance
International liquidity - Central Bank reserves

The countrys international liquidity is mainly the result of consecutive trade surpluses and direct foreign investment, which enables the reduction of external vulnerability. Among the main benefits of reserves accumulation, we could mention avoiding sudden stops in the countrys current account.
Ministry of Finance
Brazilian international Reserves and IMF Loans (US$ billion Gross)

0.0 0.0 0.0
0.0
0.1
0.2
0.1
0.0
0.0
4.8
8.8
27.5
1.8
31.2
8.3
27.5
20.8
17.0
28.3 24.9
0.0
Net Reserves (IMF loans off) IMF loans Data: R$ billion * Forecast
March 2010
38.6
51.7
60.0
52.1
39.8
21.0
28.0
53.8
85.8
180.3
193.8
238.5
241.1
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*
72
Lower external vulnerability

Brazil has consistently reduced its external debt and enlarged its volume of international reserves in the latest years. The increase in international reserves and the reduction of debt has also enabled the country to overcome the worst crisis in years. Brazil is an international creditor with cash disbursements to the IMF nowadays.
International Reserves and Foreign Debt (% of GDP and index)
Ministry of Finance
Reserves /GDP Foreign Debt / GDP Foreign Debt / Reserves (index)

6.1 19.2 3.1 8.0 15.9 2.0 6.2 38.5 6.2 5.1 33.6 6.6 6.5 37.4 5.8 7.5 41.8 5.6 8.9 38.8 4.4 8.0 30.4 3.8 13.7 14.1 1.0 11.9 12.1 1.0 15.2 12.9 0.8
March 2010
Data: % of GDP
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
73
Hi gh lig ht
Current account deficit does not impact growth forecasts

Differently from the past, current account deficit will not jeopardize growth trend in the coming years. With the world economic recovery, 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.
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
-2,8 -3,5 -4,0 -4,2 -3,8 -4,2 -24 -30 -33 -25 -24 -23 -8 -1,5 4 0,8
1,8 12
1,6 14 1,2 14 2 0,1

-28 -24 -42 -50
-1,8
-1,5 -2,2 -2,5
US$ billion % of GDP

March 2010 74
Significant increases in exports are expected

Exports are usually affected by seasonal aspects in the beginning of the year. Then, current account is expected to improve its balance between March and November.
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
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
-10
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Mar 10
75
Commodities share in total export increases

From 2003 to 2008, despite the strong appreciation in real exchange rate, Brazilian total exports has shown a remarkable performance. It has jumped from US$ 72 billion in 2003 to US$ 197 billion in 2008. Basic products exports, benefited from the rise in commodity prices, have substantially increased their share in total exports, moving from nearly 52% in 2005 to 61% in February, 2010.
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: Crdit 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
China's share in Brazil exports increased

China became one of the main destinies for Brazilian export since 2009. Nearly 93% of the export to China is comprised of basic and semi manufactured products.
% Exports - Feb 10 accumulated 12 months
Ministry of Finance
2003 Feb 10
TOTAL Europe European Union sia (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 0.4 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, both expectations for 2nd quarter

Source: MDIC and Crdit Suisse Produced by: Ministry of Finance
77
Growth in emerging economies reduces export to developed countries

From 2008 on, 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.
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

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
Exchange rate path

Considering the exchange rate, Brazil has experienced considerable change in its export composition, from basic and agricultural products to manufactured ones. In general, as an economy develops, characterized with a growing service share in GDP and increasing domestic content of manufactured exports, exchange rate policies become increasingly intertwined with trade policies, with differential sectorial impacts on the domestic economy.
Real Effective Exchange Rate (deflated by IPCA)
200
Ministry of Finance
150
100 80.5
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

79
Hi gh tli gh t
Foreign investments and domestic capital markets support deficit

Differently from other countries, where the main source to finance their external liabilities is indebtedness, Brazil has its own external liabilities mainly comprised of stocks and direct investments. From 2001 to 2009, foreign direct investments (FDI) and stocks jumped from 43% to 72% share, while fixed income securities and loans have diminished from 55% to 27%.
Ministry of Finance
Funding Sources of the Current Account (% of GDP)

3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0
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
3.0
1.5
-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
Hi gh lig ht
Outlays of profits and dividends

In February 2010, net remittances of income abroad totaled US$1.8 billion in the month, up 2.5% in comparison to February 2009. Net outflows of income on direct investments totaled US$1.2 billion, compared to US$852 million in February 2009. In the current account balance, total net outlays of profits and dividends amounted to US$1.3 billion, for a 13.8% increase in the period, while interest outlays decreased 17.8%, to US$584 million.
Profits and Dividends (% of GDP)
Ministry of Finance
0.9 0.5
1.0
1.0 1.1 1.4 1.5 1.6 2.1 0.4

2008
1.6 0.6
2009
1.5 0.6
2010
Profits Dividends Data: % of GDP, February figures

March 2010
2.3
2000
2.7
2001
2.6
2002
2.4
2003
2.0
2004
1.5
2005
1.0
2006
0.5
2007
81
Hi gh lig ht
Foreign investment flow towards the domestic capital markets

Although 2010 has started with lower level than 2009, domestic capital market, through issuances of new IPOs, will increase the high quality finance sources to Brazils current account deficit. 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.
Ministry of Finance
Foreign investment
15,000 12,000 9,000 6,000 3,000 0 -3,000 -6,000 -9,000
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
2,854 8,222
Intercompany loan Direct Brazilian investment capital share Direct Brazilian investment
March 2010
Data: US$ billion

82
Hi gh lig ht
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. This investment attitude is due to high profitability levels of the Brazilian companies, 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.
Ministry of Finance
Brazilian Direct Investments

9.000 9,000 7.250 7,250 5.500 5,500 3.750 3,750 2.000 2,000 250 -1.500 -1,500 -3.250 -3,250 -5.000 -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 8,190
Intercompany loan Brazilian direct investment capital share Brazilian direct investment Data: US$ billion
March 2010 83
Hi gh lig ht
External Solvency: less risks to foreign financial flow reversals

With increase in international reserves and reduction of external debt, Brazil has consistently reduced the risks related to foreign financial flow reversals. According to market forecasts, the international solvency index is expected to reach 10.5 in 2010.
Ministry of Finance
External Solvency Index (% of Foreign Debt)
Short Term Total Data: % share of Foreign Debt

1.4 0.2 1.2 0.2 1.3 0.2 1.6 0.2 2.4 0.2 2.8 0.3 2.9 0.3 4.2 0.5 4.6 0.9 5.3 1.0 7.8 1.2 10.5 1.2
March 2010
* Forecast
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010*
84
Hi gh lig ht
Countries with higher external debt and lower international reserves are more vulnerable
According to Crdit Suisse, countries with elevated external debt and small amount of international reserves, together with a fixed exchange rate regime, are more subject to reversals in the economic growth rates in moments of current account balance reversals. Growing deficits in current account force the markets to exchange rate adjustments.
Ministry of Finance
International Reserves and External Debt (% of GDP)
156 12
72
14
62
36
60
50
48
20
54
82
12
15
External Debt (1st year of current account deficit reversal) International Reserves (before current account deficit reversal) Data: % of GDP * Government Forecasts
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
Hi gh lig ht
Brazil is more resilient to crises than in the past

When compared to the past, lower external indebtedness, reserve accumulation and flexible exchange rate present a very favorable situation. Events like the FIFA World Cup, Olympic Games, government programs like PAC, the discovery of oil, it all will help the country in the next years.
Ministry of Finance
International Reserves and Foreign Debt (% of GDP)
-2.2
-4.0
Foreign Debt International Reserves Current Account Data: % of GDP

18.1
31.5
1.5
42.9
2.6
26.5
12.0
-6.8
-6.0
-0.5
15.2
4.8
5.3
March 2010
1974
First Oil Shock Impact
1982
External Debt Crisis
1987
External Debt Default
1998
Before Currency Devaluation
2010*
Forecast
86
Hi gh lig ht
Current Account deficits do not necessarily mean growth reduction

The maintenance of elevated current account deficits does not mean instability, according to a research published by Crdit Suisse. Australia, for instance, has faced elevated deficits in recent past decades, mainly caused by remittance of dividends and profits to other countries. Like Brazil, 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
0.0
1997
0.3
1998
1999
2000
2001
0.4
2002
2003
2004
0.0
2005
0.0
2006
2007
2008 3T2009
0.2
-0.7 -0.2 -2.4
-2.3
-0.1 -2.3
-1.0 -0.3 -2.1
-1.7 -0.1 -2.1
-0.9 -0.2 -2.1
-0.1 -2.1
-0.9 -0.2 -2.1
-2.3 -0.2 -2.3
-2.8
-3.3
-1.2 -0.1 -3.7
-1.8 -0.1 -4.1
-0.3 -0.4 -3.8
-1.5 -2.3 -3.3 -2.0 -2.8 -3.3 -3.8 -4.3 -5.1 -5.0 -4.9 -5.9 -4.6 -2.9 -3.6
-0.2 -3.6
-2.3
-0.1
-1.7
Goods Services Interests Total Data: % of GDP

March 2010 87
Hi gh lig ht
Investments financed by foreign investment

Despite of having a low domestic saving rate to finance investments, Australia had excellent economic growth performances in recent years. Even being a great commodity exporter and presenting an elevated current account deficit, the country has received big investment flows in the last decade.
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
88
Price and Quantum Indexes - 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. Feb 10 / Jan 09 12 months 15.3 -10.9 21.0 -14.0 21.0 -17.4 7.2 -5.1 1.0 -11.1 -6.2 -8.6 58.4 -32.3 -3.5 -2.3 -9.0 -4.0 4.6 -1.1
QUANTUM (% change from preceding year) Accum. Feb 10 / Feb 09 12 months 10.6 -6.8 -2.8 2.8 9.0 -1.5 4.7 -17.4 49.3 -10.0 53.6 -15.0 53.0 -4.8 25.6 -9.3 110.2 12.5 22.6 4.3
March 2010
Data: % change
Source: FUNCEX Produced by: Ministry of Finance
89
International Reserves - 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 -36.6 1.5 40.0 160.6 -126.6 -42.5 -7.3 -22.4 -3.3 -9.5 4.0 38.2 -11.4 -26.8
2008 -50.6 -28.2 24.8 197.9 -173.1 -57-.3 -7.2 -33.9 -5.2 -11.0 4.2 -22.4 -4.2 -18.1
2009 -54.5 -24.3 25.4 153.0 -127.6 -52.9 -9.1 -25.2 -5.6 -13.1 3.3 -30.1 5.0 -25.1
2010* -70.5 -45.7 16.7 186.7 -170.0 -66.8 -8.2 -35.4 -6.0 -17.1 4.4 -24.8 -3.1 -21.6 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 36.6 0.8 34.6 39.8 26.2 13.5 36.0 3.7 32.3 0.0 -25.2 38.3 180.3
2008 50.6 1.1 45.1 6.3 -7.6 13.8 31.6 2.4 29.2 0.0 -23.5 -6.9 193.8
2009 54.5 1.1 26.0 46.7 37.1 9.7 35.8 8.7 27.1 0.0 -19.8 11.2 238.5
2010* 70.5 1.0 40.0 38.0 25.0 13.0 39.7 3.6 36.1 0.0 -26.2 21.4 283.0
Data: US$ billion * Market Forecasts

March 2010 90
Fiscal Policy
Ministry of Finance
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. The trend is expected throughout the year as Brazilian Governments ongoing commitment to fiscal balance applies to 2010.
Central Governments 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
19.6
18.1
Net revenue from transfers to States and Municipalities Expenditures Data: % of GDP, seasonally adjusted monthly measures
March 2010
13
Ja
92
Fiscal Policy
Central Government budget

The primary surplus of R$ 12.8 billion (2.45% of GDP) in the first two months shows the governments full commitment to the fiscal target in 2010. With no relevant inflationary risk, the positive trend of the primary result was the combination of an increase of 17.8% in revenues and a slower increase of 8.8% in expenditures, highlighting a drop of 4.7% in the personnel expenses.
Central Governments 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 - In %
Total Revenue in January and February
2009
2,867
2010
12,775
January and February 2010
Revenues Transfers Net Revenue Expenditures Benefits Personnel Costs and Capital
17.8 10.3 19.6 8.8 7.8 4.7 25.5
March 2010
131,006
Total Revenue
23,604
Transfers to states and municipalities
107,402
Net Revenue
94,627
Total Revenue
12,775
Primary Results
Data: % change and R$ millions

Primary Result / GDP
2.45%
93
Fiscal Policy
Public Sectors fiscal results

Brazilian economy does not need additional stimulus in 2010. The strong fiscal result allows both nominal result and public debt to decrease while keeping inflation under control.
Ministry of Finance
Public Sectors Fiscal Result (% of GDP)

3.8 3.9 3.2 3.4 3.5 2.1 0.1 -1.0 -1.9 -2.8 -3.4 -4.4 -5.1 -3.5 -2.7 -1.5 -3.3 -0.3 0.4 3.3 3.3 3.3 3.3 3.3
3.2
3.3
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*
94
Fiscal Policy
Zero nominal deficit in 3 years

Nominal deficit close to zero is expected for 2012, taking in account the current level of primary surplus (3.3% of GDP) and the continuous commitment towards countrys growth sustainability. The direct benefits of a better fiscal result are the reduction of interest rates and the lower need of public sectors financing.
Ministry of Finance
Nominal Result (% of GDP)

0.1 -3.3 -1.5 -4.2 -4.6 -3.0 -3.4 -3.5 -2.7 -1.9 -1.0 -0.3 0.4
1 0
-1 -2 -3 -4 -5
Primary surplus equivalent to 3.3% 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
95
Fiscal Policy
Primary Result
The strong expansion of domestic demand, industry output and household consumption are consistent with significant recovery of tax revenues and contributions. Based on a positive scenario for macroeconomic indicators, primary surplus target is assured in 2010.
Primary Result (% of GDP)
Ministry of Finance
3.3
2003
3.3
2004
3.8
2005
3.6
2006
3.6
2007
3.6
2008
2.9
2009
2.2
2010*
Data: % of GDP from January to December each year * Jan-Feb/10, only

March 2010 96
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, according to the current level of primary surplus (3.3% of GDP). It is worth considering the required primary surplus also stems from the convergence towards the inflation target.
Ministry of Finance
Public Sector Net Debt (% of GDP)
Primary surplus equivalent to 3.3% of the GDP Data: % of GDP

March 2010
53.3
50.2
44.9
47.3
45.5
38.9
40.5
37.1
36.8
32.2
30.0
30.6
33.3
34.3
41.7
48.7
48.8
52.6
60.6
54.9
50.6
48.2
47.0
45.1
38.4
42.9
40.7
38.1
35.1
31.9
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 *
28.7
97
Fiscal Policy
Improvements on the Federal Public Debt profile

Along with the continuous pursuit of improvements on the Federal Public Debt profile, FPD has increased in 2,5% over January/10. In Feb/10, 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. 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.
Composition of Federal Public Debt - Feb/10 (R$ millions and % of GDP)
Ministry of Finance
Fixed rate 433.5 (29.0%)
TR rate linked 16.5 (1.1%) Exchange rate linked 97.1 (6.5%) Floating rate 526.4 (35.2%)
March 2010
Ination rate linked 421.4(28.2%)
Data: % of GDP and R$ millions

98
Fiscal Policy
Public Finance improvements

Historical data show the improvements in the Brazilian public finance along the last 15 years. The main achievements were the convergence of the debt-to-GDP ratio, the reversal of an increasing trend in the Social Security deficit, higher Social Security benefits, a slightly flat personnel cost trend. All in all, it has been accomplished a better expenditure profile aiming for good quality of public spending.
Public Finance (market share)
25 18.9 16.8 18.2 15 13.9 13.4 10 5.1 4.6 5 0 4.8 5.1 6.0 4.8 4.8 7.2 15.7 21.7 23.5
Ministry of Finance
20
Central Government Revenues Total Expenditures Social Security Benefits Personnel (employed and retired civil servants) Data: market share
March 2010
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
99
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. The ongoing fiscal policy during the last 18 months has reversed a fearful economic slowdown period, placing Brazil in a new cycle of development along with more employment and output.
Ministry of Finance
Countercyclical scal 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
20.0 29.0 1.6 2.0 6.0 15.0 24.0 15.0 15.0 100.0 100.0
TOTAL
R$ 263.6 billions
March 2010
Data: R$ billion
100
Fiscal Policy
Public investment boosts as PAC advances

There has been substantial increase in public investment since 2004. Considering only the first two months, public investment has raised from R$ 2,704 millions in 2009 to R$ 5,441 millions in 2010, a 101.2% change. From 2007 on, the total spent amount has reached R$ 90,0 billions. Indeed, relevant changes, such as economic growth, infrastructure reorganization, employment generation and social inclusion, have been possible in Brazil in order to overcome fragilities, to stimulate productivity and to reduce inequalities.
Public Investment - January and February (R$ millions)
PAC
20.3% 47.2% 136.0% 45.6% 101.2% 13.9%
Ministry of Finance
5,441
1,974 390
2004
2,375
2,704 Data: R$ millions and % change, for every Jan-Feb of each month PAC - Growth Acceleration Program
March 2010
568
2005
1,340
2006 2007 2008 2009 2010
101
Fiscal Policy
Developments in the Primary Expenditure framework

In the Brazilian public expenditure framework, it is possible to divide primary expenditures into Social Protection Net and Public Operating System. Social Protection Net has consolidated an essential role in the current government policy, while Public Operating System has kept up a flat path along recent years, considering all current expenses employed in operating general services.
Ministry of Finance
Primary Expenditure (% of GDP)
Social Protection Net Public Operating System

10.3 10.3
March 2010
10.3
1.6
1.5
11.0
8.5
1.5
9.0
9.3
9.7
1.5
1.3
2002
2003
2004
1.3
2005
2006
1.5
2007
2008
2009
1.7
Data: % of GDP
102
Fiscal Policy
Quality of public spending

In 2009, measures have been adopted to grant the poor and those segments of the population more vulnerable to shocks during the crisis period. These measures focused primary spending on the Social Protection Net, composed by Social Security, Social Assistance, Health and Education.
Ministry of Finance
Social Protection Net - 11,0% of GDP in 2009
Health 1.3% of GDP
Education 0.4% of GDP Social Assistance 2.1% of GDP
March 2010
Social Security 7.2% of GDP
Data: % of GDP
103
Fiscal Policy
Reversal of Social Securitys 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
1,3
1,2 6 0,8 5 0,4 0,0
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
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
Se p
Fe b
Oc
Ap
Oc
Se
Ja
Ja
ar
10
106
Fiscal Policy
Ministry of Finance
Public Sector Net Debt - February 2010 *
Public Sector Net Debt 2007

I. Public sector 1,200,799 I.1. Central Government 816,681 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx I.2. States and Municipalities 373,323 I.3. State-Owned Enterprises 10,795
R$ million 2008
1,153,631 728,327 414,954 10,351
% of GDP 2009 Feb 10

1,343,862 926,828 408,808 8,226
2007
45.12 30.69 14.03 0.41
2008
38.39 24.24 13.81 0.34
2009
42.80 29.67 12.93 0.20
Feb 10
42.07 29.02 12.80 0.26
1,345,325 932,535 406,404 6,385
Composition of Public Sector Net Debt 2007

I. Floating rate II. Fixed rate III. Inflation rate linked IV. Exchange rate linked IV.1. Internal Debt IV.2. Foreign debt V. Others 47.2 38.9 27.4 -17.5 -0.3 -17.2 4.1
% of Public Sector Net Debt 2008

58.2 35.3 32.6 -30.3 -0.9 -29.4 4.2
2009
62.0 35.8 29.9 -24.7 -2.5 -22.2 -3.1
Feb 10
67.0 32.2 31.2 -26.2 -2.6 -23.6 -4.2
Data: R$ million and % of GDP * Balances at the end of each period

March 2010 107
Fiscal Policy
Central Government Results - Above the line - February 2010

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Central Government Results
Feb 10
57,107 41,900 15,207 12,953 9,316 163 3,474 44,154 45,246 36,725 36,006 12,140 18,988 1,978 1,742 1,159 720 58 398 263 2,577 2,577 5,943 113 -1,092 2,659 -3,781 30 0 I. TOTAL REVENUE I.1. Treasury revenues I.2. Social Security revenues II. TRANSFERS TO STATES AND MUNICIPALITIES II.1. Constitutional transfers (IPI, IR and others) II.2. LC 87/96 and Exports Compensation Fund II.3. Others III. TOTAL NET REVENUE IV. TOTAL EXPENDITURE IV.1 Cost Expenses IV.1.1. Payroll Personnel and charges Social Security benefits - RGPS Disabled and retired special benefits - LOAS / RMV Salary Allowance (SA) and Unemployment Insurance (UI) Bolsa Familia Allowance IV.1.2. Other Cost Expenses FAT (excluding SA and UI) Government Credit Operations and Liabilities Reordering Subsidies for Regional Funds IV.2 Capital Expenses IV.2.1. Paid Investment IV.3 Other Cost and Capital Expenses V. TRANSFERS FROM TREASURY TO CENTRAL BANK VI. CENTRAL GOVERNMENT PRIMARY RESULT VI.1. National Treasury VI.2. Social Security VI.3. Central Bank VII. METHODOLOGICAL ADJUSTS
Ministry of Finance
R$ million Yearly Accum.

131,006 101,723 29,283 23,604 17,005 325 6,274 107,402 94,627 73,825 72,117 26,362 36,773 3,565 3,144 2,273 1,708 81 1,169 458 4,496 4,496 16,306 192 12,775 20,242 -7,489 22 155
% of GDP 12-month
759,118 573,027 186,091 129,896 97,397 3,900 28,599 629,222 580,098 443,309 437,221 150,338 227,523 19,657 27,135 12,567 6,088 504 2,638 2,947 34,389 34,389 102,400 1,209 49,124 91,168 -41,432 -611 1,160
% of GDP 12-month 2009

23.64 18.16 5.48 4.41 3.36 0.18 0.87 19.23 16.98 13.12 12.87 4.52 6.74 0.55 0.69 0.37 0.25 0.02 0.13 0.10 0.88 0.88 2.98 0.04 2.25 3.53 -1.26 -0.01 0.04
Yearly Accum. 2009

23.59 18.25 5.35 4.54 3.64 0.07 0.83 19.05 18.45 15.05 14.72 5.87 7.24 0.61 0.62 0.38 0.33 0.02 0.19 0.12 0.48 0.48 2.92 0.03 0.61 2.50 -1.89 0.01 0.08
2010
25.08 19.47 5.61 4.52 3.26 0.06 1.20 20.56 18.11 14.13 13.80 5.05 7.04 0.68 0.60 0.44 0.33 0.02 0.22 0.09 0.86 0.86 3.12 0.04 2.45 3.87 -1.43 0.00 0.03
2010
23.77 17.94 5.83 4.07 3.05 0.12 0.90 19.70 18.16 13.90 13.71 4.71 7.12 0.62 0.85 0.42 0.19 0.02 0.08 0.09 1.08 1.08 3.18 0.04 1.54 2.85 -1.30 -0.02 0.04
March 2010
Data: R$ million and % of GDP

108
Fiscal Policy
Public Sector Results - Under the line - February 2010
Ministry of Finance
Public Sector Results Feb 10 859 -701 3,145 -1,585 -2,002 426 -9 -14,138 -13,279
R$ million Yearly Accum. 17,044 12,837 5,837 -1,630 -2,345 770 -55 -28,122 -11,078 12-month 70,681 49,581 21,292 -192 -3,704 3,282 230 -171,985 -101,304 Yearly Accum. 2009 2.31 1.21 1.18 -0.08 -0.11 0.03 0.00 -5.36 -3.05
% of GDP 12-month 2009 2.05 1.35 0.67 0.03 -0.06 0.08 0.01 -5.38 -3.33 2010 2.21 1.55 0.67 -0.01 -0.12 0.10 0.01 -5.38 -3.17
I. Primary Result I.1.Central Government I.2. States and Municipalities I.3 State-Owned Enterprises I.3.1. Federal I.3.2. State I.3.3. Municipal II. Nominal Interest * III. Nominal Result *
2010 3.26 2.46 1.12 -0.31 -0.45 0.15 -0.01 -5.38 -2.12
Data: R$ million and % of GDP * No exchage devaluation

109
March 2010
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 So 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, Bikes and Similar products Brazilian Association of the Industry of Construction Materials So Paulo Commercial Association National Association of Automotive Vehicle Manufacturers National Petroleum Agency Brazilian Central Bank European Central Bank U.S. 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 So Paulo Stock Exchange Index National Bank of Economic and Social Development BNDES Participaes S.A. CAIXA CAN Capea/Esalq CNI Conab Copom CVM DIEESE EIU Fed FEF FGV FGV-CPS FIPE IMF FOMC FSE Funcex IBGE Caixa Econmica 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, Industry and Foreign trade Ministry of Planning, 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 Incio 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: Lgia Ourives, Adriano Seabra and Marcus Pessoa Art Visual Project and Final Art: Viviane Barros Layout development: Andr Nbrega, Alline Luz and Viviane Barros Technical Support Economic Policy Secretariat - SPE International Affairs Secretariat - SAIN National Treasury Secretariat - STN Emlio Garfalo Filho Ministry of Finance www.fazenda.gov.br
Ministry of Finance

Brazilian Economy Outlook

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Brazilian Economy Outlook

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th

edition March 2010

Brazilian Economy Outlook

A new economic and social policy

6.1 5.2 5.1 Average 4.2% Average 5.5%

Source: IBGE Produced by: Ministry of Finance

Investments drive growth in the 4th quarter of 2009

Composition of GDP Growth (4Q 2009/3Q 2009)

0.6 Government Spending

Data: % change from preceding quarter, seasonally adjusted figures

Gross Fixed Household Capital Formation Consumption

Investments are about to increase threefold to GDP

Investment and GDP Growth (% yoy)

13.4 5.1 -9.9 -0.2

Source: IBGE Produced by: Ministry of Finance

5.0 5.7 0.2 2.7 2.5 1.1 1.7 -0.5

7.5 5.3 2.7 3.2 4.0 6.1

0.1 0.5 -1.4

PAC 2 forecasts more than R$ 950 billions of investments up to 2014

Investiment Rate (% yoy)

Industry confidence in March is the second highest since 1995

Industry Confidence Index (points)

Optimistic view Pessimistic view

100.2 103.6 107.0 109.6 113.4 113.6 115.8 116.5

Industry can grow 8% this year without pressuring installed capacity

8.3 6.6 4.2 2.7 1.6 0.1 3.1 2.8 3.1

Data: % change from preceding year

Industrial output grew 18.4% in February on a yearly basis

115 110 105 100 95 90 85 80

Data: index-number, seasonally adjusted (Jan07 = 100)

Source: IBGE Produced by: Ministry of Finance

Industry expects a record expansion in installed capacity this year

Annual Forecast for Industry Installed Capacity Expansion (% yoy)

Data: % change from preceding year

Consumption goods: expansion of installed capacity at 27.1% for 2010-2012

Expansion of Installed Capacity (% per three-year period)

Consumption Goods Capital Goods Intermediary Goods

Data: % change from preceding three-year period

Domestic demand and profit expectations raise corporate investment levels

Survey on Influential Elements for Investments (% of companies surveyed)

31.0 Data: % of companies surveyed

Pro t Expectations Domestic Demand

Source: FGV Produced by: Ministry of Finance

Car sales increased 60% in March and surpassed previous record

353.7 308.7 285.4

300.2 271.4 247.0

251.7 213.3 221.0

Data: thousand of units

Industry will invest R$ 500 billion in 4 years

Vehicle 6% Petro Chemicals 7% Iron Metallurgy 9% Minerals 10%

156 295 89.1%

Consumer confidence rises in March

Retail sales grew 1.6% in February 2010 compared to January 2010

Sales Volume in Retail Trade (% yoy)

Source: IBGE Produced by: Ministry of Finance

Retail Sales: positive results in the economic activities

Data: % change from preceding month

Monthly Survey of Trade IBGE

Monthly Survey of Trade

Seasonally adjusted (%)

Before seasonal adjustment Preceding period of the previous year (%)

Composition of Gross Domestic Product

Gross Domestic Product