Breakout Session Sustainable Investments in Emerging Economies --- Concluding Remarks --- by

1. Breakout SessionSustainable Investments in Emerging Economies--- Concluding Remarks ---by Jorge Arbache Brazilian Development Bank -- BNDES This presentation does not necessarily reflect the views of the Board of Directors of BNDES Toronto, November 23, 2010 International Economic Forum of the Americas

2. How can foreign investment be a driver of sustainable growth in emerging economies? • By investing especially in sectors that: • Can rapidly increase GDP growth and create quality jobs • Foster export diversification • Stimulate domestic suppliers • By investing in greenfield businesses • By bringing in and sharing new technologies • By following the best practices in governance, social responsibility and environmental management

3. How can the development of a comprehensive social agenda strengthen democratic institutions in emerging economies? • By increasing the well-being and lifting people out of poverty, a comprehensive social agenda is likely to contribute to strengthening democratic institutions • The emergence of the middle class will shift the political game toward the center, reducing the risk of sudden changes in economic policy and the chosen political course

4. Which factors are key for increasing foreign investment in emerging economies? • Increasing domestic and regional markets • Coherence between macro and micro policies • Stable political environment • Favorable business climate (labor, infrastructure, regulations, taxation etc) • Strategies to promote investment • Investment and trade agreements

5. South-South economic relations: great opportunities for sustainable investment and growth in emerging economies

6. Emerging economies growth -- a window of opportunity for emerging economies! • Developed countries no longer the main source of global growth • China, India, Brazil and other emerging countries • Growth and increasing urbanization in China and India will require extremely large investments in urban planning, which will increase the demand for food and raw material

7. Emerging economies: largest component of global growth GDP growth: developed vs. emerging economies

8. The share of emerging markets in global economy is rising… Share of global consumption (% of global GDP)

9. …and the share of emerging markets as a destination of emerging markets exports is rising too Share of emerging markets as a destination of emerging markets exports

10. China – one of the main foreign investors in emerging economies A few examples in LAC and Africa • Sinopec’s $7.1 bn in Brazil – oil • Sinochem’s $3.1 bn in Brazil - oil • CNPC’s $1.4 bn in Ecuador – oil • Chinalco’s $2.1 bn in Peru – copper • Shunde Rixin’s $1.9 bn in Chile – iron • Several oil fields in Sudan, Angola, Eq. Guinea, Nigeria • FDI in infrastructure facilities needed to export raw material But usually captive suppliers of raw materials of China Chinese FDI in LAC - More than $30 bn in the last few years!

11. A few emerging economies are focusing on selling manufactured goods, while most others are selling commodities • LAC: diversification of exports has fallen over time • 80% of LAC’s exports to China are primary products • Africa almost 100% • LAC has lost its competitive edge in manufacturing -- Chinese firms have been outdoing LAC manufacturing exporters in traditional LAC’s markets • Examples • Central America’s apparel goods exported to US vs. Chinese • Mexican manufacturing goods exported to US vs. Chinese South-South economic relations resemble more and more the North-South economic relations

12. Sustainable development and investment: the case of Brazil

13. Democratic, open society • Brazil may grow beyond 5% p.a. over the next years • The domestic market will make the growth in demand feasible: basic household consumption, housing and durable goods • Investment will be driven by: oil & gas, electric energy, logistics, residential construction and agribusiness

14. Brazil resumed growth at expressive rates after 25 years Brazil and the World: GDP Growth Rates ( % ) Source: Ipeadata and IBGE. Elaborated by APE/BNDES (*) Forecasts based on IIF

15. The domestic market is the engine of the Brazilian growth… Breakdown of GDP Growth (% p.a.) Source: IBGE Elaborated by: Ministry of Finance *Estimates: Ministry of Finance.

16. ...thanks to: • Rapid expansion of job creation and the payroll • Expansion of credit: 46% of GDP in 2010 from 24% in 2003 • Expansion of social programs e.g. Conditional Cash Transfer (Bolsa Família) • Sound macroeconomic policies • Sound financial sector • Political stability

17. There has been an expressive drop in poverty… Evolution of Poverty (% of the population) * Individuals in poverty refers to individuals who are in the E economic class of consumers, whose household income for the whole family is R$ 804.00, based on prices in November 2008, according to the micro-data from PNAD

18. ... and an improvement in income distribution • Between 2003 and 2008, economic class C now represents a majority in the Brazilian population. Evolution of economic classes (% of the population) Source: Ministry of Finance

19. Investment maintains a strong upward path of growth Forecast for Rate of Investment 2010-2014 (% of GDP) Source:IBGE and APE/BNDES.

20. Concluding remarks • Developed economies – no longer the main source of economic growth for emerging economies • The South-South economic relations are becoming increasingly more complex • But to some extent, the South-South economic relations are mirroring the North-South economic relations of the past decades; in some cases, they are even worse • Brazil’s recent growth experience – a successful case of sustainable growth based on democratic institutions, sound economic policies and smart social policies

21. ThankYou