Brazil: Sustainable Growth, income distribution and social inclusion

Brazil: Sustainable Growth, income distribution and social inclusion Miami Minister Paulo Bernardo April 6th, 2008

Brazil is consolidating a mass consuption market and promoting the ressurgence of a new middle class • Faster growth and lower unemployment have fueled higher consumer spending and investment. • Unemployment rate fell from 13% in 2002 to 7,4% in 2007 • Investment rate increased from 15,3% to 17,3% of GDP in four years • In 2007, sales expanded by 10%.

19 consecutive quarters of Growth Index number (2003.II =100) Source: IBGE

In this new cycle, growth has its pillars in sustainable domestic demand GDP Components – annual growth rate % Source: IBGE

Credit level increased Credit - % of GDP Source: Central Bank

Recovering the purchase power of the minimum wage 37,2% in 5 years 2006 R$ Increase in real terms 29,9% in 9 years Source: DIEESE

The recovery of Wage Bill Index number 2000 = 100 Source: DIEESE

The result is an impressive growth on sales and consumption ... • Sale of Electronic and IT goods => 25,8% increase in 2007 • Production of capital goods => 18,5% in 2007. • Automotive Industry => 100% Sale increase in 4 years • Sale of Durable Goods => 33% increase in 4 years • Production of Cement => 20,7% increase in 5 years

Real Estate Expansion Housing – Real Estante Financing Unity R$ millions Source: SBPE

Since 2003, the largest corporations are improving their results 500largest corporations - Profit (US$ Bi) 500 largest corporations - Revenue (US$ Bi) Source: Exame Magazine

Investment is the backbone of the Sustainable Cycle % of GDP Source: IBGE

Industrial Production and Investment 29,9 Accumulated Growth base: jan/06 10,2 Source: IBGE

Fostering Sustainable Growth allows Brazil to face the social challenge ...

Growth is Reducing Poverty and Income Inequality ... % of population under poverty line Gini Index Source: FGV/PNAD/IBGE

... and reducing unemployment % 7,4% Source: IBGE

Social inclusion: 25% of the population are enrolled on conditional cash transfer programs BOLSA FAMÍLIA – “An anti-poverty program invnted in Latin America is winning converts worldwide – The Economist” (february 2008) • 11 millions families now receive the benefit. • The program has also helped to push the rate of economic growth in the poorest regions above the national average. • Strong impact on food consumption and school enrollment

Sound Fundamentals and Economic Growth for the Rise in Investments

Sustained commitments to sound fiscal policies yields its results. Public Sector Net Debt (% of GDP) Source: Central Bank

Debt has a different profile... Fixed Rate % Price index Exchange index Selic months Duration Source: Central Bank

... and inflation is under control target

External Sector – Reduction of the External Vulnerabilities

Brazil is now much less vulnerable to international turbulences it was in the past, because: • Foreign direct investment is strong; • Several consecutive years of aggressive export expansion; • Diversification of markets (INSERIR DADOS NOS COMETÁRIOS) • Increase in international reserves; • Better external indebtedness indicators;

Brazil has been running a sound trade Balance Surplus US$ billion Source: Ministry of Industry and Commerce

Increase in Foreign Direct Investment Lula Privatization Source: Central Bank

New Challenges Ahead

The Brazilian Agenda • Tax Reform • Infrastructure • PAC • New Industrial Policy • Efficiency in Public Management

Brazil: Sustainable Growth, income distribution and social inclusion