Impacts of the World Crisis in the Brazilian Economy

1. Impacts of the World Crisis in the Brazilian Economy

2. Reasons for Stagnation in 2012 • Deepening of world crisis (especially in Europe) • Decrease in investments • Production crises (overvalued currency) • Weather problems that affected agriculture

3. Economic Figures Market Expectations

4. Expenditures with Interests From April 2012 to March 2013, Brazil spent US$ 108,5 billions with interest payments, US$10 billions less than on the same period of the previous year. In the same period, the official interest rate dropped from 9,75% to 7,25%.(SELIC) The ammount saved (US$ 10 billions) is nearly enough to pay “Bolsa Família” in 2013 (the main government social program aimed to help poor families), estimated in US$ 11 billions, nearly four times the necessary ammount to fund “AgriculturaFamiliar” (government program aimed to support family owned agriculture business), estimated in US$ 2,6 billions, and almost twice the ammount aimed to fund college graduation investments in 2013, estimated in US$ 6,4 billions.

5. Expenditures with Interests However the total expenditure with interest expense for the period is still too high, being 4.4 times the amount budgeted in 2013 for education (elementary and secondary, technical, professional and higher). Brazil was in March the 5th place among the countries of higher real interest rates in the world at the time the official rate was still 7.25%,, according to the IMF and their central banks compiled and published on the MoneYou website.

6. Who is benefited by high interest rates? Fonte: Tesouro Nacional

7. Why did investments drop? • Due to the global crisis and to low growth in 2011 companies have postponed investment plans• Macroeconomic Scenario in 2012 was more uncertain and volatile, making business planning more difficult• The good news is that investments resumed to grow in the last quarter of 2012 (0.5%)• If it is sustainable, it is another story.

8. Immediate causes of the crisis in production • Decrease in investments • Loss of competitiveness of the production sector, with internal consequences (greater demand of imported products in the domestic market) and external ones (drop in exports of manufactured products)

9. Government measures to revive the Economy • 1)Payroll tax reduction, covering 42 sectors (15 are already being benefited). With this and other exemptions, the government gave up around $ 22.5 billion in taxes in 2012• 2) Increase in import taxes of several products• 3) Reduction of electricity costs to the manufacturing sector and households• 4) Reduction of interest rates (the lowest levels in our history)• 5) Ambitious investment program in roads and railways, with estimates of more than U$ 65 billion

10. Government measures to revive the Economy • 6) Set of measures that create a robust line of credit offer and reduce tax collection to encourage the construction industry (Dec/2012)• 7) Financial costs for investments suffered a structural readjustment (reduction in the official interest rates; reduction in the interest rates of the Investment Support Program (PSI) to 3.5% per year)• 8) The PSI in 2013, will provide U$ 50 billion for investments, with an average rate of around 3.5% per year (low interest and long term deadlines)

11. Labour Market

12. Evolution of Formal EmploymentBrazil, 2002 to 2011 The positive differencebetweenhiredanddismissedworkerswas 306 thousandfrom Jan to Mar-2013 (Caged) Fonte: MTE, Rais *MTE, CAGED Elaboração: DIEESE

13. Unemployment rates - annual averagesMetropolitan regions and Federal District, 2000-2012 Em (%) Total unemployment rate in January 2013 was 11%.

14. Evolution of Real WagesBrazil, 2002-2012 (Abril de 2002=100)

15. Inflation

16. Inflation targeting regime: inflation, central and target "ceiling“ (% per year)Brazil, 1999 – 2013* *Estimativa do IPCA-IBGE do Banco Central do Brasil para o ano. Fonte: SIDRA-IBGE e BC. Elaboração: DIEESE Em (%) ao ano

17. Collective Bargaining

18. Distribution of wage increases, compared with the official inflation rate (INPC-IBGE), and average real increaseBrazil, 1996 to 2012

19. Collective Bargaining Trends in 2013 • • Objective: try to keep the gains achieved in the last three years (95% of negotiations with increases above inflation and average real gain of 1.96% in 2012, the highest percentage ever since analyses started)• The economic situation is better than in 2012 and GDP is expected to grow 3% or 3.5% in 2013 • • Exchange rate is most suitable for export competitiveness and the inhibition of import of manufactured products • • Real interest rates is at its lowest level in history, and despite the increase occurred in April, it will remain at relatively low historical levels• Inflation tends to stay within the margins set by the inflation target for the tenth year in a row

20. 1st NATIONAL CONFERENCE OF NATIONAL FINANCIAL SYSTEM Tripartite debate with the participation of civil society on the following topics: • Access to banking services and customers’ rights • Access to credit, interest rates, spreads and bank fees• Society control over the National Financial System• Regulation of Constitutional Clause (Nº 192, 1988) which states the principles of the National Financial System

21. Objectives of the 1st Conference of the National Financial System (NFS) • Contribute with proposals for the construction of a JOINT LEGISLATIVE AGENDA, oriented to the democratization of the population access to the NFS; • Expansion of productive credit, regulating key variables of the NFS (interest rates, spreads and bank fees); • Protection of customers’ rights and promotion of a NFS that focus on the country’s socio-economic development and on collective interests

22. Thank you very much! Muito obrigado! www.contrafcut.org.br