Emerging Market Economies: Does this classification still make sense?

1. Emerging Market Economies: Does this classification still make sense? Panel 4 – Developing Economies World Federation of Exchanges Paulo Oliveira Jr. Chief Business Development Officer

2. Emerging Markets: AWorld Bank definition and the conventional wisdom to be challenged • The World Bank classifies member economies according to gross national income (GNI) per capita • Low Income Emerging Markets: USD 975 or less • Lower Middle Income Emerging Markets: USD 976-USD 3,855 • Upper Middle Income Emerging Markets: USD 3,856-USD 11,905 • Developed Economies: USD 11,906 or more However, the concept became popular to designate nations in a TRANSITION PROCESS or IN A CATCHING UP PATH

3. Emerging Economies have attained a relevant position among the top markets • Emerging Markets have attracted attention because of their dynamic growth, therefore developing a leading role in the global economy • The BRICs are among the top ten economies in the world INTERNATIONAL RESERVES OF SELECTED COUNTRIES IN 2009 In USD billion GDP OF SELECTED COUNTRIES IN 2008 In USD billion Developed Countries Emerging Markets Source: IMF Source: IMF and ECB (Jul09 and Aug09)

4. Emerging Markets growth has reshaped geopolitics on a global basis • The “so-called” emerging markets are leading the recent recovery • These economies established a new benchmark for global economic development, leveraging their strength on the international arena GDP PROJECTION Developed Economies GDP PROJECTION Emerging Economies Source: IMF

5. Return in Emerging Markets reflects investors confidence in the potential of such economies • MSCI Index represents economic performance and market expectations from the most sophisticated investors in the world MSCI INDEX PERFORMANCE IN 2009 Developed Countries Emerging Markets Source: MSCI Data as of 28th September 09 Note: South Korea is classified as a Emerging Economy by MSCI

6. Liquidity depth of emerging capital markets is advancing within the G-20 economies MARKET CAPITALIZATION AND GDP OF SELECTED COUNTRIES IN THE END OF 2008 Spain Note: Snapshot of the end of 2008 reveals the full impact of the global financial crisis. In December 2007 Brazil Capitalization was over 80% of GDP and in June 2009 is around 60%. Source: Goldman Sachs Research Report

7. Emerging Markets sustainable achievements are undisputable and globally recognized Is such classification still applicable and reasonable? The Brazil repositioning case as a crisis aftermath ARGENTINA, BRAZIL, CHINA, INDIA, INDONESIA, MEXICO, RUSSIA, SAUDI ARABIA, SINGAPORE, SOUTH AFRICA AND TURKEY ARE ALL G-20 MEMBERS

8. Brazil remarkable resilience during the crisis anticipates a huge potential for growth BRAZILIAN INTERNATIONAL RESERVES NET TOTAL EXTERNAL DEBT TO GDP (%) USD billion PUBLIC SECTOR NET DEBT TO GDP (%) TOTAL CREDIT OPERATIONS TO GDP (%) Source: Central Bank of Brazil

9. Brazilian excellent fundamentals attract liquidity available after crisis deleveraging • International investors have kept their confidence even under extreme scenarios • Reliable and vibrant markets have sustained a steady flow of foreign investments NET FOREIGN INVESTMENTS IN THE BRAZILIAN STOCK MARKET IN 2009 USD million FOREIGN INVESTOR PARTICIPATION IN THE BRAZILIAN STOCK MARKET 2007-2009 USD million 16 billion in 2009 *Up to September 18th Source: BM&FBOVESPA

10. New capital flows reinvigorate the Brazilian Exchange role in financing development • Regulation, transparency and improved corporate governance have reinforced the Exchange as a promoter of economic development • Raising capital in the Exchange became fashionable and profitable IPO – CAPITAL RAISED BY SHARES ISSUES IN 2009 in USD billion TOTAL CAPITAL RAISED BY SHARES ISSUES IN 2009 in USD billion Source: WFE Note: Up to August Source: WFE Note: Up to August

11. Emerging markets : an elusive concept that has to be revisited by market practitioners • The financial crisis has provided evidence that : • Some emerging countries have built advanced regulation and effective financial infrastructures that withstand volatile markets more efficiently • Some emerging markets have developed original risk management solutions and transparency rules that better cope with financial institutions leveraging • Some emerging economies have created comprehensive corporate governance rules that promote disclosure more widely • New possibilities for developing capital markets are rising • New models for economic development are shaping • Old fashioned capitalism analytical framework is being challenged • Not every country needs to follow the path of more mature and developed economies • In a multipolar world the name of the game is full and open dialogue, not only East West, but also NorthSouth • There are plenty of lessons to be learned and experiences to be shared

12. Emerging Market Economies: Does this classification still make sense? Paulo Oliveira Jr. CEO of BRAiN – Brazil Investments and Business poliveira@brainbrasil.org www.brainbrasil.org T: 55 11 3032 1016