Brazil and Latin America Economic Outlook

1. Brazil and Latin America Economic Outlook Minister Paulo Bernardo Washington, May 13th, 2009

2. Presentation • Impacts of the Economic Crisis • Brazilian Economic Situation • Counter-Cyclical Public Policies • Forecast for 2009 2

3. From 2003 to 2008, the Brazilian economy has grown 27.4%, an average of 4.1% per year. Real GDP Growth (% p.a.) Source: IBGE.

4. World GDP Growth (Annual percent change) Source: IMF (WEO)

5. BRAZIL: Contraction in the 4thQ of 2008 and Recovery in the 1stQ of 2009 Source: IBGE.

6. Real GDP Growth Source: JP Morgan – GDW (April 9th)

7. Low inflation Sound fiscal policy Low external vulnerability Strong banking sector Large domestic market Favorable Macroeconomic Conditions

8. 10 years of Inflation Targeting */ Market Expectations (Focus: 04/17/09). Sources: IBGE and Central Bank.

9. Fiscal Policy Consistency Primary Surplus % of GDP Nominal Deficit Source: Central Bank .

10. Commitment to a Sustainable Fiscal Policyhas led to PositiveResults Net Debt of the Public Sector (% of GDP) Source: Central Bank .

11. Debt´s Profile has changed Others Pre-Fixed % Price Index Exchange Rate Selic Months Duration Source: Central Bank.

12. 12 Better Fiscal Performance (Deficit as % GDP) Source: The Economist.

13. International Reserves(US$ billion) Source: Central Bank.

14. Trade Balance(US$ billion) Estimate for 2009 Source: Central Bank.

15. BIS Capital Ratio (as of December 2007, %) Source: The Bankers Magazine. 15

16. Brazil Today is a Middle Class Country Development of Social-Economic Classes (percentage of population between 15 and 60 years old) Source: CPS/FGV (IBGE).

17. Recovery of the Purchasing Power of the Population(percentage of the minimum wage necessary to acquire the basic food basket) Source: Dieese and MTE.

18. Monetary and Credit policies: Reduction in reserve requirements, cuts in the basic interest rate and increase in credit supply from state-owned banks, deposit guarantees. Fiscal policy: Tax cuts, social programs, public investment and temporary reduction in the primary surplus. Financial support to regional integration: Increase in the CCR (Agreement on Reciprocal Credit – Compensation System of Payments between Latin American Central Banks) limit, from US$ 120 million to US$ 1.5 billion. Counter-CyclicalMacroeconomic Policy

19. Ex-ante Real Interest Rates (% p.a.) Sources: Central Bank and BM&F.

20. Federal Government Investment (% of GDP) Sources: MF and MP.

21. Temporary Value Added Tax Cuts in: Automobiles and Trucks (IPI) Construction Material (IPI) Motorcycles (COFINS) Household Appliances (IPI)

22. World Crisis – lower Impact on Brazilian Internal Auto Market Autovehicles Market – Jan & Feb (tsd units)

23. Financial Assistance Working Capital for the Agribusiness sector Anticipation of cash transfers to Municipalities Special credit line for long-term investment by States

24. Minha Casa, Minha VidaThe Program Minha Casa, Minha Vida (My House, My Life), launched in March of this year, aims to finance the construction of1 million homes, at a cost of aboutR$ 60 billion, for families with income of up to ten minimum wages, in partnership with states , municipalities and private enterprise

25. Brazil - Perspectives for 2009 Economic Performance - Slowdown in the 1st semester - Acceleration in the 2nd semester Foreign accounts - Reduction in the current-account deficit - Lower but positive capital inflows - Stable international reserves Labor market and domestic demand - Positive job creation - Resumption of credit expansion

26. Early improvements Stable commodities prices Rising private credit levels (though insufficient) and falling interest rates costs (though still high) Increase in economic activity compared to the 4th quarter of 2008

27. Source: ONS

28. Impacts: Slowdown of exports; Price fall of primary goods; Decrease of money remittance; Less tourist inflow; FDI reduction; Cost increase of foreign credit; Downfall of international lending availability; The international crisis has affected in different ways Latin America; however not evenly.

29. Latin America: Measures against the Crisis • Monetary and Financing Policies: • - Reduction and flexibilization of reserves requirements • - Provision of marketability in local currency • Fiscal Policy: • - Tax cuts • - Increase and/or anticipation of infrastructure expenditures • Exchange Rate and Foreign Trade Policies: • - Provision of marketability in foreign currency • - Export financing • - Credit with financial institutions • Focal Policies: • - Housing • - Farming and Stockbreeding • - Industry • - Tourism • - Micro and Small Enterprises

30. Fiscal Stimulus Packages Source: IMF

31. Latin American will be less affected than other regions in the World Commodityprices recovery A stronger macroeconomic position than in previous crises; Quick recovery needs: Cooperation with Financial International Organization; Effective counter-cyclical policies; FDI attraction ability. Rising its importance in the World: The most important energy source; Macroeconomic stability; Consolidated democracy. Looking Ahead:

32. Thank you!