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U.S. Commercial Service
President Luis Inácio “Lula” da Silva
Took office on January 1st, 2003 Labor Party- PT First mandate - with 61.27% in 2002 Second mandate - with 60,83% in 2006 Elections October 2010
Top Exports from Brazil
Orange
Soy
Corn
Sugar cane
Airplanes
Coffee
Oil
Iron ore
Ethanol
Meat
BRAZIL– USA
1. Crisis and Recuperation
2. Economic Development
3. Trading Partners and Best Prospects
Doing Business in Brazil
Industrial Production During the Crisis
IBGE indicated growth of 0.7% in March
-14
-12
-10
-8
-6
-4
-2
0
2
4
Jan-08 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-09 Feb Mar
By category, in 1st trimester 2009 compared to same period of 2008, in % :
General industry: - 14.7 Consumer goods: -8.0Capital goods: - 20.8 Durables: - 22.5Intermediate goods: - 18.1 Semi and non-durable: -3.0
Car SalesDuring the Crisis
Car production increased 34.2% between February and March.
08 09
Invest Confidence
• The main São Paulo Stock Exchange Index, the Bovespa, has risen more than 75% from its low point last October.
• Since January, R$ 5.7 billion has been invested in the Bovespa from overseas
• Bovespa (Blue) vs. Dow Jones Industrial Average (Red).
Brazil’s Reaction to the Crisis
Government measures:
• Tax cuts such as IPI, the federal tax on domestic and imported manufactured products.
• Interest rate reduction – 9.25% per year.
• Incentives for civil construction.
• Infrastructure development.
GDP growing projection for 2010The world recovering
Source: Agencia Estado
Brazilian GDP
Source: IBGE
6.1% 6.2%6.8%
1.3%
-1.8% -1.6%
0.5%
5.0%
6.5%
1º Qtr 08 2º Qtr 08 3º Qtr 08 4º Qtr 08 3º Qtr 09 4º Qtr 09 1º Qtr 10
1º Qtr 09 2º Qtr 09
• GDP: US$ 1.58 Trillion (IMF)
• Growth Rate: 4.83 %
• Inflation Rate: 4.60 % year
• Foreign Direct Investment : US$ 35 Billion
• Interest rates, SELIC at 8.75 % year
• Foreign Exchange Rate: 1 USD = 1.75 Reais
• Unemployment Rate: 7.42 %
• 190 Million Consumers with Increased Purchasing Power
Economic Indicators2010 Estimates
Source: Central Bank Brazil
Brazil Compared - GDP(US$ Billion)
Source: International Monetary Fund
Inflation Rate
Source: Agência Estado
4.50%
1.80%
8.50%
6.00%5.50%
3.50%
7.75%
4.82%4.35% 4.60%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 BCB est.
2,477%
1993
Source: Central Bank Brazil
32.8
22.5
16.6
10.1
18.115.1
18.8
34.6
41.7
25.0
35.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 est.
Foreign Direct Investment(US$ Billion)
R$ 3.50
R$ 2.75 R$ 2.60
R$ 2.25 R$ 2.14 R$ 1.95
R$ 2.30
R$ 1.74 R$ 1.75
2002 2003 2004 2005 2006 2007 2008 2009 2010 est.
Foreign Exchange Rate
Source: BCB
Southeast – 55,09
South – 19,03
Northeast – 13,68
Center-West – 7,28
North – 4,92
Regional DisparitiesGDP share - % of total GDP - 2008
Source: International Monetary Fund
2004 2008 2009
3,710,477,153
20,041,091,354
15,911,145,829
11,530,564,312
25,625,203,865
20,182,730,487
15,990,157,812
36,187,476,416
29,216,602,946
China United States (including Puerto Rico) European Union
Brazilian Imports by Economic Blocks
2003 2004 2005 2006 2007 2008 2009
11.21
13.9015.37
19.23
24.63
32.91
21.0017.91
21.16
24.4426.37 25.64
30.46
16.00
USA Exports USA Imports
Bilateral Trade(US$ Thousands)
Office of Trade and Industry Information (OTTI), U.S. Department of Commerce
0
20
40
60
80
100
120
140
160
2007 2008 2009
U$ Th
ousa
nd
Mexico Brazil Venezuela Colombia Chile Argentina Peru Ecuador
Brazil Compared: U.S. Exports to Latin America
Source: Foreign Trade Division, U.S. Census Bureau
1. Agricultural Sector2. Aerospace (Aircraft and Parts / Airports)3. Electrical Power Systems 4. Environmental 5. Franchising6. ICT - Information & Communication
Technologies7. Insurance8. Medical Equipment9. Mining10. Oil and Gas 11. Pharmaceuticals12. Safety & Security13. Transportation (Ports / Railways) 14. Travel and Tourism
Best Prospects for Sales to Brazil
• Rio de Janeiro will host the first-ever Olympic
Games in South America August- September
2016, as well as some of the games for the
2014 World Cup. These two events will
generate numerous trade and investment
opportunities in several areas, for both games
and the city.
ESTIMATED INVESTMENTS
• The state government of Rio de Janeiro
estimates that investments from 2010-2016
will reach US$50 billion in infrastructure,
construction, transportation, public security,
education and training, among others. Most of
those investments will occur through Public-
Private Partnerships (PPPs) under Brazil’s
Growth Acceleration Program (PAC).
INVESTMENTS IN BUILDING AND CONSTRUCTION
• There will be a huge demand for
Architecture/Construction/Engineering
(ACE) services to plan and build sport
facilities (arenas, stadiums, etc), hotels,
infrastructure and transportation projects,
as well as port and airport upgrades.
INVESTMENTS IN SPORT FACILITIES
Although more than half of Rio 2016 venues are ready, since Rio hosted the 2007 Pan American Olympic Games, about 20 new facilities are to be built. They include:
•An aquatic sports stadium with 18,000 seats with an estimated construction cost of US$40 million.•An Olympic Park to host gymnastics, cycling, handball, and other sports competitions with an estimated building cost of US$200 million.•An Olympic village of 32 buildings with 12 floors each and a capacity of over 17,000 beds estimated at US$450 million.•An Olympic Tennis Center with 16 courts (US$45 million).•A renovated rowing stadium at Rodrigo de Freitas Lagoon will cost approximately S$2 million.• An arena in Copacabana for beach volley (US$7 million).•The renovation of Maracanã Stadium (where the opening and closing Olympic ceremonies will be held as well as soccer games) will cost approximately US$400 million, and must be completed before 2014 to use in the 2014 Soccer World Cup.
INVESTMENTS IN HOTEL/HOSPITAL FACILITIES
• In 2010, the number of visitors to the city is expected to grow
in 10% in comparison to 2008, when 1.68 million tourists came
to Rio. By the time of the 2014 Soccer World Cup and the 2016
Olympic Games this number will increase even more.
• Several hotels are being refurbished.
• The municipality of Rio may reduce taxes to attract new
investment in hotels; thereby creating opportunities for U.S.
hotel chains in refurbishment, architectural projects and
building or acquiring existing hotels.
• As for hospitals, a clinic will be built within the Olympic Village.
INVESTMENTS IN INFRASTRUCTURE
The estimated investment in infrastructure is about US$15 billion, including US$5 billion in logistics upgrades at seaports and airports. The main projects include:
•The modernization and enlargement of the two International Airport terminals (increasing the airport's capacity from 15 million passengers per year to 25 million),•Highway widening,•Construction of “Olympic lanes”,•The Port of Rio area revitalization to include a new 30,000 square meter leisure area featuring bars, restaurants, an amphitheater, a multi-use space and parking,•Port dredging,•Construction of two new subway lines,•The creation of a Bus Rapid Transit (BRT) system,•Housing projects (including low income housing) and•Water sanitation.
INFRA-STRUCTURE MATTERS IN BRAZIL
BR US Difference
Soy production costs 187 238 51 dollars cheaper in Brazil Transportation costs 97 26 71 dollars cheaper in U.S. Port costs 7 3 4 dollars cheaper in U.S. Total 291 267 24 dollars in favor of USA
Conclusion:
To produce soy in Brazil is 51 dollars cheaper, but the logistic costs eliminates this advantage. In the end, it is 24 dollars cheaper to get the product to market in the US.
Source: Veja Magazine
Hypothetical Cost Buildup for an Imported Machine in US Dollars
FOB price of Product 100,000Freight 2,400Insurance (1%) 1,000
CIF Price of Product 103,400Import Duty Rate: 19% -- applied to CIF 19,646IPI: 5% -- applied to CIF + import duty 6,152ICMS: 18% -- applied to CIF + import duty + IPI 23,256Merchant Marine Tax: 25% of ocean freight cost 600Warehouse: 0.65% of CIF; or min. US$ 170, max US$ 235 235Terminal Handling Charges: average US$ 100 per container 100Contribution to Custom Broker's union 2.2% CIF; or min of US$ 71, max US$ 160 160Custom Brokerage Fee: average 0.65% of CIF or min US$ 170, max US$ 450
450SISCOMEX Fee 30Typical Cargo Transportation charge 35Typical Bank Costs: 2% of FOB 2,000
FINAL COST 156,064
Points of Contact:
São Paulo : Igly Serafim, Senior Commercial [email protected]@trade.govPhone: 55-11 5186-7187
[email protected]: 55-61 3312-7481 / Fax: 55 –61 3312-7656
Belo [email protected]: 55-31 3213-1583 / Fax: 55-31 3213-1575
Recife :[email protected]: 81-3416-3075 / Fax: 81-3231-1906
Rio de [email protected]: 55-21 3823-2417 / Fax 55-21 3823-2424
THANK YOU !!