Gilson Carvalho
Brasil: Cenário Macroeconômico Maio 2015
Fiat Chrysler Finanças
Indicadores Macroeconômicos
2 Macroeconomic Overview Brazil
Source: Market Consensus, FCF
May, 2015
As série de contas externas não consideram a metodologia adotada pelo Bacen a partir de abril 2015.
Atividade 2010 2011 2012 2013 2014 2015P 2016P
PIB (USD bilhões) 2.206 2.614 2.414 2.388 2.345 2.013 1.928
PIB (BRL bilhões) 3.887 4.375 4.713 5.158 5.521 5.897 6.281
PIB (%) 7,6 3,9 1,8 2,7 0,1 (1,4) 0,9
Credito (BRL bilhões) 1.663 2.034 2.369 2.713 3.022 3.347 3.646
Credito (% PIB) 44,1 46,5 50,3 52,6 54,7 56,8 58,1
População (milhões) 196 197 199 201 203 204,2 205,7
PIB per capta (USD) 11.284 13.242 12.118 11.881 11.563 9.858 9.372
Taxa de Desemprego (%) 6,7 6,0 5,5 5,4 4,8 6,4 7,4
Contas Externas 2010 2011 2012 2013 2014 2015P 2016P
Balança Comercial (USD bilhões) 20,1 29,8 19,4 2,6 (3,9) 0,7 9,6
Balança em Conta Corrente (USD bilhões) (47,4) (52,5) (54,2) (81,1) (90,9) (82,5) (75,6)
Balança em Conta Corrente (% PIB) (2,1) (2,0) (2,2) (3,4) (3,9) (4,1) (3,9)
Investimento Estrangeiro Direto (USD bilhões) 48,4 66,7 65,3 64,0 62,5 45,0 50,0
Reservas Internacionais (USD bilhões) 287,9 352,0 378,6 375,8 374,1 365,6 361,5
Dívida Externa Total (USD bilhões) 255,7 298,2 316,8 312,0 347,6 378,2 409,2
Contas Públicas 2010 2011 2012 2013 2014 2015P 2016P
Superávit Primário (% PIB) 2,6 2,9 2,2 1,8 (0,6) 0,9 1,8
Meta Superávit Primário (% PIB) 2,2 2,3 2,2 1,9 1,8 1,2 2,0
Câmbio, Juros e Inflação 2010 2011 2012 2013 2014 2015P 2016P
Taxa de Juros (Selic - final de período) 10,75 11,00 7,25 10,00 11,75 13,75 12,00
Inflação (IPCA, %) 5,9 6,5 5,8 5,9 6,4 8,4 5,5
BRL/USD (final de período) 1,67 1,88 2,04 2,34 2,66 3,2 3,3
Cenário Macroeconômico
3 Macroeconomic Overview Brazil
1. Fraco desempenho do crescimento em
meio a um aumento dos desequilíbrios
macro econômicos
• Recessão em 2015
• Crescimento abaixo de 1% em 2016
• Demanda doméstica fraca
• Investigação de corrupção da Petrobras
• Deterioração do mercado de trabalho
• Diminuição do crescimento de crédito
• Inflação elevada
2. Desafios fiscais
• Déficit fiscal elevado
• Aumento do gasto do governo
• Riscos para consolidação fiscal (contração
econômica; atraso na implementação das medidas
fiscais)
3. Cenário político complicado
• Perda de popularidade da presidente
• Congresso fragmentado
• Investigação de corrupção da Petrobras
May, 2015
Fatores de risco para rebaixamento do grau de
investimento
• Continuação do fraco desempenho de crescimento
• Dificuldade na consolidação fiscal
• Baixa confiança no processo de implementação das
medidas de ajuste fiscal
• Perda de reservas internacionais
Pontos a serem monitorados
• Contas fiscais
• indicadores de confiança
• Eficácia congelamento dos gastos do governo
• Êxito das de medidas fiscais no Legislativo
Fatores fundamentais para melhorar o cenário
macro
• Melhoria da credibilidade política
• Redução dos desequilíbrios macro econômicos
• Consolidação fiscal
• Melhor ambiente de investimento
Cenário Macroecônomico
4 Macroeconomic Overview Brazil
Nível de Atividade: Brasil apresenta fraco desempenho do crescimento em meio aos
desequilíbrios macroeconômicos, com previsão de crescimento abaixo de 1% em 2016,
dificuldade de acesso ao crédito, fraca demanda doméstica e deterioração do mercado de
trabalho
Inflação: Pressão sobre os preços administrados, desvalorização do real e aumento dos
impostos apontam para elevada inflação em 2015, acima do teto da meta de 6,5%
Juros: Na última reunião o COPOM aumentou a Selic em 0,5% pp e sinalizou que apesar de
próximo o fim do ciclo de aperto monetário não será na próxima reunião
Câmbio: O real já depreciou em mais de 15% nesse ano com forte volatilidade e bastante
sensível às incertezas políticas, apesar disso o BC não prorrogou o programa de swaps.
Balança Comercial: A balança comercial permanece fraca e já acumula um déficit de USD 5 bi
até abril.
IED: A grande diferença das taxas de juros locais e internacionais contribuem para o influxo de
capital estrangeiro no país, apesar da instabilidade política e recessão econômica pela qual o
país está passando
May, 2015
5 Macroeconomic Overview Brazil
Crédito: a pífia performance econômica, a deterioração do mercado de trabalho e os baixos índices de
confiança do consumidor e empresário contribuem para a redução do crédito tanto para as empresas
quanto para pessoa física
Contas Publicas: apesar do comprometimento do governos com a meta fiscal, o país tem desafios
adiante, pois precisa superar a contração econômica, a dificuldade em cortas os gastos e a perda das
reservas internacionais além da incerteza na aprovação das medidas de ajuste fiscal
Politica: o cenário político está ainda mais instável devido a perda de popularidade da presidente, a
fragmentação do congresso e a investigação de corrupção da Petrobrás
Risco Soberano: o risco de um rebaixamento do grau de investimento é real. As agências de rating
estão monitorando a consolidação fiscal, a deterioração dos índices de confiança e o êxito das medidas
fiscais no Legislativo
A retomada do crescimento em 2016 (e manutenção da classificação de grau de investimento)
depende da extensão dos ajustes implementados em 2015.
Cenário Macroeconomico
May, 2015
Backup
GDP
7 Macroeconomic Overview Brazil
May, 2015
Activity Level
8 Macroeconomic Overview Brazil
2014 GDP growth was 0.1% better than forecasted, but already incorporated in the new
methodology... The perspective for 2015 is one of the worst regarding GDP. The market already
expects -1.4%.
The last GDP data was released in March by IBGE according to the new methodology for National
Accounts. IBGE also revised the historical series using the new methodology. The most relevant
changes occurred between 2011 and 2013, with an upward revision in the growth rates.
GDP 2014 (bn): BRL 5,521
1/9 Source: IBGE, FCF
May, 2015
7,6%
3,9%
1,8%
2,7%
0,1%
-1,4%
0,9%
2010 2011 2012 2013 2014 2015F 2016F
GDP
Activity Level
9 Macroeconomic Overview Brazil 2/9
Source: Credit Suisse, BofA, FCF
A bunch of reasons explain Brazilian’s low growth…
Domestic Issues Global Issues Infrastructure
Investments
Reduced Cross
Border Trade
Demography Fragility of
Institutions
Potential growth lower than 3,0% Negative GDP Growth
Low business and consumer confidence
High inflation
Low credibility on
fiscal policy
Reduced
predictability
Risk of electricity and
water rationing
Downgrade rating
Petrobras
Low growth on
important markets
(Euro Area)
China’s growth
slowdown
Risk of Greece
leaving Euro Area
Punctual Issues Structural Issues
Poor infrastructure
conditions impact
productivity
High raw material import
taxes and few
commercial agreements
with non prime
counterparties
Lost of momentum of
labor force
Low productivity
Poor perception over
quality of institutions
May, 2015
Purchasing Managers’ Index (PMI)
10 Macroeconomic Overview Brazil 3/9
Source: Latin Focus
The Markit manufacturing Purchasing Managers’ Index (PMI) fell from March’s 46.2 to 46.0
in April, thus dropping to the lowest level in over four years. As a result, the PMI index is now
further below the 50-threshold that separates contraction from expansion in business
conditions in the manufacturing sector. According to Markit, April’s figure came on the back
of a steeper decrease in output, new business and buying levels.
May, 2015
PMI
Note: A reading above 50 indicates an expansion in business activity while a
value below 50 points to a contraction.
Labor Market
11 Macroeconomic Overview Brazil
Deterioration in labor market conditions in 2015 is expected. The growth of occupied population will be compatible with the slight increase in the unemployment rate in next years.
4/9
Source: BCB, FCF
May, 2015
Unemployment
12 Macroeconomic Overview Brazil 5/9
May, 2015
FEAR OF UNEMPLOYMENT INDEX
UNEMPLOYMENT INDEX
74,7 7573,8
72,274,4 74,6
71,6
76,5
73,574,7 75,3 74,5
6971,3
72,5 73 73,676,1 77
75
98,8
Mar
-10
May
-10
Jul-1
0
Sep-
10
Nov
-10
Jan-
11
Mar
-11
May
-11
Jul-1
1
Sep-
11
Nov
-11
Jan-
12
Mar
-12
May
-12
Jul-1
2
Sep-
12
Nov
-12
Jan-
13
Mar
-13
May
-13
Jul-1
3
Sep-
13
Nov
-13
Jan-
14
Mar
-14
May
-14
Jul-1
4
Sep-
14
Nov
-14
Jan-
15
Mar
-15
Source: IBGE & CNI
GDP Breakdown
13 Macroeconomic Overview Brazil 6/9
Increase of Brazilian GDP’s growth depends on a substantial hike in investments rate and
on some internal measures (labor reform, tax reform, enhancements on infrastructure) and
a better global outlook...
...The low level of confidence indexes (business and consumers) led to a investments
deceleration in 2014.
Source: IBGE, Tendências, FCF
May, 2015
Breakdown of GDP value added in 2014 (%)
5,6
23,4
71,0
Agriculture Industry Services
62,7%
20,3%
19,8%
11,6%
-14,3%
Household Consumption Government Consumption Investments Exports Imports
GDP Breakdown
14 Macroeconomic Overview Brazil 7/9
On the demand side, the decrease in the investments and the fall in imports explained the
lower GDP growth during 2014...
...On the supply side, industry and agriculture reverted the strong increase presented in
2013.
Source: IBGE, Tendências, FCF
May, 2015
2008 2009 2010 2011 2012 2013 2014 2015F 2016F
Household Consumption 6,4% 4,2% 6,4% 4,8% 3,9% 2,9% 0,9% 0,2% 0,1%
Government Consumption 2,1% 2,9% 3,9% 2,2% 3,2% 2,2% 1,3% 2,2% 2,0%
Investments 12,7% -1,9% 17,8% 6,6% -0,6% 6,1% -4,4% -4,6% 0,6%
Exports 0,4% -9,2% 11,7% 4,8% 0,5% 2,1% -1,1% -1,4% 5,0%
Imports 17,0% -7,6% 33,6% 9,4% 0,7% 7,5% -1,0% -9,0% -3,7%
Agriculture 5,5% -3,8% 6,8% 5,6% -2,5% 7,9% 0,4% 0,1% 0,9%
Industry 3,9% -4,8% 10,4% 4,1% 0,1% 1,8% -1,2% -4,3% 2,3%
Services 4,8% 1,9% 5,8% 3,4% 2,4% 2,5% 0,7% -0,7% 1,0%
5,0% -0,2% 7,6% 3,9% 1,8% 2,7% 0,1% -1,4% 0,9%GDP (%)
De
ma
nd
Su
pp
ly
GDP growth on supply and demand sides (%)
Investments vs GDP
15 Macroeconomic Overview Brazil Source: IBGE, FCF
May, 2015 8/9
Investments vs GDP
16 Macroeconomic Overview Brazil 9/9
Source: BNDES, Credit Suisse
Lack of suitable infrastructure is a serious
bottleneck to increase growth pace of
Brazil.
Investment rate of Brazil is recurrently
lower than 20%. Infrastructure investments
are far below the level of other developed
countries and from BRICS’.
Infrastructure Investments
(% of GDP, average 1992-2011)
Water
Energy
Airports
Ports
Railroads
Highways
China
Japan
India
Other Developed
Countries
Middle East &
Africa
Eastern Europe
European Union
USA
LatAm
Brazil
Infrastructure Investments in Brazil
(% of GDP)
May, 2015
Inflation
17 Macroeconomic Overview Brazil
May, 2015
Inflation
18 Macroeconomic Overview Brazil
CPI began the year upper the limit of 6.5% yoy and should keep pressured along 2015, mainly due to administered prices and food...
… besides the inflation will be above the upper target limit in the current year, the government has been taken the measures to bring the inflation closer to the target in 2016.
1/1
Source: IBGE, FCF
May, 2015
4,3
5,96,5
5,8 5,96,4
8,4
5,5
4,5 4,5 4,5 4,5 4,5 4,5 4,5 4,5
2009 2010 2011 2012 2013 2014 2015F 2016F
CPI Evolution (% p.y)
CPI Target
Interest Rates & FX
19 Macroeconomic Overview Brazil
May, 2015
Interest Rates
20 Macroeconomic Overview Brazil
At last Central Bank Monetary Policy Committee (COPOM) meeting, Selic was raised in another 50 bp to 13.25% in May 2015 that until now bring a +600 tightening cycle initiated in April’13. Market expects another hike of 50bp to reach 13.75% in the end of 2015. There are few entities in the market that are forecasting a Selic at 14% in the end of this year.
1/1
Source: BCB, FCF
Besides the pressured inflation, it should remain high along the year since the focus of the monetary authority moves to 2016, the monetary policy strategy tends to put less weight on current inflation and more attention on economic growth and fiscal adjustment.
May, 2015
8,75
12,50
7,25
10,00
11,00
12,25
13,75
12,00
7
9
11
13
Interest Rate - Selic (% p.y.)
FX
21 Macroeconomic Overview Brazil
1/2
Since the middle of 2011, BRL entered in a downward trend. From September 2014 until
now the deterioration of fiscal accounts, the uncertainty about economic policy to be adopted,
the turbulences around political environment and the difficulty on the fiscal adjustment
approval led to a sharp deterioration in the flow to Brazil and the exchange rate had
depreciated faster. The market expects BRL 3.20 / USD for the end of 2015.
Source: BCB, FFB
May, 2015
FX
22 Macroeconomic Overview Brazil
2/2
BRL x USD : Currency behavior in the last years
PSDB x PT 54,28 x 27,04
PSDB x PT 53,06 x 31,01
PT x PSDB 46,44 x 23,19
PT x PSDB 48,61 x 41,64
PT x PSDB 46,91 x 32,61
PT x PSDB 51,6 x 48,4
FHC FHC Lula Lula
Source: BCB, TSE, FFB
Dilma
May, 2015
External Accounts
23 Macroeconomic Overview Brazil
May, 2015
Trade Balance
24 Macroeconomic Overview Brazil 1/
3 Source: Market Consensus/BCB, MDIC, FCF
The first annual deficit since 2000, 2014 posted a trade balance deficit of USD 3.9 bn…
May, 2015
...Mainly explained by the contraction of exports, that negatively affected commodity prices
and the slowdown in demand of major trading partners.
32%
23%
16% 17%
23%
-23%
32%
27%
-5%
0%
-7%
-16%
3%
30%
17%
24%
32% 44%
-26%
42%
25%
-1%
7%
-4%
-18%
-2%
33,7
44,7 46,1
40,0
24,7 25,3
20,3
29,8
19,4
2,6
(3,9)
0,7
9,6
(10,0)
-
10,0
20,0
30,0
40,0
50,0
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F
Exports (%) Imports (%) Trade Balance (USD bi)
As séries de contas externas não consideram a metodologia adotada pelo Bacen a partir de abril 2015.
Trade Balance 2014 – Main Products
25 Macroeconomic Overview Brazil
2/3
Source: Secex, Mdic
Main Exported Products 2014 Main Imported Products 2014
May, 2015
Main Exported Products Value % Share
1 - Soybeans & products 31.408 14
2 - Ores 28.402 12,6
3 - Oil and fuel 25.175 11,2
4 - Transport material 20.374 9,1
5 - Meats 16.891 7,5
6 - Chemicals 15.051 6,7
7 - Metallurgic products 14.423 6,4
8 - Sugar & ethanol 10.357 4,6
9 - Machines & equipaments 8.671 3,9
10 - Paper & pulp 7.218 3,2
11 - Coffee 6.616 2,9
12 - Footwear & leather 4.287 1,9
13 - Eletric equipament 3.965 1,8
14 - Precious metals and stones 2.817 1,3
15 - Textiles 2.536 1,1
Main Imported Products Value % Share
1 - Fuel and Oil 45.040 19,7
2 - Mechanical Equipment 31.874 13,9
3 - Electrical and Electronical Equipment 27.013 11,8
4 - Motor Vehicles and parts 19.470 8,5
5 - Organic and Inorganic Chemicals 12.834 5,6
6 - Plastics and its Products 8.849 3,9
7 - Fertilizers 8.443 3,7
8 - Iron, Steel and its Products 7.468 3,3
9 - Pharmaceutica 7.427 3,2
10 - Optical and Precision Equipment 6.761 3
11 - Rubber and its products 4.091 1,8
12 - Cereals and milling products 3.183 1,4
13 - Airplanes and its parts 2.571 1,1
14 - Synthetic and Arificial Filaments and Fibers 2.503 1,1
15 - Cooper and its products 1.986 0,9
This deficit was funded mostly by a higher volume of external loans, which drove the external debt up.
Current Account
26 Macroeconomic Overview Brazil
The current-account deficit was the widest in 13 years. The deficit is boosted by the trade balance deficit.
3/3
Source: BCB, Credit Suisse, FCF
May, 2015
-24
-31-33
-25 -25 -23
-8
4
12 14 14
2
-28-24
-48 -53-54
-81
-83-76
-2,8
-3,5
-4-4,3
-3,8
-4,2
-1,5
0,8
1,81,6
1,3
0,1
-1,7-1,5
-2,1 -2-2,2
-3,4
-3,9 -4,0 -3,9
-4,5
-2,5
-0,5
1,5
-90
-70
-50
-30
-10
10
Current- Account Balance
USD billion % of GDP
As séries de contas externas não consideram a metodologia adotada pelo Bacen a partir de abril 2015.
Foreign Direct Investments (FDI)
27 Macroeconomic Overview Brazil 1/
1
Foreign direct investments (FDI) are expected to decline in the upcoming years as a result of lower growth perspectives for the local economy
Source: BCB, FCF
May, 2015
Intercompany Loans Capital market share
As séries de contas externas não consideram a metodologia adotada pelo Bacen a partir de abril 2015.
Credit Operations
28 Macroeconomic Overview Brazil
May, 2015
Credit x Income Commitment x Delinquency
29 Macroeconomic Overview Brazil 1/
6
Source: BCB, FCF
May, 2015
The population leverage has become much bigger in recent years, with no room for new financial loans. According to the current scenario, interest rates have gone up and credit costs are higher nowadays.
31,3 30,2
35,5
40,7
43,9 44,1 46,5
50,3 52,6
54,7 56,8
58,1
17,4 18,2 18,2 18,9 19,6 19,7
23,3 22,9 21,9 22,0 22,0 21,8
6,2 6,9 6,4 7,2 7,0 5,3
6,7 6,9 5,7
6,8 5,4 5,6
-
10,0
20,0
30,0
40,0
50,0
60,0
70,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F
Credit Operations (%GDP)
Income Commitment (%)
Delinquency Rate for Individuals (%)
Delinquency
30 Macroeconomic Overview Brazil 2/
6
Delinquency remained relatively stable in 2014 following the reduction in credit concessions to
auto financing. Total loans to this segment decreased 4.5% in 2014, leading delinquencies to
decline from 5.2% to 3.9%.
Source: BCB, Credit Suisse
Delinquency Rate (%)
May, 2015
The rising unemployment, low confidence, and tightened monetary and fiscal policies, creates an
expectation that credit growth continue its gradual deceleration and delinquency tends to
increase, as it adjusts to a challenging economic scenario for companies and consumers.
Credit Operations
31 Macroeconomic Overview Brazil 3/
6
As a result of the current monetary tightening cycle, spreads and interest rates also
increased in the period for both earmarked and non-earmarked operations.
Source: Market Consensus/BCB, FCF
May, 2015
Based on the scenario for economic activity in the current year, the continuity of monetary
politic and the ongoing fiscal adjustment, the deceleration in credit operations is expected.
43,9 44,1 46,5
50,3 52,6
54,7 56,8 58,1
2009 2010 2011 2012 2013 2014 2015F 2016F
Total Credit Operations (% GDP)
BNDES participation
32 Macroeconomic Overview Brazil 4/
6
Source: BNDES, Credit Suisse, FCF
Since 2008, National Treasury injected more than BRL 400 bln in the Public Banks to
support credit originations and offset the effects of financial crisis
No further contribution from National Treasury to public banks in the next 3 years, due
to the high impact on public accounts, with reflects over sovereign credit ratings
May, 2015
Track Record of Money Injection on Public Banks
(BRL bln)
TJLP x Selic
33 Macroeconomic Overview Brazil 5/
6
Source: BNDES, FCF
Current tightening cycle (initiated on October 2014) widened the gap between Selic and
TJLP (“Long Term Interest Rates”) to 625 bps (biggest gap since 2008).
In the last week of December, CMN announced an increase of TJLP to 5,50%py. Market
currently predicts further increases on TJLP along 2015, so that it will surpass 6,00%py
level at year end.
May, 2015
Bank loans
34 Macroeconomic Overview Brazil 6/
6
Participation of public on total credit portfolio increased from 34% in 2007 to 59% on
December 2014.
Origination pace of credit operations at public banks decreased from 11.2% yoy to 10.5%
yoy in April, totaling BRL 3.061 trillion, which represents 54.5% of GDP.
May, 2015
Source: Credit Suisse, FCF
Public Accounts
35 Macroeconomic Overview Brazil
May, 2015
Public Accounts
36 Macroeconomic Overview Brazil
Fiscal account has deteriorated very sharply since 2011 at both the flow (fiscal deficit) and
stock (gross public debt) levels. The consolidated public sector recorded a primary deficit of
0.6% of GDP in 2014 as a direct result of lower tax revenues for the central government
due to less contributions related to a smaller economic growth and an increased in the
government expenditure.
Source: Market Consensus /BCB, FCF 1/
5
Net debt is gross debt minus financial assets corresponding to debt instruments. These financial assets are: monetary gold and SDRs,
currency and deposits, debt securities, loans, insurance, pension, and standardize guarantee schemes and other accounts receivable.
May, 2015
Gross debt has increased owing to the continued direct issuance of BRL 60.0 billion to the
BNDES and a fiscal deficit (primary surplus minus interest payment) of 6.7% of GDP. The
steady erosion of the fiscal stance pushed net and gross public debt up.
42,1
39,2
36,4 35,2
33,8 34,1 35,0
41,0
60,9
53,4 54,2
58,7 57,2
58,9
61,7 61,9
2009 2010 2011 2012 2013 2014 2015F 2016F
Brazilian Debt (% GDP)
Net Debt Gross Debt
Primary & Nominal Results
37 Macroeconomic Overview Brazil
Source: Credit Suisse, FCF
2/5
The primary result posted a deficit of 0.6% of GDP in 2014. The cumulative primary surplus
in 2015 has reached 28% of the objective set for the year (1.2% of GDP). Recession will
make it an even more challenging goal for the year, and Central Bank already admits it. The
market expects a primary surplus of 0.9% of GDP in 2015. For 2016, the forecasted target is
2.0% of GDP.
May, 2015
Public Sector Primary Result
-0.6
0.9
Fiscal Measures
38 Macroeconomic Overview Brazil
May, 2015
In January the Government has reinforced its commitment to fiscal adjustment (on spending and revenue) and
freeing up the tariffs. However some measures to effect must be approved by the Senate by the end of May,
once they expire on July 1. 3/5
Source: Santander, FCF
Before Now
Wage bonus Needs 1 month of work Needs 6 months working
Unemployment insurance Needs 1 month of work Needs 18 months working for 1st request ( 12 months for the 2nd request
and 6 months for the 3rd)
Death pension Pay the total amount (w/o limits)
Needs 2yrs married and 2yrs of contribution to the pension system.
Payment depend on the age expectancy: 50% of the total amount is paid.
Young widow(er) will not receive
Unemployment insurance to fishermen When it is not fishing season3yrs as fisherman needed and cannot receive this benefit if receives
another (as illness assistance)
Sick leave as of 15 days out of work due to illnessAs of 30 days out of work due to illness ( 12 months for the 2nd request and 6
months for the 3rd)
CIDE and PIS/Cofins (tax on gasoline and
diesel)
None CIDE at gasoline and diesel prices/
PIS/Cofins at BRL0.266 cents in gasoline price
and at BRL0.148 cents in diesel price
CIDE at 10 cents in gasoline price and 5 cents in diesel price/ PIS/Cofins at
12 cents in gasoline and at 10 cents in diesel prices
IPI (tax on cars production) 3% - 9% 7% - 13%
IPI (tax on cosmetics) Wholesale prices equalized to retail prices
IOF (tax on finacial operations) on consumer
loans1.50% 3%
PIS/Cofins on imports 9.25% 11.75%
PIS/Cofins on financial revenues 0% 4.65%
FIES (government funded scholarship
program)
Extended the period to fulfill its obligations with the private schools on the
program, reducing its short term monthly
Financial institution's Social Contribution on
Net Income (CSLL)15% 20%
2015 BudgetGovernment will freeze BRL 69.9 billion reais (USD22.5 billion) of spending
from 2015 budget.
39 Macroeconomic Overview Brazil
Source: Rating Agencies, FCF 4/
5
Sovereign Ratings
S&P downgraded, on March 2014,
Brazil's long-term foreign currency
sovereign rating one notch to
BBB-, adopting a stable outlook.
Moody’s and Fitch agencies have
indicated a likely downgrade in
case of no improvements on fiscal
accounts and inflation/growth
performances.
On March 2015, S&P maintained
Brazil’s long term sovereign rating
in BBB-, keeping a stable outlook
due to the economic policy
changes proposed by the
government.
Brazilian Sovereign Credit Ratings
Positive Negative Stable Outlook
May, 2015
Focus on Economic Team Monetary tightening
Fiscal adjustment
Fx adjustment (End of BCB swap program)
Brazil economic challenges have increased Economic recession
High inflation
Fiscal deterioration and growing debt
Downside risks Low confidence indexes and low growth
Challenging external conditions
Corruption scandals and complex political system
Sustainability of the adjustment process
Lack of microeconomic reform agenda
40 Macroeconomic Overview Brazil
Source: Rating Agencies, Fitch 5/
5
Sovereign Ratings
May, 2015
Inflation Growth Market expectation *
* Based on Focus research, April 10th, 2015
Fiscal deterioration and Growing Debt
Low growth and High Inflation
% yoy
(% GDP)
Politic
41 Macroeconomic Overview Brazil
May, 2015
Dilma’s Approval
May, 2015 42
Macroeconomic Overview Brazil
After Dilma Rousseff’s reelection, the disclosure of several corruption scandals, depreciation of the local currency, the upward trend of inflation and the labor market deterioration, Datafolha reported strong decline in government approval, reaching now 62% of disapproval.
In addition, the fiscal adjustments in place and cuts in social benefit entitlements are likely bring about a decline in political support from unions and social movements, which are among the most traditional supporters of the ruling PT.
Source: TSE, FCF 1/2
Confidence Index
43 Macroeconomic Overview Brazil
The sharp fall presented since the beginning of the 2014 is still “downhill”. In 2015 the confidence index already reached the worst level since 2005. This result was motivated by the worsening of domestic scenario, the expectations and the worries about labor market, inflation and the risk of water and electricity shortage.
Social Movements
World Cup
Source: FGV, CNI, FCF
May, 2015
2/2
83,3
76,175
80
85
90
95
100
105
110
115
120
125
Confidence Index
Consumer Confidence Index Industry Confidence Index