International Consulting Economists’ Association

12 April 2011

Brazil:

Has the Future finally arrived?

Peter Collecott

Outline

• Some Basics• A Selective History• Serial Disappointment• Recent Success• Is Success now Sustainable?• Brazil as a BRIC• Future Prospects and Challenges

Scale (1)

Scale (2)

Scale (3)

Brazil is:• the 5th largest country• the 5th most populous country• the 4th most populous democracy• The 7th/8th largest economy

Brazil has:• the largest area of tropical forest• the greatest biodiversity• the largest flows of fresh water• etc etc

Some Numbers Area Russia 17.1

Canada 10.0China 9.6US 9.6

Brazil 8.5(US - Alaska 8.1)Australia 7.7India 3.2

Population China 1,340India 1,190US 311Indonesia 238

Brazil 190Russia 142

Urbanisation 84%

GDP $2.09 tn (market) $2.18 tn (PPP)

GDP/head $10,800 $11,300

A Selective History

1500 European discovery 1700s Minas Gerais Gold Rush 1808 arrival of Portuguese Court 1822 Independent Empire 1888 Abolition of Slavery 1889 Declaration of a Republic 1930 - 1985 Authoritarian/Military

Regimes 1985 - 1994 Transition to Democracy 2003 - 2010 President Lula

Success and Serial Disappointment

Success and Serial Disappointment

Success and Serial Disappointment

Success and Serial Disappointment

Recent SuccessGDP ($bn)

Recent SuccessExports and Imports ($bn)

Recent SuccessExports/GDP (%)

Recent Success

Poverty Indicators BrazilUMIC

s

Poverty (% of population below national poverty line) 22

Urban population (% of total population) 84 75

Life expectancy at birth (years) 72 71

Infant mortality (per 1,000 live births) 18 21

Literacy (% of population age 15+) 90 94

Recent Success

Recent SuccessHuman Development

Is success sustainable?Inflation

Is success sustainable?Public Sector Debt

Is success sustainable?Forex Reserves ($bn)

Is success sustainable?The Exchange Rate

Is success sustainable?Direction of Exports

Is success sustainable?

• Brazil produces what a globalised world needs:– Raw materials– Food– Biofuels – and now oil & gasYet over 50% of exports are manufactures

• And it can continue to do so:– Untapped mineral resources– Land, agricultural technology, water– Clean energy matrix – 43% renewables– Rapidly internationalising conglomerates

Brazil as a BRICGoldman Sachs’ verdict

• Doubts in 2003:– Openness to trade– Investment and savings levels– Public and foreign debt levels

• Enthusiasm in 2011:– Brazil best performing BRIC market since 2001

(US$)– 5 year CDS lower post-crisis– Weights in portfolio: China 36.8% Brazil 33.3%

Brazil as a BRIC

Brazil is an emerging global power– Certainly economically; probably politically

In many ways the most solid of the BRICs:• Democratic• Politically stable• Unlikely to suffer social upheaval

– Urbanisation has happened– The middle class is growing– Population is stabilizing

• Unlikely to suffer badly from Climate Change• The most “like minded”

Brazil’s Global RoleCurrent Stereotypes

• China – the workshop of the world

• India – provider of IT-based services

• Brazil – global provisioner

Brazil’s Future Role?

Probably will be the global leader in bio-industries– Bio-energy– Biomaterials from bio-refineries– Bio-pharmacuticals– Bio??

Brazil has the requisite:– Biodiversity– Agricultural land - and water– Agricultural expertise– Industrial base– S&T base

The Challenges

In order to benefit maximally, Brazil needs to address: – The political culture– The inefficiencies of the State:

• Public services• The taxation system• The justice system• Labour laws

– Low investment, in particular in:• Education• Infrastructure

– The need for continual improvements in efficiency and innovation

Brazil needs to turn itself from a well functioning democracy to a modern efficient state