Perspectives for the Brazilian Economy and the Role of BNDES

Andre CarvalhalHead of International Capital Markets

June 2010 – São Paulo

BNDES Highlights

Founded on June 20th, 1952

100% state-owned company

Key instrument for implementation of Federal Government’s

industrial and infrastructure policies

Support to micro, small and medium-sized companies

Main provider of long-term financing in Brazil

Emphasis on financing investment projects

EXIM activities

Equity investor through BNDESPAR

Finances long-term investments

Equity Participation

BNDES

BNDESPAR

Internationalization of Brazilian companies

BNDES Limited

Group Structure

Finances capital goods production and purchases

FINAME

As of Dec 31, 2009

Consolidated Assets

R$ 386.6 billion US$ 222.0 billion

Financing of:

• Complete business projects

• Export of goods and services

• Machinery and equipment

Equity Investment

• Stocks and debentures

• Venture Capital

• Seed Capital Funds

• Private Equity Funds

Main Instruments

BNDES vs. Multilateral Banks

IDB = Inter-American Development Bank

IBRD = The International Bank for Reconstruction and Development (World Bank) (*) Unlike other institutions, 12-month fiscal year ends June 30th

CAF = Corporación Andina de Fomento

Capitalization = Shareholders’ Equity / Total AssetsROA = Return On average AssetsROE = Return On average Equity

US$ millon BNDES IDB IBRD CAF

31/12/2009 31/12/2009 30/06/2009* 31/12/2009

Total Assets 222,050 84,006 275,420 15,887

Shareholders' Equity 15,867 20,674 40,037 5,287

Net Income 3,868 794 3,114 235

Loan Disbursements 71,589 11,424 18,564 5,292

Total Loans 162,917 58,049 105,698 11,687

Capitalization 7.1% 24.6% 14.5% 32.9%

ROA 2.3% 1.0% 2.4% 2.4%

ROE 25.0% 4.0% 8.0% 6.2%

Founded 1952 1959 1945 1968

Perspectives for the Brazilian Economy

The Brazilian economy can grow much faster than the

average in developed countries

Investments will be driven by four main sectors: oil & gas,

electric power, logistics and housing

Opportunities for intensive strategies in innovation and social

and environmental sustainability

Main challenges: increase aggregate investment/GDP rate,

and boost competitive progress in the manufacturing industry

The Brazilian economy can grow much faster than the

average in developed countries

Investments will be driven by four main sectors: oil & gas,

electric power, logistics and housing

Opportunities for intensive strategies in innovation and social

and environmental sustainability

Main challenges: increase aggregate investment/GDP rate,

and boost competitive progress in the manufacturing industry

GDP may grow 5% p.a. in the 2010-2014 period

Source: IBGE.

GDP: Annual Real Variation (%)GDP: Annual Real Variation (%)

* 2009 and Avg 2010-14: BNDES' Forecasts.

Sources: IBGE and BNDES.

*

2.8 2.5

5.7

3.24.0

6.15.1 5.0

-0.2

-0.50.51.52.53.54.55.56.5

Average1984-93

Average1994-03

2004 2005 2006 2007 2008 2009 Average2010-14

Investment has strong growth path

Source: BNDES. Elaborated by: APE/BNDES

Forecast of Investment Ratio 2009-2012 (% of GDP)

16,4

17,4

18,7

21,2

20,2

18,6

16,7

15,0

16,0

17,0

18,0

19,0

20,0

21,0

22,0

2006 2007 2008 2009 2010 2011 2012

Forecast

BNDES was responsible for 37% of total credit increase since sep/08

BNDES was responsible for 37% of total credit increase since sep/08

Source: BNDES. *considering the average exchange rate for each year

BNDES Approvals and Disbursements1 (US$ billion)BNDES Approvals and Disbursements1 (US$ billion)

10.913.1 13.6 12.9

19.322.3 23.5

34.1 33.1

50.6 50.5

66.3 68.8

85.2

71.5

88.2

0

10

20

30

40

50

60

70

80

90

2003 2004 2005 2006 2007 2008 2009 2010*

Dis burs ements A pprovals

*last 12 months up to January 2010

Disbursements by Business Sector

52%

30%

11%

7%

46%

35%

12%

7%

48%

30%

14%

8%

40%

38%

17%

5%

50%

36%

9%

5%

53%

33%

7%

7%

40%

40%

8%

12%

43%

39%

6%

12%

46%

35%

5%

14%

2001 2002 2003 2004 2005 2006 2007 2008 2009

I ndustry I nfrastructure Farming and Cattle Raising Trade and Services

3,776 5%

2,632 4%

45,558 64%

13,026 18%

547 1%6,055 8%

2009 Operations

Exchanged to US dollar on disbursement date

US$ 72 billion

Number of Operations

390,729

Disbursements

225,29658%

28,725 7%

23,711 6%

112,997 29%

micro and small individuals large othermedium

PetrobrasPetrobras

Equity Investment Portfolio

• Equity investments: evaluation uses lowest value among acquisition cost or market value

• Market appreciation valued at US$ 53 billion as of Dec 31st, 2009

Stock Book Value Market Value Profit

Eletrobrás 2,483 4,322 1,839

Vale 2,131 7,857 5,726

Petrobras 676 14,410 13,734

Other listed companies 10,123 17,686 7,563

Investment in unlisted companies * 4,008 9,076 5,068

Total 19,421 53,351 33,930

(*) estimated value based on projections of economic value

US$ million

Investment Outlook: Positive ProspectsInvestment Outlook: Positive Prospects

Sectors Growth 2005-8 2010-13 (%)

Infrastructure 111 152 6.5

Industry 191 271 7.2

Total 302 423 7.0

US$ billion

US$/R$ = 1.80

Source: BNDES Forecast

Sectors

 

US$ billion Growth

2005-2008 2010-2013 % year

         

Electric Power 38 51 6.4

Telecom 37 37 0.2

Sanitation 12 22 11.7

Railroads 9 16 13.2

Roads 23 33 7.8

Ports 5 14 22.9Infra 111 152 6.5

Investments in Infrastructure were not affected by the crisis

Investments in Infrastructure were not affected by the crisis

Source: BNDES

Investment in Industry: Domestic-led sectors have already recovered from the crisis

Investment in Industry: Domestic-led sectors have already recovered from the crisis

Sectors US$ billion Growth

2005-2008 2010-2013 % year

Oil and Gas 112 171 8.8

Mining 29 25 (3.1)

Steel 15 20 5.7

Petrochemical 5 17 28.9

Vehicles 12 17 7.3

Electronics 8 12 6.7

Pulp & Paper 10 10 0.5

Industry 191 271 7.3

Source: BNDES

Challenges for InfrastructureChallenges for Infrastructure

PAC (Growth Acceleration Program)

2014 World Cup

2016 World Olympics

Pre-salt

Environmentally sustainable projects

PAC (Growth Acceleration Program)

2014 World Cup

2016 World Olympics

Pre-salt

Environmentally sustainable projects

Focus on infrastructure: PAC (Growth Acceleration Program )

BRAZIL AGENDA

PAC Program

Source: Presidency of Republic (www.pac.gov.br)

FX: 1.7412 (Dec.09)

PAC Investments: 2007 - 2010US$ billion % of Share

ENERGY: 157.8 55

SOCIAL & URBAN: 98.1 34LOGISTICS: 33.5 12

TOTAL 289.4 100.0

ENERGY Electric Energy - Generation - Transmission - Distribution Oil & Gas Renewable Energy

LOGISTICS Highways Railroads Ports Airports Waterways Merchant Marine

SOCIAL & URBAN Electricity for Everyone Sanitation Urbanization Subways Water Resources

Disbursements by Region

BNDES is an Important Supporter of PAC

% of Share

73.4

6.520.1

100.0

Inter-regional

27%

Center-West

5%

Northeast

24%

North16%

South8%

South-East20%

BNDES in PAC

• 327 projects: - Supported Projects: US$ 57.3 Bn

- Eligible Projects: US$ 13.1 Bn• 17 Prospective Projects: US$ 6.7 Bn

FX: 1.7306 (Apr.10)

BNDES Portfolio in PACUS$ billion % of Share

ENERGY: 56.5 73.4

SOCIAL & URBAN: 5.0 6.5LOGISTICS: 15.5 20.1

TOTAL 77.0 100.0

• US$ 883.3 billion in investments as of 2011: US$ 532.7 billion in the 2011-2014 period and US$ 350.9

billion after 2014:

US$ 633.3 billion for energy

US$ 60.5 billion in transport, including railways and the High-speed Train (TAV)

Assorted social investments:

US$ 10 billion in urban mobility

US$ 12,8 billion in the Citizen’s Community program

My House, My Life (MHML) goal of 2 million homes

Other programs include A Better City, Water for Everyone and Electricity for Everyone

• US$ 883.3 billion in investments as of 2011: US$ 532.7 billion in the 2011-2014 period and US$ 350.9

billion after 2014:

US$ 633.3 billion for energy

US$ 60.5 billion in transport, including railways and the High-speed Train (TAV)

Assorted social investments:

US$ 10 billion in urban mobility

US$ 12,8 billion in the Citizen’s Community program

My House, My Life (MHML) goal of 2 million homes

Other programs include A Better City, Water for Everyone and Electricity for Everyone

US$/R$ = 1.80

PAC 2

2014 World Cup2014 World Cup

• For the 2014 World Cup, FIFA requires investments to the tune of US$ 6.4 billion

• BNDES ProCopa Programs

• Arenas

Up to US$ 2.7 billion to build and remodel stadiums and urbanization investments in surrounding areas.

• Tourism

Up to US$ 556 million to build, remodel, expand and modernize hotels.

• For the 2014 World Cup, FIFA requires investments to the tune of US$ 6.4 billion

• BNDES ProCopa Programs

• Arenas

Up to US$ 2.7 billion to build and remodel stadiums and urbanization investments in surrounding areas.

• Tourism

Up to US$ 556 million to build, remodel, expand and modernize hotels.

US$/R$ = 1.80

Brazil has a great opportunity to improve its urban

infrastructure and generate employment

Investment in: transport, urban mobility, hotels, tourism,

communications, security, stadiums and electric energy:

US$ 16 billion in investments in the Olympics will

produce an impact US$ 56.8 billion by the end of 2027*

All these investments will have relevant impacts on a

wide array of production chains as well as on the

expectations of the private sector.

Brazil has a great opportunity to improve its urban

infrastructure and generate employment

Investment in: transport, urban mobility, hotels, tourism,

communications, security, stadiums and electric energy:

US$ 16 billion in investments in the Olympics will

produce an impact US$ 56.8 billion by the end of 2027*

All these investments will have relevant impacts on a

wide array of production chains as well as on the

expectations of the private sector.

*government’s forecast US$/R$ = 1.80

2016 Olympics2016 Olympics

Pre-salt - Great opportunity for Brazil: growing long-term

demand for the complex goods and services supply industry

Strategic goals for the goods and services supply industry: Competitive and sustainable expansion of its supply capacity

Developing higher aggregate value segments

Generating higher-skilled employment

Maintaining the steady increase in local goods & services

Pre-salt

The BNDES will foster investments throughout the entire oil and gas production chain, aiming at building a

competitive global supplier of goods and services in the Oil & Gas sector.

Impacts from Petrobras investments on the production chain (2009-2013)

US$ 111.6 bn in investments may generate industrial production of almost US$ 202.2 billion

Total investments represent 22% of the pre-salt. Therefore, such impacts are still underestimated and have room for growth.

Source: Petrobrás and IBGE. Elaborated: APE/BNDES

In US$ billion Direct Effect Indirect Effect Total

Machinery and Equipment 43.1 8.3 51.4Transport Equipment (especially Ship-building) 28.1 6.8 34.9Metals 11.0 19.9 30.9Other production sectors 9.1 36.9 46.0Trade 13.2 8.6 21.9Services 7.1 34.0 17.1

Total 111.6 90.6 202.2

US$/R$ = 1.80

Brazil’s Long Term ChallengesBrazil’s Long Term Challenges

Resume and qualify long-term planning (energy, logistics, environment, IT infrastructure, ...)

Promote and stimulate domestic savings in order to provide long-term funds for investment (banks and capital market)

Develop capacity for innovation and competitiveness in the manufacturing industry, and promote global presence of Brazilian companies (vs. significant challenge due to exchange rate appreciation)

Increase opportunities for social mobility (job expansion, development/improvement in education) and reduction of the inequality in income distribution

Promote innovation and development of renewable energy sources

The Brazilian Government, specifically the BNDES, is committed to supporting investments, particularly in energy and infrastructure

Thank you!

Brazilian Development Bank - BNDES

To contact us:www.bndes.gov.br/english/