Brazilian Confederation of Agriculture and Livestock

Brazilian Agribusiness: Investment Policies and Opportunities

5 August, 2013 Eduardo RiedelVice-President of CNA

CNA in Brazil – an institutional overview

• The Brazilian Confederation of Agriculture and Livestock - CNA was founded in 1951.

• In recent years CNA has consolidated its position as the main forum for debate and decision making for Brazilian agribusiness.

• The CNA System comprises twenty-seven state-level agriculture and livestock federations and over two thousand rural unions, through which direct support measures are provided for farmers at the local level.

• CNA speaks on behalf of 5 million Brazilian rural producers.

CNA institutional mission

• Represent, organize and strengthen Brazilian farmers, defend their rights and interests, while promoting economic, social and environmental development in the farm sector.

• CNA System comprises the National Rural Learning Service - SENAR which provides capacity building for farmers and farm workers, and Instituto CNA, a research institute which conducts rural development studies and promotes social responsibility.

CNA system

Brazilian Rural Employers System

SOCIETY

FEDERATIONS

UNIONS

FARMERS

Capacity building of technicians and farmers

In 2012, the CNA and SENAR trained 553 technicians to disseminate low carbon technologies among producers.

CNA presence in China

Main objectives

Promotion of Brazilian agribusiness in China and in other regional markets,

including Taiwan, Hong Kong and Macau

Identification of opportunities for direct investments in infrastructure and

logistics for warehousing and distribution of Brazilian agricultural and

livestock production

Image & positioning of Brazilian agribusiness

Trade Promotion and Market Access

FDI Attraction Trade Intelligence

Strategies for the Chinese market

Opening of Beijing office - 14 November, 2012

Main objectives

Advocacy of interests of Brazilian agribusiness within

European institutions

Reduction of sanitary and phytosanitary barriers for

Brazilian products

Image & positioning of

Brazilian agribusiness

Policy advocacy, trade intelligence

and market access

Policies and negotiations monitoring

Strategies in the European market

CNA presence in Europe

Innauguration of Brussels office 19 June, 2013

SRI

Competitive Inteligence

Market access

negotiations

Trade and investment promotion

SRI

1 . Analysis of market trends and elaboration of differentiated strategies

2. Identification of business opportunities

1. Trade promotion strategies

2. Actions to attract investments in infrastructure and logistics

3. Expansion of the institutional network and alliances

1. Identification of opportunities and barriers

2. Monitoring of public policies in the target markets

3. Policy advocacy regarding trade negotiations

CNA International Relations Department (SRI)

Identification of market opportunities and barriers

• Work with trade promotion institutions and government agencies

Proposition of a domestic and foreign policy agenda

CNA International Strategy

• Different strategies for primary and processed products

• Market intelligence strategies: scale products and market niches

Brazilian GDP 2012

Employment

Total Exports 2012

Sources: CEPEA-USP,SUT/CNA, MAPA and IPEA. US$ 1 = R$ 1,84, Brazilian Central Bank average. 2004 Employment data

Other sectors GDP (80.2%)US$ 1.839 trillion

Agribusiness GDP 2012US$ 412.0 billion (19.8%)

Agribusiness Agriculture

US$290.4 billion(70.5%)

Agribusiness Livestock

US$121.8 billion(29.5%)

Other SectorsUS$ 146.77 billion

(60.5%)

US$ 2.251 trillion

US$ 242.6 billion

AgribusinessUS$ 95.81 billion

(39.5%) Agribusiness37%

AgronegócioBrazilian Agribusiness

Cot

ton

1.3

1.7

2012/13 2022/23

+ 30.7%

2012/13 2022/23

Mai

ze

+ 20.0%

77.9

93.6

2012/13 2022/23

Soyb

ean

81.5

99.2

+ 21.8%

2012/13 2022/23

Cof

fee* + 10.9%

46

51

Agribusiness ProjectionsGrains and Fibers – 2012/13 to 2022/23 (million tons)

Source: MAPA*Million 60kg bags

184.2

222.3

+20.7%

Gra

ins

2012/13 2022/23

Cat

tle

8.9

10.9

2012/13 2022/23

+22,5%

2012/13 2022/23

Poul

try +44%

14.1

20.6

2012/13 2022/23

Pork

3.6

4.3

+20.6%

Agribusiness ProjectionsMeats – 2012/13 to 2022/23 (million tons)

Source: MAPA

26.5

35.8

+34.9%

Mea

ts2012/13 2022/23

Suga

r

36.3

44.5

2012/13 2022/23

+ 22.6%

2012/13 2022/23

Ora

nge

Juic

e

+ 17.8%

20.2

23.8

2012/13 2022/23

Cel

lulo

se

14.2

18.2

+ 28.2%

2012/13 2022/23

Pape

r + 24.3%

10.4

13.0

Agribusiness ProjectionsStrategic Products – 2012/13 to 2022/23 (million tons)

Source: MAPA

Sources: MDIC, MAPA and IBGE

Exports43.6%

Agribusiness Production and Domestic Consumption

Domestic consumption

56.4%

The importance of foreign market to Brazil

Source: MAPA, Conab and UNICA

66.7%

84.1%

56.6%

66.9%

81.5%

43.9%

39.3%

80.8%

33.3%

15.9%

43.4%

33.1%

18.5%

56.1%

60.7%

19.2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cotton

Corn

Soybean

Poultry meat

Cattle meat

Coffee

Sugar

Ethanol

Domestic Consumption Exports

Source: MAPA

Main Markets for Brazilian Agribusiness 2012

United States7.3%

Russia 3.0%

China18.8% Japan

3.7%

European Union23.4%

Source: USDA

Observation: 2012’s data

Brazil: World production and exports ranking

Main Products

World Ranking World Trade participation

(%)Production Exports

Sugar 1º 1º 44%

Coffee 1º 1º 26%

Orange juice 1º 1º 81%

Soybeans 1º 1º 17%

Cattle meat 2º 1º 39%

Poultry 3º 1º 35%

Maize 3º 2º 25%

Pork meat 4º 4º 22%

Soybean oil 4º 2º 19%

Soybean meal 4º 2º 8%

Cotton 5º 2º 11%

Source: *USDA; **AgroStat/MAPA

Brazilian agricultural exportsMain destinations in 2012

Products Main destinations Total imports volume*(thousand tons)

Imports from Brazil **

(thousand tons)

Imports from Brazil participation

(%)

Coffee United States 1,429 301 21%

Meat Hong Kong 1,010 698 69%

Maize Iran 3,500 2,966 85%

Soybean China 64,550 23,689 37%

Cotton South Africa 34 0.94 3%

United State:Consumption and Imports (2012)

Products Consumption* (thousand tons)

Imports* (thousand tons)

Imports from Brazil** (thousand tons)

Imports from Brazil participation

Coffee 1,405 1,430 301.4 21%

Rice 3,810 683 7.4 1%

Cattle 11,744 1,007 18.7 2%

Poultry 13,342 51 0.37 1%

Pork 8,438 363 0.17 0%

Cotton 15,938 22,965 2.8 0%

Corn 265,441 3,810 726.9 19%

Soybeans 47,756 680 N/A 0%

Sugar 3,294 3,810 266.98 7%

Fonte: * USDA / ** AgroStat/MAPA

It is necessary to increase the production

Over 280 million ton. by 2020.

Over 450 million ton. by 2030

Source: FAO

Low Carbon Agriculture (ABC)

Countries Yield Increase (%)

Australia 7

Brazil 40

Canada + United States 15

China and Russia 26

European Union 4

Source: FAO

The World shall increase its production by 60% to serve a world population of 9.1 billion people by 2050

+ 2.8 billion ton.

280 million ton.

World supply

Agricultural and Livestock Production Areas in Brazil

Brazil has 851 million hectares

95.8 million hectares with cities, infrastructure and others (11.3%)

236 million hectares with food production, forest production and biofuels (27.7%)

329.9 million hectares (38.7% of the country) ocupied by rural properties

93.9 million hectares with native vegetation inside rural properties (11%)

61% of the Brazilian territory is preserved

519.7 million hectares

314.8 million ha (37%)

110 million haIndigenous territories

(13%)

95.8 million ha (11%)

236 million ha (28%)

94 million ha (11%)

Total Area: 851.5 million hectares

Áreas públicas preservadas

Terras Indígenas

Outros usos

Áreas de produção agropecuária

Área preservada dentro das propriedades rurais

Preserved public areas

Indigenous territories

Other uses

Agricultural production

Preserved area inside farms

Sources: IBGE, Censo Agropecuário 2006

Land Use in Brazil

 Amazon deforastation in comparison to the Governmental Goals

7577 mile2

1478 mile2

Goal for deforastation reductionObserved deforastation

The goal established in the National Plan for Climate Changes is to reduce the deforastation in 80% by 2020 in comparison to the average observed between 1996-2005

8 years before the deadline, we’ve achieved 72% of our goal.

De

fore

sta

tion

(m

ile2

)

1797 mile2 (72% of the goal)

Low Carbon Agriculture Program – ABC (in Portuguese)

Targets for adoption of technologies that reduce GHG emissions in the Brazilian agriculture

Technological Process Increase of Area/Use - 2020

Recovery of Degraded Pastures 15 million ha

Crop-Livestock-Forest Integration 4 million ha

No-Till System 8 million ha

Biological Nitrogen Fixation 5.5 million ha

Planted Forests 3 million ha

Treatment of Animal Waste 4.4 million m3

Source: Decree nº 7390, of December 9th, 2010

70 million ha to be available

What We Could Produce on 70 million hectares

Current Production With + 70 million ha

Grains and fibers 160 million tons 379 million tons

Bovine Meat 9.1 million tons 15 million tons

Sources: CNA, based on IBGE data, CONAB e SIGSIF

Note: Considering the same current levels of technology.

+ 136.88%

+ 66.67%

Production and Exports of Soybeans and Maize

2012Brazilian Production

139.3 million tonsProduction80.3 mn t= 57.6%

Domestic Consumption**15 mn t

Exports9.7 mn t= 14.6%

Surplus55.6 mn t

Production59.0 mn t= 42.4%

Domestic Consumption**57.9 mn t

Exports56.7 mn t= 85.4%

Surplus1.1 mn t

Produção de soja e milho > 5 mil toneladas

Itacoatiara2.3 mn t(3.5%)

Porto Velho*3.6 mn t(5.5%)

SantarémBelém

São Luís/Itaqui

Salvador/Ilhéus3.0 mn t(4.5%)

3.1 mn t (4.7%)

Vitória4.9 mn t(7.4%)

23.1 mn t (34.8%)

Rio Grande6,2 milhões/t (9,3%)

São Fco do Sul5.9 mn t (8.9%)

1.3 mn t(2.0%)

Paranaguá16.6 mn t (25.0%)

Santos

Zero

* Porto de Porto Velho (RO) = distribui para os Portos de Itacoatiara (AM) e Santarém (PA)** Valores estimados do consumo internoFonte: Produção (CONAB, Safra 2011/2012) e Exportação por Porto (SECEX, 2012)

Exports (2012)

16ºS 16ºS

SantanaZero

Surplus received(regions N, NE e CO)

55.6 mn t

Infrastructure Projects – Northern Arc

Santos (SP) – Cape of Good Hope – Shanghai (China)

20,475 km or 11,056 Nautical Miles31 days trip

COST $ 767.5 thousand (by route)*

Santos (SP) – Rotterdam 10.056 km or

5,430 Nautical Miles15 days trip

COST $ 377.5 thousand (by route)*Ita

qui (

MA) – M

iami

5,587

km or

2,96

3 Nau

tical

Miles

6 Day

s trip

Belém (PA) – Shanghai (China) 20,235 km or 11,087 Nautical Miles

31 days tripCOST $ 760 thousand (by route)*

Sea Routes (distances, time and costs)

Source: http://e-ships.net/dist.htm (jul, 2012) and Aprosoja / *Average cost for a day: $ 25,000.00

Sant

os (S

P) –

Miami

9,198

km or

4,96

7 Nau

tical

Miles

10 D

ays t

rip

Investment ProgramsToll Roads

7.5 thousand km of Toll Roads(5 thousand km are being duplicated)

R$ 42 billion – estimated investment(R$ 23.5 bi over the first 5 years)

Winning bidder: lowest toll rate

Tolls to be charged after 10% of duplication

Leveraged IRR: 10.8% to 14.6% p.a.

Concession term: 30 years

Investment ProgramsRailways

10 thousand km of railways

R$ 91.1 billion - estimated investment(R$ 56 billion over the first 5 years)

Capacity will be sold through public offers

Independent Rail Operators

Leveraged IRR: 13% to 14.6% p.a.

Open access along the whole rail network

Concession term: 30 years

Opening of the Brazilian Ports to Private Capital

The innovations introduced by Law No. 12.815, of 05/16/2013, which modernized the port sector in Brazil, created:

The possibility to build port terminals with private capital

Investment opportunities of R$ 57.2 billion

To make the Brazilian port operations more competitive, the Government will also review the regulatory mark on cabotage, in 2013, with the support of the private sector.

Investment ProgramsPorts

Winning BidderHighest cargo handling with lowest fees

R$ 20.2 billion to be invested(R$ 3.5 bi in concessions and R$ 16.7 bi in leases)

Leases and Concessions

End of cargo differentiation (own cargo and third-party cargo)

R$ 30.6 billion to be invested

Private Use Terminals – TUPs

Term: 25 years(one-time renewal)

Term: 25 years(renewable continuously)

Dredge contracts for 10 years (in blocs)

R$ 6.4 billion to be invested(R$ 3.8 bi in waterways and R$ 2.6 bi in roads)

Access to ports

Dredge: deepening and maintenance of access channels, turning basins and berths

Access roads: 45 interventions in 18 ports

Review of Government Procurement Legislation

The Brazilian Senate has created a Committee to modernize law 8.666/93 that deals with bid tenders and government procurement. This review process has Senator Kátia Abreu as rapporteur and will mainly focus on:

• Burocracy reduction; and

• Increased transparency in public procurement.

Confederação da Agricultura e Pecuária do Brasil