Brazil: New Initiatives for Industrial and Technological Development Opportunities for Foreign Investors Luiz Fernando Furlan Minister of Development, Industry and Foreign Trade June 2004

There is a Brazil that many people know Amazon forest Soccer Carnival Coffee It keeps being successful, but there is still more to know

The Brazil that you must know Innovation, technology, competitiveness and productivity

The Brazil that you must know GDP: US$ 500 billion (2003); Per capita income: US$ 2,800 (2003); 6,300 Ph.D. graduated every year; 97% of the children aged 7 to 14 are in school.

The Brazil that you must know The number of current accounts in Brazilian banks increased by 28%, from 56 to 71.5 million (2000-03); In 2003, from 18.7 millions of income tax declarations, 18.2 were submitted through the internet (97.3%); Almost 100% of the import/export procedures are performed electronically through Siscomex – an integrated trade system; In 2003, the volume of bank transactions made through the internet by individuals increased by 27.9%, reaching R$ 1.5 billion.

The Brazil that you must know Phone lines (fixed + mobile) per 1,000 inhabitants Source: International Telecommunication Union / 2002

The Brazil that you must know Personal Computers per 1,000 inhabitants Source: International Telecommunications Union / 2002

The Brazil that you must know Users of Internet per 1,000 inhabitants Source: International Telecommunications Union / 2001

The Brazil that you must know Industrial Production Base: 2002 = 100 Source: MDIC, IBGE

The Brazil that you must know Vehicles Output (x 1000) Source: Anfavea

The Brazil that you must know Shoes Output (millions of pairs) Source: IBGE

The Brazil that you must know Cell Phones Output (x 1000) Source: MDIC

The Brazil that you must know Steel Output (x 1000 ton) Source: MDIC

The Brazil that you must know Trade Balance US$ billion Target for 2006: US$ 100 billion Source: Secex/MDIC last 12 months ending in May

Competitive and High Added Value Export Sectors: Exports total in 2003: US$ 73 billion – Break down: Transport materials: US$ 10.6 billion – [14.5%]; Aircraft: US$ 1.9 billion – [2.6%]; Vehicles and parts: US$ 4.1 billion – [5.6%]; Steel and metallurgical products: US$ 7 billion – [9.6%]; Petrochemical sector: US$ 4.9 billion – [6.7%]; Mobile phones: US$ 1.2 billion (to USA only) – [1.6%].

The Brazil that you must know External Exposure Interest payments/Exports Net external debt/Exports 19,9 36,4 3,6 1,8 1,0 1,5 2,0 2,5 3,0 3,5 4,0 1998 2000 2002 2004* 36 32 28 % 24 20 Fernando: Lei incentivo Regional. Lei prorrogada para a Inovação regional 16 1998 2000 2002 2004* Source: Central Bank of Brazil (*forecast)

Development and Sustainable Growth Focus of the New Development Initiative Industrial Modernization Innovation and technological development Targets Economic growth, Improvements in competitiveness and efficiency Os pontos de modernização, desenvolvimento tec. e incentivo ao investimento eles são elementos que contribuem para capacidade de inovação. E a partir do processo de inovação geramos a melhor inserção externa (competitiva), fortalecemos a PME´S e as escolha das opções gera necessariamente a melhoria a capacidade de inovação da matriz produtiva.

Guidelines Enhancement of the country’s technological base in areas that show potential for national and international growth; Creation of a favorable environment for private and public investments; Coordinated actions with states, metropolitan regions and local governments; Employment and income generation; Improvement of the image of Brazil abroad.

Initiatives for Industrial, Technological and Foreign Trade Development Competitiveness and innovation: R$ 15 billion (almost US$ 5 billion) of governmental investments; Creation of the National Council on Industrial Development; Creation of the Brazilian Agency for Industrial Development; Horizontal and vertical policies.

Initiatives for Industrial, Technological and Foreign Trade Development Competitiveness and innovation: Future bearer sectors (Biotechnology, Nanotechnology, Biomass) Strategic options Semiconductors Software Capital goods Medical and pharmaceuticals products

Initiatives for Industrial, Technological and Foreign Trade Development BNDES – Programs and credit lines: PROSOFT (US$ 35 million): US$ 26 million already made available by June; MODERMAQ (US$ 860 million); PROFARMA (US$ 172 million); Customized Capital Goods (US$ 172 million);

Investment Room The Brazilian Administration is setting up an investment room designed to help foreign investors to invest in Brazil; Its objective is to bring together decision makers from important related areas in Federal Government and make them ready and available to get in touch with anyone willing to invest in Brazil; Fast track policies to overcome burocracy.

FDI Composition – 2000-2003 Major Sectors Others Telecommunications (US$ 82 billion, FDI inflow) Others Telecommunications Finance Vehicles Chemicals Energy Trade Source: Central Bank of Brazil

Announced Investment Plans (US$ millions) Sector 2003 2004 Share (%) 2003 / 2004 (%) Mining 6 495 11 401 34,5 140,8 Steel 764 5 720 17,3 648,7 Transports 232 3 334 10,1 1 337 Mechanical/Metallurgy 1 036 3 195 9,7 208,4 Electro/electronic 75 2 275 6,9 2 933,3 Telecommunications 863 2 078 6,3 Infrastructure 12 941 1 484 4,5 -88,5 Chemical products 457 804 2,4 75,9 Petrochemicals 247 750 2,3 203,6 Others 3 805 1975 6,0 -52 Total 26 915 33 016 100 22,7 Source: BNDES/MDIC

2004 Outlook FDI: US$ 14,25 billion forecast (Central Bank) Infrastructure: R$ 298 billion PPA 2003-2007 Investment announcements: 71% growth (2003 / 2002) Exports: US$ 83 billion Target for 2006: US$ 100 billion GDP growth: 3.5% (2% due to exports)