INFRASTRUCTURE IN BRAZIL Scenarios and Opportunities NY, 4 th October 2012

 One of the key factors for a sustainable socioeconomic growth is infrastructure: 2 INTRODUCTION ENERGY GENERATIONTELECOMMUNICATIONS TRANSPORTATION SYSTEM (ROADS, RAILROADS, AIRPORTS…..) SANITATION HOUSING

 The correct dimensions of a country’s infrastructure represents the welfare of its population, because it brings:  Business costs reduction;  Improvement of country’s productivity;  Enhancement of the quality of goods and services produced; and,  Regional integration  After some years of growth, one of the core issues of Brazilian’s agenda is infrastructure development. 3 INTRODUCTION

BRAZIL’S ECONOMIC OVERVIEW 4

 Brazil has been experiencing a major social and economic transformation:  An increase of 27.7% in GDP per capita  US$ 12.7 thousand (2003 to 2011 – Ipea data)  A reduction in income inequality: wealthiest increased by 16.6%  the poorest rose by 91.2% (Ipeadata 2003 to 2011)  More than 30 million people have risen from the poverty level to the middle class bracket (“New Middle Class”)  An increase of 30% in the number of new homes over the past ten years (IBGE)  A reduction in illiteracy: from 11.4% in 2004 to 8.6% in 2011 (IBGE) BRAZIL OVERVIEW SOCIAL INDICATORS 5 HIGHER DEMAND FOR BASIC SERVICES PRESSURE FOR EXPANSION OF INFRASTRUCTURE

 Brazilian’s GDP: US$ 2.4 trillion (the world's sixth largest economy)  GDP’s Growth: 2.7% (in 2011); 1.6% (in 2012) and 4.5% (in Bacen)  Inflation Target: 4.5% per year (2012, 2013 and 2014) – with a 2% “margin”  Inflation Forecast for 2012: 5.2% (Bacen – 06/09)  Average Unemployment rate: 5.3 % (August/2012) (IBGE)  Foreign Reserves: US$ 377 billion (August/2012) (Bacen)  (FDI) Direct Foreign Investments in 2012: US$ 60 billion (Bacen)  Exports: US$ 264 billion/year (Forecast for 2012 of the MDIC) BRAZIL OVERVIEW ECONOMIC INDICATORS 66 SUSTAINABLE GROWTH IS ONLY POSSIBLE WITH THE EXPANSION OF INFRASTRUCTURE

DEFICIT IN INFRASTRUCTURE 7

PORTS BRAZILIAN PORTS: MAIN BOTTLENECKS AND DEMANDS 8 US$ 21,4 BILLION TO MITIGATE PORT INFRASTRUCTURE PROBLEMS US$ billion

DEFICIT IN INFRASTRUCTURE HIGHWAYS 99 A HUGE GAP IN TRANSPORTANTION INFRASTRUCTURE RAILROADS

DEFICIT IN INFRASTRUCTURE HOUSING 10 EVOLUTION OF THE HOUSING DEFICIT – MILLIONS OF HOMES 10 HOUSING DEFICIT ESTIMATED AT 5.6 MILLION HOMES

GOVERNMENT PROGRAMS 11

The investment forecast: US$ 575 billion (2012 – 2014) GOVERNMENT PROGRAMS GROWTH ACCELERATION PROGRAM (PAC) THE MAIN SECTORS (IN BILLIONS) 12 POTENCIAL FOR CONCESSIONS AND PUBLIC-PRIVATE PARTNERSHIPS

OTHER GOVERNMENT PROGRAMS 13

INVESTMENT PROGRAM IN LOGISTICS – HIGHWAYS & RAILROADS (AUG 15, 2012)  Concession of 7.5 thousand kilometers of Highways  Concession of 10 thousand km of federal railroads  Investments of over US$ 66 billion in 25 years:  US$ 21 billion in highways  US$ 45 billion in railroads AIRPORT CONCESSIONS (2012)  Guarulhos, Brasília and Campinas Airports were conceded by the Federal Government in February 2012: US$ 14 billion PETROBRAS INVESTMENT PLAN – 2012 TO 2016  Oil: US$ billion (2012 – 2016) relating to 980 projects  Gas: US$ 13.5 billion (2012 – 2016) relating to 105 projects OTHER GOVERNMENT PROGRAMS 14

15 FORECAST OF NEW INITIATIVES PORTS Bids on concessions for ports are scheduled for October 2012 Investments: US$ 15 to 20 billion through to 2030 Adaptation of existing ports and the creation of new ports AIRPORTS Bids on new concessions for two internationals airports are scheduled for October 2012 – Rio de Janeiro e Belo Horizonte Investments: US$ 1 to 2 billion

2014 WORLD CUP 16

WORLD CUP INVESTMENT OF R$ 27 BILLIONS 17

RIO OLYMPIC GAMES 2016 TOTAL INVESTMENT OF US$ 29 BILLIONS 18

19 WHAT IS NECESSARY TO LEVERAGE INVESTMENTS? Favorable political and institutional framework Investment Major events Political will (government programs) Favorable economic development “Planning Cycle”

PROJECT PLANNING AND DEVELOPMENT 20

Development of preliminary technical studies such as the study of technical feasibility, economic viability, environmental feasibility and legal and juridical studies. Preliminary technical studies Set of necessary and requisite elements, with an appropriate level of accuracy to characterize the works or services, prepared on the basis of indications of the preliminary technical studies. Basic Project Set of necessary and requisite elements for the full implementation of the works  drawings and specifications of materials and services that enable the realization of the physical works. Executive Project PLANNING CYCLE (Law 8666/93) 21 HOW TO RECONCILE AGILITY, QUALITY, LEGALITY AND CONTROL?

Each step of the planning cycle requires specialized services:  Engineering Project Services (construction engineering and assembly; environmental engineering, etc.)  Economic and financial analysis of projects (feasibility)  Project management  Technical support services  Technical and financial management and monitoring of works  Analysis of compliance between project design and execution 22 PROJECT PLANNING AND DEVELOPMENT

 To solve bottlenecks in infrastructure we need a robust specialized consultancy with efficient techniques and experienced professionals  Brazil is currently training a large contingent of qualified professionals  The Brazilian market for specialized services in infrastructure sectors is expanding and becoming attractive in global terms 23 GROWING DEMAND FOR CONSULTANCY SERVICES The consultancy sector will receive 5 to 10% of the total to be invested in infrastructure in Brazil in the coming years

CHALLENGES 24

 RECUPERATION OF THE BRAZILIAN TECHNICAL CAPACITY  ATTRACTING FOREIGN CONSULTANCY COMPANIES  GOVERNMENT AND PUBLIC INCENTIVES FOR SERVICE SECTORS 25 Challenges

26 THANK YOU! CESAR CUNHA CAMPOS Director