MINISTRY OF PLANNING Brazil: Growth, Reforms and Social Inclusion Minister Paulo Bernardo Nova Iorque, abril de 2009

MINISTRY OF PLANNING 2 Recent Developments of Brazilian Economy: –Strength of macroeconomic fundamentals –Growth with social commitment Counter-cyclical Policies

MINISTRY OF PLANNING Brazil has consolidated a mass consumption market and has promoted the emergence of a new middle class, capable of inducing endogenous growth Objective of PPA for 2004 – 2007: Growth with generation of employment and income, environmentally sustainable and reducing social inequalities

MINISTRY OF PLANNING From 2003 to 2008, the Brazilian economy has grown 27,4%, an average of 4,1% per year. Average ,1% p.y. Real GDP Growth (% py) Source: IBGE.

MINISTRY OF PLANNING Primary Surplus Fiscal policy consistency Source: Central Bank Nominal Deficit Primary Surplus2,914,094,34 Nominal Deficit4,233,502,01 % of GDP

MINISTRY OF PLANNING Source: Central Bank Accumulated 12 months Upper band Target – 4,5% The Central Bank is credible and autonomous to pursue the inflation target... %

MINISTRY OF PLANNING Public and Private Partnerships Operational Autonomy of the Central Bank Bankruptcy Law Civil Service Efficiency Tax Reform The strength of macroeconomic fundamentals is accompanied by structural reforms

MINISTRY OF PLANNING Source: FGV/PNAD/IBGE Growth has reduced income inequality and taken 20 million people out of poverty Population below of poverty line Gini Index %

MINISTRY OF PLANNING Fonte: MDS e SOF/MP.*LOA 2009 Households assisted (million) 8,76,73,6n.d. Amount transferred (R$ billion) (Growth rate) 11,1 (target) 11,0 In 2008, the expansion of the amount transferred includes the accumulated inflation, measured by the consumer price index (INPC) until 2007, and the extent of benefit to young people from 15 to 17 years old. Aiming to improve income distribution, the government extended the Bolsa Família program. Bolsa Família Amount transferred and number of households assisted 9 11,1 % Budget 0,84%0,95% 1,33% 1,37%1,42%1,41%1,50%1,52%

MINISTRY OF PLANNING 10 Disbursements of PRONAF – Plano Safra (R$ billion of December/2008; Deflator: INPC) Beneficiaries of PRONAF (in contracts) Source:MDA. To ensure income for small farmers, in 2009, the resources for Pronaf have been expanded. The amount for the current year represents more than seven times the amount for 2002, in real terms. YearNorthNortheastMiddle-WestSoutheastSouthBrazil 2002/ / / / / / Total

MINISTRY OF PLANNING 11 Unemployment reached the lowest rate in December 2008 (6,8%). Labor Market Source: IBGE.

MINISTRY OF PLANNING... It has contributed, in conjunction with inflation control, to recovering the purchasing power of the population. percentage of the minimum wage expense in acquiring the basic food basket Source: Dieese and MTE.

MINISTRY OF PLANNING Development of Economic Classes (percentage of population between 15 and 60 years old) And, in conjunction with the Bolsa Família Program, it has allowed significant social mobility. Brazil today is a middle class country. Source: CPS/FGV (IBGE).

MINISTRY OF PLANNING With the expansion of the middle class and the increase of credit, for the period 2004 to 2008: Retail sales increased 47.3%, with an emphasis on equipment and office materials, computing and communication (+275.9%) and furniture and kitchen appliances (+120.8%) Growth of 84.7% on sales of national cars Expansion of 52.3% on sales of the supermarket sector Construction: 10.3% annual growth over the past two years

MINISTRY OF PLANNING Counter-cyclical Policies PAC (Growth Acceleration Program) Strengthening the BNDES Energy Minha Casa, Minha Vida Housing Program Tax Reduction for motorcycles, automobiles, building material and kitchen appliances 15

MINISTRY OF PLANNING Source: IBGE % of GDP Investment is an important pillar of the current growth cycle

MINISTRY OF PLANNING Disbursement of BNDES (R$ billion of December/2008; deflator IPCA) Private investment, in turn, has received support from BNDES, with emphasis on infrastructure and SMEs 17 Disbursement of BNDES for infrastructure and SMEs (R$ billion of December/2008; deflator IPCA) Source: BNDES.

MINISTRY OF PLANNING The challenge is to maintain public investment even in the scenario of falling revenues. Such investment, however, is essential to induce private investment and mitigate the fall in aggregate demand caused by the external crisis. * 2009 = LOA 2009 (Law + Credtis) Source: STN/MF e SOF/MP. Public Investment, 2000 – 2009* (R$ billion; commitment paid) 18 Rem: Administered Revenues at prices of Feb/09 (deflator: IPCA). Excluding pension income. Source: RFB/MF. Administered Revenues – real growth (IPCA) (the same month of the previous year)

MINISTRY OF PLANNING RegionLogisticsEnergy Social and Urban Total North7,123,24,134,4 Northeast14,142,219,776,0 Southeast25,2134,07,0166,2 South9,619,91,230,7 Middle-West4,415,41,521,3 National35,660,1221,4317,1 TOTAL96,0295,0255,0646,0 Investment by region Investment by region R$ billion

MINISTRY OF PLANNING ENERGY: OVERVIEW Increase of 100,000 GWh of energy supply between 2002 and Construction of 26 hydroeletric power stations, corresponding to 11,917 MW in addition (10% more over 2007 production) Investment of R$ 4.2 billion on the construction of 26 transmission lines, covering 6,800 Km. Investments of US$ 28 billion until 2013 and different systems of oil production starting by Estimated production of oil of 2.1 million bpd in 2013 and 2.48 million bpd in Today the production is about 1.9 million bpd. Oil reserves are estimated to increase between 40% to 60% (15.5 million boe). About 7 milion m 3 /d of natural gas available to the market in 2013 and 40 million m 3 /d in Today the production is about 59 million m 3 /d. Strengthening Brazilian petrochemical chain and attraction of investors in the supply chain. 20

MINISTRY OF PLANNING Minha Casa, Minha Vida The Program Minha Casa, Minha Vida (My House, My Life), launched in March of this year, aims to finance the construction of 1 million homes, at a cost of about $ 60 billion, for families with incomes of up to ten minimum wages, in partnership with states, municipalities and private enterprise.

MINISTRY OF PLANNING 22 Commitment to Macroeconomic Sustainability Average economic growth of 4.1% in the last six years and the strengthening of fiscal, monetary and external sector indicators. Social Inclusion 20 million people left poverty in the period 2003 to About 18 million Brazilians entered the middle class from 2002 to Doubling the amount of credit offered to the person. Increase of 40% in the number enrolled in higher education. Creation of 8.9 million formal jobs.

MINISTRY OF PLANNING Thank you!