1. 1 Henrique de Campos Meirelles June 2004 Brazil Meets Markets

2. 2 I. Economic Activity II. Inflation III. External Sector IV. Fiscal Policy and Debt Management V. External Solvency Ratios

3. 3 I. Economic Activity

4. 4 GDP After FX Crises 3.5% -0.2% -4.9% -6.2% -6.7% -7.4% -10.5% -10.8% -11.0% -13.3% Brazil (2004) Brazil (2003) Russia (1998) Mexico (1995) Korea (1998) Malaysia (1998) Thailand (1998) Uruguay (2002) Argentina (2002) Indonesia (1998) Source: IMF, Brazil 2004: Central Bank estimate

5. 5 GDP Growth -1.2 -0.9 0.5 1.4 1.6 1Q032Q03 3Q034Q031Q04 % Seasonally Adjusted Source: IBGE

6. 6 Industrial Output Source: IBGE, May 2004 = BCB estimate 85 90 95 100 105 110 Jan 99 Sep 99 May 00 Jan 01 Sep 01 May 02 Jan 03 Sep 03 May 04 s.a., 2002 = 100

7. 7 Industrial Output Source: IBGE Total+6.0+5.1 Capital Goods+21.1+20.1 Intermediate Goods+5.3+3.6 Consumer Goods+4.3+3.6 Durable+23.4+19.0 Semi-Durable e Non-Durable+0.2 % Apr 04 Apr 03 Jan-Apr 04 Jan-Apr 03

8. 8 -5 0 5 10 15 20 25 30 35 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Jan 04 Feb 04 Mar 04 Apr 04 Capital Goods Intermediate Goods Durable Goods Non-Durable Goods % Source: IBGE Accumulated growth since June 2003, seasonally adjusted Industrial Output by Categories of Use

9. 9 Industrial Sales x Industrial Output Source: IBGE, CNI 100 105 110 115 120 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Jan 04 Feb 04 Mar 04 Apr 04 Jun 03 = 100 Industrial Output Industrial Sales Inventories reduction

10. 10 -25 -20 -15 -10 -5 0 5 10 Apr 03Jul 03Oct 03Jan 04Apr 04 Insufficient Excessive Balance Quarterly Industrial Survey: Level of Inventories % of Sample Source: FGV

11. 11 Real Retail Sales 97 98 99 100 101 102 103 104 105 106 107 108 Jan 01 May 01 Sep 01 Jan 02 May 02 Sep 02 Jan 03 May 03 Sep 03 Jan 04 Apr 04 Seasonally Adjusted, 3-Month Moving Average Average 2003 = 100 Source: IBGE, Banco Central

12. 12 Apr 04 Apr 03 Jan-Apr 04 Jan-Apr 03 Total+10.1+7.2 Furniture & Electronics+33.3+24.5 Fuel and Lubricants+9.6+6.8 Supermarket, Food, Beverage and Tobacco +6.1+3.8 Vehicles & Autoparts+11.8+10.1 Clothing-0.8-0.4 Retail Sales % Source: IBGE, Banco Central

13. 13 Retail Sales -2 2 6 10 14 18 22 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Jan 04 Feb 04 Mar 04 Apr 04 Accumulated growth since June 2003, seasonally adjusted Supermarket Clothing Furniture & Electronics Vehicles & Autoparts % 26 Source: IBGE, Banco Central

14. 14 Industrial Employment: Brazil Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Jan 04 Feb 04 Mar 04 Apr 04 s.a., Jun 2003 = 100 99.5 100.0 100.5 101.0 Source: CNI

15. 15 Formal Employment s.a., Jun 2003 = 100 99 100 101 102 103 104 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Jan 04 Feb 04 Mar 04 Apr 04 Source: Ministry of Labor and Employment

16. 16 Industrial Real Wages s.a., Jun 2003 = 100 Source: CNI 99 100 101 102 103 104 105 106 107 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Jan 04 Feb 04 Mar 04 Apr 04 108

17. 17 GDP x Domestic Demand 96 98 100 102 104 106 1Q022Q023Q024Q021Q032Q033Q034Q031Q04 Domestic DemandGDP 2Q03 = 100 Source: IBGE

18. 18 GDP x Investment Growth -8% -6% -4% -2% 0% 2% 4% 6% GDPInvestment 1Q032Q033Q034Q031Q04 Source: IBGE

19. 19 Real Interest Rates (360-day swap): Source: Bacen 8 12 16 20 24 28 32 36 40 Jan 97 Jan 98 Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 % p.a. Avg 01/02 17.6% Avg 97/99 21.4% Avg 00 12.3% Avg 03 13.2% Avg 04 10.1%

20. 20 9 11 13 15 17 19 21 23 25 Jan/02 Mar/02 May/02 Jul/02 Sep/02 Nov/02 Jan/03 Mar/03 May/03 Jul/03 Sep/03 Nov/03 Jan/04 Mar/04 May/04 97 98 99 100 101 102 103 104 105 106 107 Retail Sales (t+9) right scale Real Interest Rate vs. Retail Sales % p.y. 2003=100 Real Interest Rate left scale

21. 21 Packing Paper Shipments s.a., Jun 2003 = 100 Source: ABPO 99 103 107 111 115 119 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Jan 04 Feb 04 Mar 04 Apr 04 May 04

22. 22 Power Consumption: São Paulo Source: São Paulo State Energy Department 98 100 102 104 106 108 110 112 114 116 Jun 03 Jul 03 Aug 03 Sep 03 Oct 03 Nov 03 Dec 03 Jan 04 Feb 04 Mar 04 Apr 04 May 04 s.a., Jun 2003 = 100

23. 23 Business Confidence -40 -30 -20 -10 0 10 20 30 40 50 60 70 Jan 02 Apr 02 Jul 02 Oct 02 Jan 03 Apr 03 Jul 03 Oct 03 Jan 04 Apr 04 Future Conditions Current Conditions Net Expectations Source: FGV Industrial Survey

24. 24 In a Nutshell 1 st quarter GDP growth confirms economic rebound. Result is consistent with the 3.5% growth estimate for the year. Industrial output continued to expand in 2004, with positive prospects for the near future due to increasing domestic and external demand. Sales have been outpacing production growth, affecting level of inventories. Credit growth and payroll increase explain sales expansion, still led by durable goods. Unemployment rate affected by increase in labor force. However, formal employment is rising.

25. 25 II. Inflation

26. 26 IPCA Monthly Inflation Rate % -0.5 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Jan 02 Apr 02 Jul 02 Oct 02 Jan 03 Apr 03 Jul 03 Oct 03 Jan 04 May 04 Source: IBGE

27. 27 % IPCA Annual Inflation Rate 4.5 6.0 7.5 9.0 10.5 12.0 13.5 15.0 16.5 18.0 Jan 02 May 02 Sep 02 Jan 03 May 03 Sep 03 Jan 04 May 04 5.1%

28. 28 Inflation Expectations: 12-Month % 4 5 6 7 8 9 10 11 12 13 14 Jan 03 Mar 03 May 03 Jul 03 Sep 03 Nov 03 Jan 04 Mar 04 Jun 04 6.2% Source: Bacen

29. 29 III. External Sector

30. 30 Current Account Surplus: 1994/2004 -0.3 - 4.7 0.8 -5 -4 -3 -2 0 1 2 1994199519961997199819992000200120022003 % of GDP *2004: 12-month to April 2004* 1.1

31. 31 Current Account vs. Trade Balance -36,000 -30,000 -24,000 -18,000 -12,000 -6,000 0 6,000 Jan 96 Dec 96 Nov 97 Oct 98 Sep 99 Aug 00 Jul 01 Jun 02 May 03 Apr 04 Current account -8,000 -4,000 0 4,000 8,000 12,000 16,000 20,000 24,000 28,000 Trade balance

32. 32 US$ billion Highest trade balance surplus ever recorded May 28.0 Trade Balance -10 -5 0 5 10 15 20 25 30 Jan 99Jul 99Jan 00Jul 00Jan 01Jul 01Jan 02Jul 02Jan 03Jul 03Jan 04

33. 33 Trade Balance Source: Ministry of Development, Industry and Foreign Trade 45 50 55 60 65 70 75 80 Jan 99 Jul 99 Jan 00 Jul 00 Jan 01 Jul 01 Jan 02 Jul 02 Jan 03 Jul 03 May 04 US$ billion 12-Month, Accumulated 51.9 79.9 Imports Exports

34. 34 Imports Substitution Imported Quantum left scale Industrial Output right scale Dec 1995 = 100 90 95 100 105 110 115 120 125 130 135 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 96 98 100 102 104 106 108 110 112 114 116 118 Dec 1995 = 100

35. 35 Export Growth Diversification Contribution by Country to Exports Growth - last 12 Months - Argentina 19% China 12% Netherlands 8% Germany 4% Italy 4% United States 3% Others 50%

36. 36 European Community 25.6% United States 21.9% Argentina 7.1% China 6.4% Mexico 3.8% Japan 3.2% Chile 2.7% Others 29.3% Brazilian Exports by Market Last 12 Months

37. 37 IV. Fiscal Policy and Debt Management

38. 38 Consolidated Public Sector Primary Surplus % of GDP Apr 04 4.23 -2 0 1 2 3 4 5 6 Jul 94 Feb 96 Sep 97 Apr 99 Nov 00 Jun 02 Jan 04 Source: Bacen

39. 39 Debt-to-GDP Ratio 27 36 45 54 63 Jan 91 Apr 92 Jul 93 Oct 94 Jan 96 Apr 97 Jul 98 Oct 99 Jan 01 Apr 02 Jul 03 % of GDP Apr 04 56.6% Source: Bacen

40. 40 FX-Linked and Fixed Domestic Debt as a Share of the Total Debt Source: Bacen FX-Linked Domestic Debt/Total Debt % 16 21 26 31 36 41 Jan 02 Sep 02 May 03 May 04 16.6 1 5 9 13 17 Jan 02 Sep 02 May 03 May 04 16.4 Fixed Domestic Debt/Total Debt

41. 41 V. External Solvency Ratios

42. 42 Total International Reserves US$ billion Jan 02 Mar 02 May 02 Jul 02 Sep 02 Nov 02 Jan 03 Mar 03 May 03 Jul 03 Sep 03 Nov 03 Jan 04 Mar 04 30 34 38 42 46 50 54 Source: BCB

43. 43 Net International Reserves (IMF criteria) US$ billion Source: BCB Jan 02 Apr 02 Jul 02 Oct 02 Jan 03 Apr 03 Jul 03 Oct 03 Mar 04 22.4 12 14 16 18 20 22 24 26 28 Central Bank announces policy of accumulation of reserves

44. 44 Net External Debt US$192.3 bi 120 140 160 180 200 220 240 260 1991199319951997199920012003 US$ billion Source: BCB

45. 45 Net External Debt/GDP Ratio 10 15 20 25 30 35 40 19961997199819992000200120022003 % 2004* * 2004: BCB estimate

46. 46 Interest Payments/Exports Ratio % 18 22 26 30 34 38 199619971998199920002001200220032004* * 2004: BCB estimate

47. 47 1.5 2.0 2.5 3.0 3.5 4.0 199619971998199920002001200220032004* Net External Debt/Exports Ratio * 2004: BCB estimate

48. 48 Impact of a 1% FX change on Debt/GDP ratio 0.17 0.19 0.21 0.23 0.25 0.27 0.29 0.31 0.33 0.35 Jan 00 Sep 00 May 01 Jan 02 Sep 02 May 03 Apr 04 % Source: Bacen

49. 49 Henrique de Campos Meirelles June 2004 Brazil Meets Markets