1. 1 Banco Central do Brasil The Future Economic Outlook for the Mercosur Region Miami - May, 2001

2. 2 The Future Economic Outlook for the Mercosur Region Mercosur - General View Main Macroeconomic Indicators - Mercosur Macroeconomic Outlook - Brazil Intra-Regional Trade and FDI Statistics Harmonization I.II.III.IV.V.

3. 3 I - Mercosur - General View The Future Economic Outlook for the Mercosur Region

4. 4 The Future Economic Outlook for the Mercosur Region –Eliminate barriers to trade and facilitate the cross-border movement of goods and services; –Promote conditions of fair competition in the free trade area; –Increase substantially investment opportunities; –Create effective procedures for the implementation of Mercosur, for its joint administration and for the resolution of disputes; –Establish a harmonized legislation and a framework for further multilateral cooperation. FIntegration of Member-Countries - Objectives

5. 5 The Future Economic Outlook for the Mercosur Region –Strengthen the convergence and macroeconomic coordination for the development of the integration process; –Adopt policies that assure fiscal responsibility and guarantee price stability; –Reduce distortions to trade and ensure a predictable framework for business planning and investment; –Promote sustainable economic and social development. FGovernments’ approaches

6. 6 II - Main Macroeconomic Indicators - Mercosur The Future Economic Outlook for the Mercosur Region

7. 7 1994199519971996 US$ million -17,942-23,142-30,811 Current Account -5,599 53,346 47,747 Imports (FOB) -6,748 59,742 52,994 Exports (FOB) -3,351 49,858 46,506 Trade Balance -1,688 43,545 10,467 External 37,26049,94658,50950,969 International Reserves Domestic 33,079 Brazil - Macroeconomic Indicators GDP 19981999 -33,625-25,062 -1,261 49,272 48,011 -6,604 57,744 51,140 42,80534,948 483,970614,524662,929677,698 Constant value * 5.84.22.73.6 GDP Growth 2,075.966.015.86.9 Inflation % CPI 654,114433,231 -0.10.8 3.28.9 * 1994-1999 - Constant value in 1990 dollar / 2000 - Current prices Source: BID - Basic Socio-Economic Data - Statistics and Quantitative Analysis - www.iadb.org IMF - International Financial Statistics - November, 2000 and 2000 Year Book 2000 ** -24,595 -698 55,783 55,086 33,011 595,881 4.5 5.9 /** Preliminary

8. 8 1994199519971996 US$ million -4,985.0-6,521.0-11,954.0 Current Account 1,760.0 22,283.0 24,043.0 Imports (FOB) -2,123.0 28,554.0 26,431.0 Exports (FOB) 2,357.0 18,804.0 21,161.0 Trade Balance -10,992.0 16,023.0 -4,139.0 External 14,550.014,516.018,324.022,337.0 International Reserves Domestic 20,162.0 Argentina - Macroeconomic Indicators GDP 19981999 -14,376.0-12,290.0 -782.0 24,115.0 23,333.0 -3,117.0 29,558.0 26,441.0 24,770.026,268.0 208,668.0202,486.0213,738.0231,056.0 Constant value * 8.0-4.04.88.6 GDP Growth 4.23.40.20.5 Inflation % CPI 241,774.0234,448.0 4.2-3.0 0.9-1.2 /* Constant value in 1990 dollar (n.a.) Not available data Source: BID - Basic Socio-Economic Data - Statistics and Quantitative Analysis - www.iadb.org IMF - International Financial Statistics - November, 2000 and 2000 Year Book

9. 9 1994199519971996 US$ million -231.0-499.0-247.0 Current Account -586.0 4,383.0 3,797.0 Imports (FOB) -312.0 4,192.0 3,880.0 Exports (FOB) -270.0 4,489.0 4,219.0 Trade Balance -274.0 3,360.0 -244.0 External 1,018.01,029.0871.0711.0 International Reserves Domestic 3,604.0 Paraguay - Macroeconomic Indicators GDP 19981999 -131.0-235.0 -332.0 3,040.0 2,708.0 -218.0 3,941.0 3,723.0 776.0990.0 6,983.07,298.07,367.07,545.0 Constant value * 3.14.71.32.6 GDP Growth 20.613.49.87.0 Inflation % CPI 7,503.07,539.0 -0.40.5 11.56.8 /* Constant value in 1990 dollar Source: BID - Basic Socio-Economic Data - Statistics and Quantitative Analysis - www.iadb.org IMF - International Financial Statistics - November, 2000 and 2000 Year Book

10. 10 1994199519971996 US$ million -213.0-233.0-287.0 Current Account -687.0 3,135.0 2,449.0 Imports (FOB) -704.0 3,498.0 2,793.0 Exports (FOB) -563.0 2,711.0 2,148.0 Trade Balance -438.0 1,918.0 -706.0 External 1,056.01,240.01,339.01,639.0 International Reserves Domestic 2,624.0 Uruguay - Macroeconomic Indicators GDP 19981999 -476.0-605.0 -868.0 3,173.0 2,305.0 -772.0 3,601.0 2,829.0 2,161.02,222.0 11,445.011,278.011,888.012,468.0 Constant value * 7.3-1.55.44.9 GDP Growth 44.742.228.319.8 Inflation % CPI 13,043.012,623.0 4.6-3.2 10.85.7 /* Constant value in 1990 dollar Source: BID - Basic Socio-Economic Data - Statistics and Quantitative Analysis - www.iadb.org IMF - International Financial Statistics - November, 2000 and 2000 Year Book

11. 11 III - Macroeconomic Outlook - Brazil The Future Economic Outlook for the Mercosur Region

12. 12 Recent Economic Developments –Continuous progress in the fiscal front –Inflation within target –Floating foreign exchange regime –Economic growth recovery

13. 13 Fiscal Targets 1999-2002 PRIMARY SURPLUS % of GDP 1999 3.10% 3.10% 2001 3.00% 2000 3.25% 3.25% (Revised targets) 2002 3.00% The Fiscal Adjustment Program

14. 14 Year cumulative data R$ billion Target Occurred Fiscal Targets - Primary Surplus 0 5 10 15 20 25 30 35 40 MarJunSepDecMarJunSepDec 9900

15. 15 GDP reviewed on October 2000 49.9 49.9 30 35 40 45 50 55 60 JanMarMayJulSepNovJanMarMayJulSepNovJan 990001 Feb Net Public Sector Debt % of GDP

16. 16 Economic Activity is Peaking Up % real variation /* 2001 estimates FGDP growth of 4.3% is expected in 2001 F GDP growth of 4.3% is expected in 2001 0.22 0.79 4.46 4.30 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 1998199920002001*

17. 17 6.5% 12.9% 6.8% 20.6% -1.2% 13.7% INDUSTRY: PRODUCTION AND SALES Jan-Dec 2000 / Jan-Dec 1999 Source: IBGE and FIESP Source: IBGE and FIESP Industry’s Performance Observed data INDUSTRIAL PRODUCTION CAPITAL GOODS INTERMEDIATE GOODS DURABLE GOODS SEMI & NON-DURABLE GOODS REAL SALES - FIESP

18. 18 Accumulated inflation from January to December CONSUMER PRICES IPC-FIPE 23.17 10.04 4.83 -1.79 8.64 4.38 199519961997 1998 19992000 IPCA 22.41 9.56 5.22 1.66 8.94 5.97 199519961997199819992000 INPC 21.98 9.12 4.34 2.49 8.43 5.27 199519961997199819992000 IPC-BR 25.91 11.34 7.21 1.66 9.12 6.21 199519961997199819992000

19. 19 FFollowing a peak of 45%, the short-term interest rate has F Following a peak of 45%, the short-term interest rate has steadily declined steadily declined Interest Rate 44.99% Over-Selic Rate % p.y. 15.85% April 18th updated 10 20 30 40 50 JanAprJulOctJanAprJulOctJanApr 990001

20. 20 Exchange Rate F The floating exchange rate has operated smoothly R$/US$ 1.20 1.40 1.60 1.80 2.00 2.20 JanAprJulOctJanAprJulOctJanApr April 24th updated 990001

21. 21 Trade Balance - monthly and cumulative in 12 months (US$ billion) Monthly - left scale Cumulative in 12 months - right scale Trade Balance -1.6 -1.4 -1.2 - 0.8 - 0.6 -0.4 -0.2 0 0.2 0.2 0.4 0.4 0.6 0.6 JanMaySepJanMaySepJanMaySepJan -10.0 -9.0 -8.0 -7.0 -6.0 -5.0 -4.0 -3.0 -2.0 0 1.0 98990001 Mar

22. 22 NET FOREIGN DIRECT INVESTMENT Accumulated in the year Source: Central Bank of Brazil * 2001 year projections FDI excluding Privatizations FDI in Privatizations Source: Central Bank of Brazil US$ billion 9.9 16.8 25.4 30.030.3 24.0 7.2 2.6 11.6 5.2 19.4 6.1 21.1 8.8 23.2 7.1 20.0 4.0 0 5 10 15 20 25 30 35 19961997199819992000 2001 * Foreign Direct Investment

23. 23 Inflation Expectations FThe Central Bank Survey on market expectations for inflation indicates an IPCA of 4.5% for 2001 and 3.7% for 2002 IPCA % p.a. 2001 2002 4.5 3.7 3.60 3.80 4.00 4.20 4.40 4.60 JanFebMarAprMayJunJulAugSepOctNovDecJanFebMarApr 0001 Market expectation/Banco Central do Brasil daily survey April 17th updated

24. 24 IV - Intra-Regional Trade and FDI The Future Economic Outlook for the Mercosur Region

25. 25 Brazil - Trade Level with Mercosur Source: MDIC/Secex Brazil - Trade Level (Exports plus Imports) with Mercosur US$ billion (FOB) 0.0 0.5 1.0 1.5 2.0 2.5 19811982198319841985198619871988198919901991199219931994199519961997199819992000 0 2 4 6 8 10 12 14 16 ParaguayUruguayArgentina Argentina Paraguay and Uruguay

26. 26 The Future Economic Outlook for the Mercosur Region –Brazil: The average growth of exports to Mercosur was 4.6% p.a., with 7.1% p.a. to Argentina, approximately. The imports average growth was 9.3% p.a., with 11.0% p.a. from Argentina. –Argentina: The exports growth to Mercosur was approximately 4.2% p.a. in average, while imports grew 1.6% p.a.. –Paraguay: The exports to Mercosur average growth was approximately 6.0% p.a., with 50.9% to Uruguay. The imports average growth was 3.1% p.a., with 16.7% from Uruguay. –Uruguay: The average growth of the exports to Mercosur was -2.7% p.a., while the average growth of imports was 1.7% p.a. FIncrease of trade level since the beginning of Mercosur Period 1994-2000 Average growth of the trade level intra-Mercosur

27. 27 –The total Brazilian exports to Mercosur is US$ 40,798 million accumulated in the period January 1996-February 2001, with 76.3% to Argentina. Most of the total exports are manufactured goods (90.2%). FBrazil - Exports to Mercosur - Jan 1996 to Feb 2001 Brazilian Exports to Mercosur Distribution by Country Argentina 76% Paraguay 14% Uruguay 10% Brazilian Exports to Mercosur Distribution by Sector Manufactured 90.2% SpecialOperations 0.3% Basic 6.4% Semi-manufactured 3.1% Brazil - Exports to Mercosur Source: MDIC/Secex

28. 28 Brazil - Exports to Mercosur Jan 1996 - Feb 2001 US$ million ArgentinaParaguayUruguayTotal Total31,117.45,673.64,006.440,797.5 Basic Goods 1,972.4168.6451.12,592.2 Semi-manufactured Goods 992.238.7239.91,270.9 Manufactured Goods 28,073.45,425.83,303.736,802.9 Special Operations 79.440.411.7131.5 Source: MDIC/Secex

29. 29 –The total Brazilian imports from Mercosur is US$ 42,896 million accumulated in the period January 1996-February 2001, with 85.1% from Argentina. Most of the total imports are raw materials (48.8%). FBrazil - Imports from Mercosur - Jan 1996 to Feb 2001 Brazilian Imports from Mercosur Distribution by Country Argentina 85% Paraguay 5% Uruguay 10% Brazil - Imports from Mercosur Fuel and Lubricants 10.9% Non-Durable 17.4% Capital 9.6% Raw materials 48.8% Durable 13.3% Brazilian Imports from Mercosur Distribution by Sector Source: MDIC/Secex

30. 30 Brazil - Imports from Mercosur Jan 1996 - Feb 2001 US$ million ArgentinaParaguayUruguayTotal Total36,517.92,074.84,302.942,895.6 Capital Goods 4,037.67.488.64,133.6 Consumer Goods 11,137.0129.01,887.813,153.8 Non-Durables Non-Durables5,774.5124.01,551.57,450.0 Durables Durables5,362.45.1336.35,703.8 Raw materials 16,667.91,937.62,307.120,912.6 Fuel and Lubricants 4,675.40.819.44,695.6 Source: MDIC/Secex

31. 31 Brazil US$ million Argentina%Paraguay%Uruguay%Total% 1993-------- 19944,136-1,054-732-5,921- 19954,041-2.31,30123.481210.96,1543.9 19965,17027.91,3251.8811-0.17,30518.7 19976,77030.91,4076.28707.39,04723.8 19986,748-0.31,249-11.28811.38,878-1.9 19995,364-20.5744-40.4670-24.06,778-23.7 20006,23316.283211.8669-0.17,73314.1 19932,717-276-385-3,378- 19943,66234.835227.556947.84,58335.7 19955,59152.751546.373829.76,84449.3 19966,80521.75527.294427.98,30221.3 19977,94116.7518-6.29672.49,42513.5 19988,0311.1350-32.41,0427.89,4240.0 19995,814-27.6260-25.7647-37.96,721-28.7 20006,84317.735135.0602-7.07,79616.0 Source: MDIC - Secex Exports Imports

32. 32 Argentina US$ million Brazil%Paraguay%Uruguay%Total% 19932,790.7-357.8-512.6-3,661.1- 19943,656.331.0497.739.1649.626.74,803.631.2 19955,510.950.7631.626.9654.20.76,796.741.5 19966,619.920.1581.4-7.9717.19.67,918.416.5 19978,107.322.5621.26.8835.316.59,563.820.8 19987,924.4-2.3621.90.1843.31.09,389.6-1.8 19995,689.3-28.2563.2-9.4818.6-2.97,071.1-24.7 2000*5,168.3-9.2409.4-27.3558.1-31.86,135.8-13.2 1993-------- 19944,287.5-71.6-424.7-4,783.8- 19954,174.4-2.6139.895.3279.3-34.24,593.5-4.0 19965,325.227.6181.329.7293.85.25,800.326.3 19976,897.529.5319.676.3371.026.37,588.130.8 19987,054.72.3347.68.8528.042.37,930.34.5 19995,598.9-20.6304.1-12.5395.8-25.06,298.8-20.6 2000*4,726.2-15.6217.5-28.5328.7-17.05,272.4-16.3 * Data for Jan-Sep 2000 only Source: www.mercosur.org.uy Exports Imports

33. 33 Paraguay US$ million Argentina%Brazil%Uruguay%Total% 1993-------- 199469.2-298.9-9.2-377.3- 199583.220.2410.737.434.0269.6527.939.9 199690.08.2516.725.848.743.2655.424.2 1997101.312.6460.9-10.822.2-54.4584.4-10.8 1998155.753.7347.6-24.620.8-6.3524.1-10.3 199953.1-65.9235.0-32.419.1-8.2307.2-41.4 200090.971.2336.043.0108.8469.6535.774.4 1993-------- 1994308.0-555.0-28.6-891.6- 1995491.259.5644.816.233.918.51,169.931.2 1996386.6-21.3847.731.552.254.01,286.510.0 1997641.065.8961.513.462.619.91,665.129.4 1998460.5-28.2785.6-18.377.223.31,323.3-20.5 1999312.0-32.2493.4-37.269.8-9.6875.2-33.9 2000498.259.7501.71.772.43.71,072.322.5 Source: www.mercosur.org.uy Exports Imports

34. 34 Uruguay US$ million Argentina%Brazil%Paraguay%Total% 1993-------- 1994382.3-492.5-24.1-898.9- 1995267.1-30.1700.042.124.93.3992.010.4 1996271.71.7831.018.749.498.41,152.116.1 1997354.330.4940.213.160.722.91,355.217.6 1998513.244.8935.2-0.583.838.11,532.213.1 1999368.6-28.2557.3-40.481.0-3.31,006.9-34.3 2000*315.5-14.4386.9-30.661.1-24.6763.5-24.2 1993-------- 1994652.6-709.7-8.6-1,370.9- 1995608.5-6.8698.6-1.613.658.11,320.7-3.7 1996690.813.5745.56.725.386.01,461.610.7 1997790.814.5802.17.623.7-6.31,616.610.6 1998839.46.1793.4-1.116.6-30.01,649.42.0 1999795.6-5.2651.7-17.914.4-13.31,461.7-11.4 2000836.15.1666.62.315.36.31,518.03.9 Source: www.mercosur.org.uy * Jan-Sep 2000 Exports Imports

35. 35 The Future Economic Outlook for the Mercosur Region –The total stock of FDI in Brazil in 1995 was US$ 42,530 million. The average growth in the period 1996-2000 was 40.5 % p.a. –Argentina’s FDI in Brazil growth averaged 39.1 % p.a. –The average growth of Uruguay’s FDI in Brazil in the same period was 25.2 % p.a. –Increase of other countries’ FDI in Brazil in the period 1996-2000. Italy: 151.0 % p.a. Spain: 101.1 % p.a. Portugal: 87.7 % p.a. FIncrease of foreign direct investment Period 1996-2000 Brazil - Average growth of FDI

36. 36 V - Statistics Harmonization The Future Economic Outlook for the Mercosur Region

37. 37 –Methodology and data compatible with international standards and principles, allowing data comparability –Harmonization of public policies so as to achieve common goals –Commitment to fiscal solvency and monetary stability –Requirement, at a first step, of common harmonized statistics on fiscal and public debt. Harmonized Statistics:Harmonized Statistics: Statistics Harmonization

38. 38 Fiscal result accumulated in 12 months September 2000 Concept National Government Primary Result National Government Nominal Result Consolidated Public Sector Net Debt Includes International Reserves Includes International Reserves Excludes International Reserves Excludes International Reserves National Government Net Debt Includes International Reserves Includes International Reserves Excludes International Reserves Excludes International Reserves Fiscal Net Debt Change Harmonized methodology ArgentinaBrazilParaguayUruguay % of GDP 0.1 -2.3 30.6 39.8 35.9 45.2 3.7 2.5 -1.3 45.2 50.4 26.1 31.2 3.8 -4.0 -4.5 17.7 28.0 17.7 28.0 3.0 -1.9 -4.2 28.2 42.3 26.2 40.3 4.6 Source: https://gmm.mecon.gov.ar Statistics Harmonization

39. 39 ARGENTINA Consumer Price Index Period Number index Base 99=100 MonthlyYearly 12 months March 2000 100.2-0.50.3-1.1 June 2000 99.5-0.2-0.4-1.2 September 2000 99.6-0.2-0.3-0.7 % change BRAZIL Broad National Consumer Price Index Period Number index Base Dec/93=100 MonthlyYearly 12 months March 2000 June 2000 September 2000 % change 1,6040.20.96.9 1,6150.21.66.5 1,6660.25.07.8 Source: https://gmm.mecon.gov.ar Statistics Harmonization

40. 40 PARAGUAY Consumer Price Index Period Number index Base Dec/92=100 MonthlyYearly 12 months March 2000 June 2000 September 2000 % change URUGUAY Consumer Price Index Period Number index Base Dec/96=100 MonthlyYearly 12 months March 2000 June 2000 September 2000 % change 2472.14.89.6 249-0.65.510.3 2551.58.09.4 125.80.61.34.5 127.60.52.84.8 129.20.54.15.3 Source: https://gmm.mecon.gov.ar Statistics Harmonization