1. Brasil 2017 a 2020 A Forward Look Fevereiro 2016

2. 2012 a 2014 the consumption bubble The beginning: Commodities cycle 2006 a 2012 The beginning of lhe end. 2012 The failed keynesian drive2012 a 2014 The bubble burst2015/2016 Very important too understand that the bubble burst without creating a Banking crisis; It is the government revenues that has been storngly hit;

5. New Pattern of Consumption

6. Desempenho atual da absorção doméstica já é o pior da série histórica

7. BUBBLE RECOVERING PERIOD Units x 1.000

8. Brazil lived 8 years of steady economic development and positive social changes due to the formalization of several millions of Brazilian workers; Unemployment reached the lowest point in recent history – the number of Brazilians holding jobs reached the highest point in our history – and wage grew more than 4% per year in real terms; The share of the Brazilian population living in the formal economy – having a formal labor contract – moved from 1/3 of the population to almost 2/3  by far the best performance among the BRICS; The retail sale of cars and SUVs jumped from 1,300,000 a year to 3,900,000; The same pattern applies to others consumption items like TVs sets, cellular phones and home appliances; The origin of these transformations is to be found twenty years ago, with the introduction of the Real Plan and the structural reforms of the FHC government; But a series of management mistakes and particularly the blackout crisis of electricity in 2000, caused the economic growth in the final years of his government to be very low and made FHC a lame duck president entering the 2002 elections; 2004/2011 The Lula’s Golden age

9. With presidential elections approaching and having Lula consolidated as the front runner in the polls, the investors panicked sending Brazilians assets price to hell and forcing the government to negotiate a program with the IMF; Just before the elections Lula made public a personal letter declaring that his government would follow the macroeconomic policy of his predecessor and respect contracts and property; Before investors became convinced, only in 2003, that the Lula government would have a proper economic policy the situation was really chaotic in many important markets, with exchange rate deeply undervalued, the unemployment rate higher than 12% and the long interest rate futures skyrocketing; The return of confidence triggered a strong asset price swing with reflects in the real economy. The appreciation of the real against the dollar led to a deflationary shock to the economy, especially through the real value of wages, lower interest rates and a significant hike in the prices of Brazilian stocks; The positive surprise with Lula’s economic policy was equal to an internal expansionary shock led by expectations; 2004/2011 The Lula’s Golden age

10. 2011/2014 PT: The beginning of bitter times Unemployment rates reached all time lows, bringing wage tensions and especially shortage of skilled labor to the labor market; On the other hand, consumer debt had exceeded its natural limits and began to cross the borders of a potential credit bubble; Finally, as full capacity was reached, productivity stagnated and wage increases started to strongly impact inflation; In addition, the influence of commodities markets began to subside. Brazilian terms of trade of Brazil reached its historical peak in 2011; As Dilma took office, the growth drivers that led the Lula years had lost strength and reduced the potential for economic growth through consumption:

11. 2011/2014 PT: The beginning of bitter times With the first signs of losing steam, Dilma’s government response was the worst possible: to try to revive consumption through credit expansion backed by the federal government banks and increase in government spending; One of the impacts of that policy was to keep growing imports even as in exports weakened due to the reversal of the commodity cycle. This created a strong reversal to our external accounts; The use of credit expansion and fiscal outlays to push the economy created a short period of renewed strength in consumption which only reinforced inflationary pressures and a consumer debt hangover; In order to bring inflation back to its target, the Central Bank decided to raise the SELIC interest rate in 2013 creating a new hurdle to the expansionary fiscal and credit policy; Dilma’s government's insistence on maintaining the stimulus to consumption via government spending (above levels consistent with an adequate primary surplus) and the credit expansion through public banks, created the conditions for the anemic economy in the second half of her first term and the deterioration of the fiscal and external accounts ; Business confidence was hit hard as investors felt aggravated by authoritarian and artificial measures in strategic sectors, eroding the credibility gained among the international financial community during the previous eight years;

13. USA Economy 2008 a 2012

15. Terms of Trade

16. Foreingn Trade prices

17. Current Account balance

18. Export and Imports quantuns GDP

19. THE BUBBLE BURST

22. Balance of Payments In US$ millions

23. Commodities exports

24. Imports Quantum

26. Cars sales 1.000 montly units

27. PMI industria

28. LABOUR MARKET

29. Maio 2015 Real monthly total wages in R$

30. 12 months new formal jobs

31. 2016E: 11,7% 2017E: 13,0% Unemployment rate

32. Total personal income – formal and informal

33. Labour Markets Statistics

34. Total real wage bill 2002 = 100

35. Total personal banking debt

36. Total bank credit outstanding anual growth

37. Total credit outstanding % GDP

38. CPI year to year change

39. Fiscal Structural Push

40. LOOKING AHEAD 2018 - 2022

41. 2018 general election and a new political equilibrium

42. General Election 2018 and the economy ahead PSDB/PMDB win the presidential elections; Lula and the PT became minors actor in Brazilian Politics With the new politic equilibrium Brazil will enter in a new period of structural politic and economic reforms; target a much more friendly Market policy; It will be a structural reform not a Liberal Revolution; The economy will receive a new push toward long term growth; GDP will start growing at higher speed, reaching something around 4% during 2019/ 2022 period and moving again toward the long term 3% average; The central bank will succeed stabilizing the inflation rate around 3-4,5% average; The Private Sector respond positively to the new economic environment ; Private consumption start increasing again at 4-5% a year speed;

43. Some elements of the reform agenda The most important items will be center at a Reform of The Brazilian State; At the center of this agenda will be the Social Security rules; Reform of the expenditure rules and laws that will open same space to a fiscal reform; A new set of rules regarding government expenditures and credit borrowing; Central Bank administrative independence A new round of state companies privatizations; A new round of free trade agreement with others countries, inclusive MERCORSUR Reform;