BRAZILA BRAND OF EXCELLENCE

BRAZILIAN ACHIEVEMENTS 2010 YOUR BEST CHOICE FOR BUSINESS AND INVESTMENT

PAC 1: A Long Cycle of Expansion Growth in Industrial Output Floating Exchange Rate and International Reserves Annual GDP growth Data in % annual change International reserves allow secure exchange rate fluctuation PAC 1 PAC 2 8 250 US$ billions Mar 03 - 241.7 6 6 Ago 08 - 205.1 Average 200 5 5.5% 4 4 2 150 Average 3 4.2% 0 100 2 - 2 50 1 - 4 Average 1.7% 0 0 - 6 Jan Jan Jan Jan Jan Jan Jan Jan Jan 1998 2000 2002 2004 2006 2008 2010* 2012* 2014* 1995 1997 1999 2001 2003 2005 2007 2009*10* 02 03 04 05 06 07 08 09 10 *Government forecast Source: IBGE *Forecast Source: FGV Source: Central Bank of

Investment Has Strong Growth Path Job Creation Inflation Targeting Forecast of investment ratio 2009-2012 (% of GDP) Net Creation of Jobs Six consecutive years of inflation on target 22.0 10 MILLION JOBS IN THE FORMAL ECONOMY 8 1600 Market 21.0 7 forecast Forecast 20.0 1200 6 2010 4.91% 19.0 800 5 4 18.0 400 3 17.0 0 2 16.0 -400 1 15.0 0 1 2006 2007 2008 2009 2010 2011 2012 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10* Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Source: APE/BNDES *Government forecast Source: MTE/CAGED Source: Brazil is awash with optimism, thanks to a booming economy, huge new oil fields, the 2014 World Cup and the 2016 Olympic Games

Achievements.indd 1 4/17/10 1:22 AM BRAZIL Contents

APRIL / MAY / 2010

DIRECTOR AND EDITOR Dirceu Brisola ENGLISH EDITOR Brian Nicholson ASSISTANT EDITOR Luiz Gonzaga S. Neto CONTRIBUTORS Fernando David, Gilberto Costa, Luiz Gonzaga S. Neto, Roberto Amado COVER PHOTOS Sub-salt : Agência Brasil, Agência , Vast oil fields lie , Centro Cultural more than 7,000m Banco do Brasil - , beneath the ocean Ricardo Stuckert/PR, Unica, VC surface. (Illustration GRAPHIC DESIGN from Agência Assaoka.D Comunicação Petrobras) GRAPHIC PRODUCTION Solange Melendez PRINTED AT Rio de Janeiro celebrates: the city will host the World Cup and the Olympic Games Ipsis Gráfica

COVER BRAZIL 3 MINISTRY OF EXTERNAL NOW Accelerated Economic Growth and a New Level of RELATIONS Editora Brazil Now Ltda. World Business is Boosting Optimism About Brazil Av. Prof. Alfonso Bovero, 323 The Brazilian economy is likely to grow between 6% and 7% in 2010: domestic TRADE AND INVESTMENT 01254-000 São Paulo SP Brazil consumption is breaking records, with rising employment and income. PROMOTION DEPARTMENT Phone: 55 11 3672 4323 Fax: 55 11 3875 7100 Anexo Administrativo I - Sala 534 FUTURE 1 http://www.brazilnow.com 11 Palácio Itamaraty Brazilian Companies Recover; Resume Major Esplanada dos Ministérios - Bloco H Distribution Investments at Home and Abroad 70170-900 Brasília - DF Brazil - a Brand of Excellence is Brazilian private industry is once again investing in acquisitions and in expansion of Phones: 55-61-3411-8793/ distributed worldwide by the productive capacity. 8794/8798 Brazilian Ministry of External Fax: 55-61-3411-8790/6735 E-mail: [email protected] Relations, via its embassies, SPECIAL REPORT 15 [email protected] consulates and other offices. A BANK AS BIG AS BRAZIL Website: www.braziltradenet.gov.br Distribution within Brazil is the Banco do Brasil regained the top spot among Brazilian banks in 2009, earning the highest responsibility of the publisher, profit ever recorded by any of the country’s banks. Editora Brazil Now Ltda. Trade Programmes Division Phones: 55-61-3411-8989 FUTURE 2 Fax: 55-61-3411-8967 TO ADVERTISE PLEASE 27 CONTACT Major Sporting Events Spell Big Business E-mail: [email protected] Editora Brazil Now Ltda. The 2014 World Cup and 2016 Olympic Games are Attracting Substantial Investments in [email protected] Transportation and Other Infrastructure, Tourism and Civil Construction. Trade Information Division http://www.brazilnow.com Phones: 55-61-3411-8932 Fax: 55-61-3411-8954 FUTURE 3 29 E-mail: [email protected] RESPONSIBLE DIRECTOR Performance During Global Credit Crunch Shows Dirceu Brisola (MT 8.961) Strength of Brazilian Banks Trade Promotion Operations The success of the Brazilian banking and financial system during the international credit Division With the support of the crunch became a world reference. Phones: 55-61-3411-8529/8531 MINISTRY OF EXTERNAL Fax: 55-61-3411-6007 RELATIONS 33 FUTURE 4 E-mail: [email protected] Brazil Accelerates Production in Sub-Salt Petroleum A major new oil field makes Brazil one of the biggest centers for offshore investments in the Trade Fairs and Tourism Division Phones: 55-61-3411-8960 world. Projects totaling US$115 billion through 2020. Fax: 55-61-3411-8957 E-mail: [email protected] 36 PAC Infrastructure Expansion Spurring Economic Growth Brazil’s Faster Growth Program, called “Programa de Aceleração do Crescimento - PAC”, involves megaprojects in energy, land transportation and in urban and social infrastructure.

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Achievements.indd 2 4/17/10 3:08 PM Cover

ACCELERATED ECONOMIC GROWTH AND A NEW LEVEL OF WORLD BUSINESS IS BOOSTING OPTIMISM ABOUT BRAZIL

The Brazilian economy is likely to grow between 6% and 7% in 2010: domestic consumption is breaking records, with rising employment and income. New business is being driven by investment in infrastructure, massive oil discoveries in the offshore sub-salt fields and the staging of the 2014 World Cup and the Olympics in 2016.

BY DIRCEU BRISOLA / LUIZ GONZAGA S. NETO These up-beat expectations are of 10%, as does investment which in The Brazil of the present is look- rooted in economic reality: according the final months of 2009 increased ing to the future with immense opti- to average market forecasts, Brazil’s 6.6%, three times more than con- mism. A climate of confidence reigns GDP should rise between 6% and sumption in the period. not only among Brazilians, but also 7% in 2010, underpinned by fam- Mathematically, even if the Brazil- among foreigners who do business in ily consumption, which in the third ian economy doesn’t expand at all in Brazil, or now seek to do so. It’s not quarter of 2009 rose 2.7% against the 12 months of 2010, the GDP for unusual for the foreigners to be even the previous quarter. This points to this year would show positive growth more optimistic. an explosive annualized growth rate of 2.7%, compared with 2009,

Floating Exchange Rate and International Reserves Net Public Debt International reserves allow secure exchange rate fluctuation 65 % of GDP 250 US$ billions Mar 03 - 241.7 Market forecast 60 Ago 08 - 205.1 200 55

150 50 45 100 40

50 35 0 30 Jan Jan Jan Jan Jan Jan Jan Jan Jan Dec Dec Dec Dec Dec Dec Aug Dec Dec Dec Dec Dec DEC 02 03 04 05 06 07 08 09 10 02 03 04 05 06 07 08 08 09 10 11 12 13 Source: Central Bank of Brazil Source: Central Bank of Brazil

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Achievements.indd 3 4/17/10 3:08 PM More than half of the 2009/10 Brazilian sugarcane harvest – 57.4% - will go to ethanol production, likely to reach 27.4 billion liters this year.

thanks to a carry-over effect from the Foreign Direct Investment Brazilian Ethanol Production last months of 2009. Strong foreign demand for Brazilian assets (billions of liters) Projections by senior Brazilian and ensures resources to sustain growth 30 (US$ billions) international analysts already assume 50 the possibility of growth in Brazilian Central Bank’s forecast 25 economic activity being as high as 40 20 7% in 2010. One such optimist is Jim O’Neill, chief economist at investment 30 15 bank Goldman Sachs and creator of

the acronym BRICs (for Brazil, Rus- 20 10 sia, India and China). At the end of March, in an interview with Spain’s El 10 5 Mundo, O’Neill said that “Brazil will have a spectacular decade ahead and 0 0 2002 2004 2006 2008 2010 2000/01 2004/05 2005/06 2008/09 may be the new country of fortune”. Source: Central Bank of Brazil Source: Unica O’Neill added that the 7% projection was his personal estimate, while that Happily, however, the crisis found cient alternatives to the world reces- of his bank was 6.4%. Brazil with healthy economic funda- sion. Thanks to this, Brazil emerged The outlook for Brazil has become mentals and public and private insti- from the economic turbulence stron- even more encouraging when one tutions ready and able to implement ger than it was before, and today the remembers the gloomy forecasts anti-cyclical policies directed at main- country is heading for annual average that reigned just 18 months ago, as taining investment and expansion of GDP expansion of at least 5.5% dur- the specter of a terrible depression consumption of the country’s grow- ing the next five years. threatened the world economy. ing domestic market, creating effi- This growth, driven by domestic 4

Achievements.indd 4 4/17/10 1:22 AM Inflation Targeting Reduction of the Public Deficit Six consecutive years of inflation on target Fiscal result of the public sector, as a % of GDP 4 8 Market 3 7 forecast Primary 2 6 2010 4.91% 1 5 0 4 - 1 3 - 2 - 3 2 Nominal 1 - 4 0 - 5 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 2002 03 04 05 06 07 08 09 10* 11* 12* 13* 14* Source: Central Bank of Brazil *Finance Ministry Forecast Source: Banco Central

the Brazilian oil industry by invest- years, it may be the world’s sixth larg- ing US$220 billion to build new oil est oil exporter. platforms, purchase ships and equip- “The ascension of Brazil as an ment, build five refineries, lay gas economic giant is one of the major pipelines and make other investme themes of our time. It isn’t only re- nts. Exploration of the huge sub-salt defining Latin America, but also the fields alone will demand US$115 bil- economy of the entire world,” the lion investments through 2020. Wall Street Journal noted in a special For its part, BNDES-PSI, with supplement published on Brazil at funds totaling R$80 billion, is grant- the end of March. “The new role that ing long-term credit lines at low inter- Brazil is performing is something we : “Brazil will grow with est rates for the capital goods, inno- have to work at building every day,” fiscal security, reducing the public debt and keeping inflation under control.” vation and export sectors. Moreover, said President Luiz Inácio Lula da Silva the hosting of the World Cup football at the beginning of April. “We’re still demand, has been stimulated by a set competition in 2014 and the Olympic set on the idea of making the country of government initiatives. Top of the Games in 2016, are already attracting the fifth largest economy in the world list are the Accelerated (Economic) billionaire investments in the areas in the next 10 years,” he added. Growth Plan (PAC, in the Portuguese of transportation, urban real estate, In a lengthy article published acronym), the Brazilian Development heavy construction and social, sport- at the end of 2009, the Economist Bank’s Sustainable Investment Pro- ing and tourism equipment and facili- magazine said Brazil may become the gram (BNDES PSI), and oil industry ties (see report on page 14). world’s fifth largest economy in the expansion propelled by gigantic prov- The climate in Brazil is no longer next decade, and with some advan- en reserves in the deep underwater simply one of confidence in the fu- tages over the other BRICs. “Unlike fields of the so-called sub-salt layer. ture, but of faith in the present. In China, Brazil is a democracy. Unlike PAC involves enormous invest- the first quarter of this year, Brazil India there are no insurgencies, no ment: R$636 billion will have been basked in a virtual torrent of good religious or ethnic conflicts or hostile invested in country’s infrastructure news: the country regained its posi- neighbors. Unlike Russia, it exports from 2007 through the end of 2010. tion as the eighth largest economy in more than oil and armaments and More than R$1 trillion is scheduled the world (which it had lost in 1999), treats foreign investors with respect,” for 2011-2014 in the areas of energy according to the Economist Intelli- the Economist said. And in March of (oil and gas, electric power and etha- gence Unit (EIU); it became the third this year, the conservative EIU, part of nol), logistics (highways, ports and largest exporter of foodstuffs, over- the Economist Group, revised upward airports and railroads); and in urban taking Canada to place behind only from 4.8% to 5.5% its projections for and social areas (housing, sanitation, the United States and the European Brazilian growth this year. subways, schools and urbanization). Union; it overtook Germany and to According to Goldman Sachs, Bra- According to its 2010-2014 busi- become the fourth largest automo- zil is the leader among the BRICs in ness plan, Petrobras plans to expand tive market in the world; and in five terms of the Growth Environment 5

Achievements.indd 5 4/17/10 1:22 AM Score (GES), an index used to mea- countries,” said Roberto Setubal, in 2010. sure the sustainability of a country’s president of Itaú Unibanco, Brazil’s “It will be one of the lowest in the growth. The GES includes 13 vari- largest private bank. world. Lower than in China, India, ables in the area of policy formula- For Setubal, the Brazilian elections Germany or the United States,” Man- tion and institutional frameworks. in October this year will not change tega said. The Brazilian government Brazil was the country that advanced the positive scenario. He dismissed expects the public accounts to reach most in political and macroeconomic the idea that the elections or their re- a nominal zero deficit at the end of conditions as well as in the area of sult could have any negative impact 2012 or beginning of 2013. technology. on the economy, given the maturity According to economist Altamir For Brazilian Finance Minister Gui- shown in recent years. Lopes, head of the economics depart- do Mantega, Brazil has the potential Public accounts and sustain- ment at the BCB, the average rate of to grow at least 5.5% a year between ability – Brazil’s accelerating eco- interest in Brazil in the 12 months to 2011 and 2014. “We’re among the nomic activity, already visible in the February was 21.6% in 2004, falling half-dozen countries with the best rates of growth in the world. That’s Agricultural Output Grew 94% with fiscal stability, reduction of the Between 1991 And 2009 We expect agricultural productivity to maintain its growth in the 2009/2010 harvest. The planted area should continue to grow sustainably at about 3.5% Brazil’s Share of World Exports a year. Brazilian grain harvest 2009/2010* (1990/1991=100) (1990 - 2008) 250 1.23 In % 244.5 1.18 200 1.13 1.08 150 1.03 126.1 0.98 100 0.93 50 0.88 0.83 1990/91 1993/94 1996/97 1999/00 2002/03 2005/06 2009/10

*Fourth survey Jan 10 Grain production 2009* 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: CONAB * Estimate Source: OMC, MDIC Planted area

public debt and inflation under con- final quarter of 2009, could be seen to 12.7% in 2009 and reaching 9.2% trol,” Mantega said. even more clearly in the public ac- in 2010. The interest base rate (Selic) Even more optimistic was ex-min- counts released at the start of this continues at 8.75%, its lowest level ister Antonio Delfim Netto, an eco- year. A report from the Brazilian Cen- ever. The exchange rate should con- nomics professor, who said that “Bra- tral Bank (BCB) at the end of March tinue stable to this end of the year zil now has all the conditions to grow showed that the net public sector at R$1.80 to the dollar, according to at an annual rate of 6% to 7% in debt reached 42.1% of GDP. After BCB projections. the next several years, without prob- falling to 38.5% in 2008, public debt Federal government tax receipts lems.” Brazil, Delfim Netto pointed in 2009 rose to 42.9% as a result of are now growing again, after being out, “has everything needed to reach the crisis and is now already dropping affected in 2009 by tax exemptions the middle of the 21st century as a back, projected to end 2010 at 40% granted to several sectors to stimu- developed democratic economy with of GDP and reach 39% in 2011. late economic activity and consump- a domestic market of extraordinary Brazil obtained a primary surplus tion. proportions and playing an important of R$17 billion in the first two months According to Federal Tax Office role in world politics.” of 2010, the equivalent of 3.26% of data, total tax collections and social The year that should have been a GDP. The benchmark for this year is levies reached R$53.54 billion in Feb- crisis, 2009, was in fact an opportuni- a public account surplus of 3.3% of ruary this year, a 13.23% increase on ty for Brazil to check out the strength GDP. Achieving this target will mean the same period in 2009. “The Fed- of its economy. “Brazil lived almost in that the nominal deficit should fall eral Tax Office expects 12% growth paradise (in 2009) compared to other from 3.33% of GDP in 2009 to 1.5% in collections in 2010,” said Planning 6

Achievements.indd 6 4/17/10 1:22 AM Minister . “We are trade and a reduction of international “In recent years, that sensa- lowering our initial estimate because commodity prices. tion has been replaced by a wave we’re conservative and want to en- According to monetary authori- of optimism, both domestically and sure the achievement of the primary ties and other specialists, the current abroad, with Brazil becoming part of surplus target.” account deficit is clearly financeable the BRICs and destined to be a new As far as inflation is concerned, through the expected inflow of di- power center in the next few years,” measured by the Expanded Con- rect foreign investment, projected at wrote Mendonça de Barros, a former sumer Price Index (IPCA), Brazil has around US$38 billion this year, and minister for communications and ex- now enjoyed six consecutive years of by the recovery in exports (which is president of the Brazilian Develop- rates within the government’s target already happening). This is without ment Bank (BNDES). range. Market expectation is for the taking into account the country’s in- Production and investment – IPCA to be 5.18% in 2010 and 4.5% ternational reserves, now standing at The recent numbers on industrial ac- in 2011. “Inflation will definitively US$245 billion. tivity and consumption are the prime converge towards the center of the According to Octávio de Barros, reason causing repeated upward re- target range,” said Henrique Meire- chief economist at Bradesco, the sec- visions for Brazil’s GDP. The country’s lles, president of the BCB. “Surprises ond largest private Brazilian bank, industry is growing strongly. Industrial with inflation are less probable, Brazil “the recovery of economic activity is output in February this year recorded

Expanded Retail Sales Brazil as a Global Food Supplier Share (%) 135 130 2009/10 2013/14 2014/15 2019/20 125 Sugar 46.5 46.5 46.5 46.5 120 Green coffee beans 27.2 27.2 27.2 27.2 Soybeans 30.2 31.9 32.5 35.8 115 Soy Meal 22.1 20.7 20.5 19.5 110 Soy Oil 21.1 16.2 16.4 17.8 105 Corn 10.1 10.9 11.2 12.7 Beef 25.0 30.9 30.7 30.3 100 Pork 12.4 14.0 13.9 14.2 95 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Chicken 41.4 47.7 48.0 48.1 07 07 07 07 08 08 08 08 09 09 09 09 Source: USDA 2010 and AGE/MAPA 2010 Source: IBGE

is now highly predictable, and that consolidating and spreading, and in a rise of 1.5% compared to January, is reflected in the country’s low pre- our view financing the Brazilian trade and grew 18.4% compared to the mium risk,” Meirelles said in a speech deficit continues to be assured.” At same month in 2009, according to in New York. the beginning of April, Bradesco re- the Brazilian Geography and Statis- On the foreign front, according vised its Brazilian GDP growth fore- tics Institute (IBGE). The best feature to the Central Bank’s Focus Bulletin, cast up from 6% to 6.4%. of this expanding production was the market projects a current transac- Economist Luiz Carlos Mendonça capital goods growth of 1.7% in the tions deficit of US$50 billion (2.53% de Barros noted that “at the end month, showing a rise in industrial in- of GDP) in 2010, compared with of this first decade in the 21st Cen- vestment in installed capacity, which US$24.3 billion registered in 2009. tury, the Brazilian economy seems to may relieve inflationary pressures. This is partly due to the projected fall have left behind a past of mediocre “Industry is gradually moving back in the Brazil’s trade balance, which is growth, with brief moments of ex- to the highest point in the historic likely to reach US$10 billion in 2010 pansion, followed always by foreign data series, registered in September compared to US$25.3 billion in 2009. exchange crises, inflation and finally of 2008,” said Andre Macedo, coor- Last year, Brazilian total trade recession.” Mendonça de Barros dinator for industry at the IBGE. For flows totaled US$281 billion, a fall of was writing in the book “Brazil Post- Armando Monteiro Neto, president 24.3% from 2008 when they reached Crisis”, edited by economists Fabio of the Brazilian Industrial Confedera- US$371 billion. This retraction was Giambiagi and Octávio de Barros, tion (CNI), “the survey made it clear a consequence of the international which is a collection of essays by the that we won’t have inflationary pres- financial crisis, retraction in global country’s foremost economists. sures because of any imbalance be- 7

Achievements.indd 7 4/17/10 1:22 AM tween supply and demand.” the country’s growth an underpin- feel the crisis and this year is looking According to Monteiro Neto, the ning of stability. The 2% rise in GDP for growth of 7% over 2009. use of installed industrial capacity registered in the fourth quarter of Sales of automobiles, mobile now stands at 81%, and may reach 2009, compared to the quarter im- phones, computers, TVs, refrigerators 84%. That, he says, is a high but safe mediately before, was led by a rise and washing machines beat records level. The rate of investment as a pro- in family consumption, by the capital last year at the height of the crisis. In portion of GDP in the Brazilian econ- goods sector and construction. the first quarter of 2010, licensing of omy should rise to 18.6% in 2010, This growth was reflected in an new vehicles (automobiles, light com- getting near to the pre-crisis (2008) unemployment rate of 7.4% in Feb- mercial vehicles, trucks and buses) level of 19% and reach 21.2% in ruary, the lowest level ever recorded beat historic records for the period, 2012. The government’s goal is to for the second month of the year, with sales of 788,000 units, accord- raise the rate to 25% in the next few according to the IBGE’s Monthly Em- ing to the Brazilian Federation of Au- years. ployment Survey (PMI). Ministry of tomobile Dealers (Fenabrave). “Domestic consumption and GDP Labor data showed the creation of The market for electronics has also have already resumed growing at 390,844 formal job positions in the been showing astonishing growth. the same speed as before the crisis,” first two months of the year, which According to the Brazilian Associa- said Alexandre Schwartsman, chief was also the best result on record tion of Electronic and Electric Indus- economist at the Santander bank, since 1992. The government expects tries (Abinee), the total market for in a speech to Rio de Janeiro’s Indus- the economy to generate 1.8 million computers (including desktops, note- trial Federation (Firjan) in the seminar new vacancies in 2010. The mass of books and netbooks) jumped from “Brazilian and World Economic Sce- salaries has been growing for seven 3.2 million units in 2003 to 12 million narios in 2010”. At the beginning of consecutive years and in 2010 should units in 2009, the same level as 2008 April, recovery in Brazil’s economic rise more than 6% compared to the (which was an exceptional year for sector led economists at Santander to previous year. Brazil). revise their GDP growth projections “We’re proud of having taken 30 “The future looks promising,” upwards from 4.8% to 5.8%. million people out of poverty and said Antonio Hugo Valerio, director The Industrial Confidence Index raised them into the middle classes for the IT area at Abinee. He said he (ICI) advanced 1.9% in February of and of having employed nearly 12 mil- believes that sales of PCs (desktops, this year to 115.8 points, up from lion Brazilians in the formal economy notebooks and netbooks) will be 113.6 points in January, according in these seven and a half years of the above 14 million in 2010, more than to the Getúlio Vargas Foundation government,” said , 17% growth compared to 2009. (FGV). This was the highest level since until recently the President’s Chief of “Brazil is currently the fourth or fifth December 2007 and was the 13th Staff. Rousseff was referring to the computer market in the world,” said consecutive rise. “The high level of new Brazilian middle-class, which Valerio. At the same time the produc- optimism among entrepreneurs was during the last decade has come to tion of mobile phones in Brazil leapt evident in the favorable expectations account for 64% of the population from 27 million units in 2003 to 62 for hiring new personnel and in the (around 120 million people). That’s million in 2009, with 46 million sold prospects for business within a six- because some 30 million very-low in- in the domestic market, 23.4 million month horizon,” the survey showed. come individuals have risen into Class of them to new subscribers. In farm production, a Ministry of C, the new “popular middle class”, Internet – The Brazilian inter- Agriculture, Livestock and Supply sur- according to the Institute for Applied net market is growing at the same vey estimated the 2009/2010 grains Economic Research (IPEA). pace. According to research by Ibope/ harvest (soybeans, rice, wheat, beans This represents a major contingent Nielsen, the country had 66.3 million and others) at 143.95 million tonnes, of new consumers, in particular with home, work, school and public access an increase of 6.5% on the 2008/09 average family income in the R$1,100 users in December 2009. Class C us- harvest. Good climatic conditions will to R$4,800 band – roughly US$610 ers, according to the survey, showed result in higher average productivity – US$2,700 a month. These are fre- the greatest growth in internet par- and in the case of soybeans a record quently eager first-time purchasers of ticipation. Purchases made by inter- crop. a new car, a computer, a cell-phone, a net in Brazil last year totaled R$10.6 Mass Market – The burgeoning flat-screen TV, and so on. For this rea- billion, a 30% rise compared to the Brazilian domestic market has given son the Brazilian retail sector did not same period in 2008, according to re- 8

Achievements.indd 8 4/17/10 1:22 AM The Surge in Investment Net Job Creation Expected in Q2/2010* % compared with previous year Difference between the percentage of companies expecting to hire workers (43%) and those expecting to fire (5%) in Q2/2010 (% between Q1/2010 and Q4/2009). 20 40 Investment 15 38 36 GDP 30 10 20 24 5 18 17 10 13 11 8 8 3 1 0 1 Spain Italy 0 -9 -5 India -10 Brazil Japan China

-10 France Canada S. Africa England U. States Germany Argentina -10 Singapore 2002 2003 2004 2005 2006 2007 2008 2009 2010* *Survey of employment expectations for the second quarter of 2010, carried out by interviews with 850 employers *Finance Ministry Forecast Source: IBGE Source: Manpower

External Credit Consumer Confidence Index Brazil immune to the turmoil on sovereign CDS market Data in points, seasonally adjusted 700 120 Increase of 15.4% 600 115 500 400 110 300 200 105 100

0 100 Jan Jan Jan Jan Jan Feb Feb Feb Feb 01th 08th 15th 22th 29th 05th 12th 19th 26th 95 Source: Bloomberg Greece Brazil Nov Jan Mar May Jul Sep Nov Jan Feb Portugal U.K. 08 09 09 09 09 09 09 10 10 Spain Germany Source: FGV

search by E-bit, an electronic trading to build one million homes, aimed at As a result, Brazil reduced its housing consultancy. the low-income population at a cost shortfall from seven million homes to According to the Brazilian Tele- of R$34 billion, with total subsidies 5.8 million units between 2006 and communications Agency (Anatel), worth 1.2% of GDP. 20009, according to the Ministry for 88% of Brazilian towns now have In its second phase, the same pro- Cities. For this reason, the civil con- broadband. Coverage has been en- gram calls for building another two struction sector was one of those couraged by the government through million homes by 2014 with R$71.7 which most contributed to sustaining the “Schools Broadband Project”, billion of investment. In addition to economic activity in the country. The which has connected 45,000 schools this program, the government ex- sector is going through a period of to broadband internet. By the end of pects to have R$176 billion available euphoria with growing employment, 2010, 92% of Brazil’s public school in housing finance from the Brazilian income and private investment. population, urban and rural, will have System of Savings and Loans (SBPE) Social inclusion – Apart from access to high-speed internet. – this financing is directed more to- the poorer families that have risen to Housing – Home purchase, wards families with incomes higher Class C, another group of 27 million mainly by Class C families, has con- than the focus of the “My House, My people were pulled out of extreme tributed a great deal to expanding Life” program. poverty between 1990 and 2008, investment in construction, an area Caixa Economica Federal (CEF), according to an IPEA survey. Since that has generated jobs in Brazil. In a major state-owned savings bank December 2002, the real minimum March of last year the government that is the country’s main source of wage has risen by more than 48%, launched a popular housing program housing finance, signed off on home approaching its record value of the called “My House, My Life” as part loans worth R$47 billion in 2009, an mid-1950s, according to the Man- of the PAC. The first-phase target is amount 102% greater than in 2008. agement Committee of the PAC. The

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Achievements.indd 9 4/17/10 1:22 AM Poverty Reduction is Larger in Social Security Result Poorer Regions R$ billion (R$ billion and % of GDP) % of GDP The increase in cash transfers in recent years, 250 1.8 particularly in the minimum wage and the 1.7 Bolsa Família Program, has substantially and comprehensively reduced poverty. In 2009, 200 1.6 the year of the crisis, poverty continued its 1.5 downward trend. 150 1.4 70 Poverty % 1.3 60 100 1.2 1.1 50 50 1.0 40 0.9 0 0.8 30 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Social security revenue 20 Social security benefits 10 Source: MPOG and SIN Social security benefits 0

North South NortheastSoutheast Midwest in March showed that over the last action in the derivatives market was 2003 decade Brazil reduced shantytown unique in the world,” said Central Source: PNDA/IBGE/IPEA 2008 dwellers by 16%, a drop of around Bank President Henrique Meirelles 10.4 million people. The number of said in a speech in New York. Family Income Supplement Program people living in housing without basic Public federal banks were essential (Bolsa Family) represents an income amenities fell by 31.5% to 26.4% in to sustain the expansion of credit op- transfer in exchange for education 10 years, thanks to the adoption of erations in the financial system dur- (only mothers who send their children economic and social policies, falling ing the crisis and throughout 2009. to school receive benefits). This pro- birth rates and migration from the From September 2008 to December gram now reaches more than 11 mil- country to the city, the study said. 2009, the credit/GDP ratio increased lion very-low income families. “From Exemplary Solution – This pro- from 37.4% to 45%. For 2010, the 2003 to today, more than R$190 bil- fusion of positive data is a clear dem- projection is for credit supply to reach lion has been invested in actions in onstration of the progress that Brazil 49% of GDP. the social area,” said , has made. The Brazilian government’s Allied to this, Brazil’s state-owned the Minister for Social Development anti-crisis policy was one of the best companies helped drive economic and Fighting Hunger. in the world and became an interna- activity. The share of federal pub- Two recent studies illustrate Bra- tional benchmark. The country had lic investment and federally-owned zil’s social progress. A survey by econ- been recording accelerated growth companies in gross fixed capital for- omist Marcelo Neri of the Center for with GDP expansion of 6.1% in 2007 mation increased from approximately Social Policy (CPS) at the Getúlio Var- and 5.1% at the end of 2008. With 9.8% at the end of 2008 to more gas Foundation (FGV) showed that the collapse of Lehman Brothers in than 17% at the end of 2009. 53.5% of Brazilians of full African de- September 2008, the crisis came to In the area of taxation, the gov- scent, and almost half of mixed-race Brazil and caused a sharp fall in in- ernment implemented a powerful Brazilians, are already in Class C, the dustrial output, exports, consumer package of tax-breaks that will total new “popular middle class”. The data and company credit availability and R$123 billion from 2007 through showed great progress in the last 15 the supply of dollars to the market. 2010 for the sectors of infrastructure, years, even though Brazilian society The Brazilian Central Bank played capital goods, automotives, construc- is a long way from being egalitarian. a key role with the injection of US$71 tion, electronics and information In 1993, just 23.8% of Brazilians of billion into the foreign exchange mar- technology. Instead of cutting social full African descent, and just 21.7% ket and the reduction of commercial spending, as happened in previous of mixed-race Brazilians, belonged to banks’ compulsory deposits in the crises, the government maintained a classes A, B and C. federal institution. “The injection of policy of raising the value of the min- Also, the UN report “State of the liquidity in foreign currencies has be- imum-wage and expanded the social World’s Cities 2010/2011” published come an international reference and protection network. 10

Achievements.indd 10 4/17/10 1:22 AM Brazilian Companies Recover; Resume Major Investments at Home and Abroad FUTURE 1 Brazilian private industry is once again investing in acquisitions and in expansion of productive capacity. From the strong base of their domestic market, companies are resuming investments and buying businesses abroad.

BY LUIZ GONZAGA S. NETO level, making significant acquisitions,” not be possible without the good JBS, the world’s largest beef packer said Joesley Mendonça Batista, presi- performance of the Brazilian econo- and a growing supplier of pork, poultry dent of JBS. “We took advantage of my, which had already overcome the and mutton, announced in September the period of instability, making some global crisis at the end of the second 2009 the acquisition of control of one acquisitions and strengthening our quarter of 2009, when encouraging of its largest rivals in Brazil, the beef structure. We emerged from this crisis data started to appear. The recovery processor Bertin. This was just one period stronger and better prepared to became more vigorous at the begin- year after the collapse of investment grow.” ning of 2010 with strong expansion of bank Lehman Brothers, which sparked JBS made 30 acquisitions in the last consumption, income, credit and em- an international credit crunch. At the 15 years, so that today it has 23 pro- ployment. same time JBS announced the acquisi- cessing factories distributed between “Such productive investment tion of Pilgrim’s Pride, one of the larg- Brazil, Argentina, the United States abroad was possible only because est US poultry processors and located and Australia, the four most important companies had a strong base in the in Texas, for US$2.8 billion. beef processors in the world. It is Bra- Brazilian market,” said Welber Barral, Though the world economy still zil’s most internationalized company, who heads the foreign trade secre- reverberated from the international according to a study by Sobeet, the tariat known as Secex, which is part retraction, JBS went on to buy the Brazilian Society for the Study of Trans- of Brazil’s Ministry of Development, ranch, animal feed factory and slaugh- national Companies and Economic Industry and Foreign Trade. terhouse business of Rockdale Beef in Globalization, a São Paulo-based study The strength of the Brazilian do- Australia in March 2010. This consoli- group. mestic market, with the creation of dated JBS as the largest processor and Such aggressive expansion would a growing mass market that today exporter of animal protein in the world with annual revenue of R$34.3 billion Industrial Demand Data in points, seasonally adjusted and the capacity to slaughter 12.6 mil- 140 lion head of cattle. Significant investments such as 120

these have been made by Brazilian 100 private industry, encouraged by the 80 booming domestic market, the strong national currency, the access to long- 60

term financing from Brazilian public 40 banks, the availability of cash and a 20 strong sense of spotting strategic op- portunities. 0 Jan Jul Jan Jul Jan Jul Feb “We began to have a clearer vision 07 07 09 09 09 09 10 in the second half of 2009 and were External demand Historical average Domestic demand Global demand able to take our company to another 11

Achievements.indd 11 4/17/10 1:22 AM class. The members of this new middle class are anxious to acquire their first home, television, computer, mobile telephone or car, or to upgrade what they already have. Volkswagen announced last No- vember that it will invest R$6.2 bil- lion in Brazil to increase its Brazilian production capacity. This came while the uncertainties of the financial crisis around the world slowed the global automotive industry. With record car sales in the first half of 2010, Brazil has risen to become the fourth largest ve- hicle market in the world, overtaking Germany and trailing only China, the United States and Japan. Above: The Fiat Group inaugurated a new Brazil’s automobile industry fore- R$1 billion CNH factory and autoparts distribution center at Sorocaba, some 100 casts it will sell 3.4 million vehicles this km west of São Paulo city. Left: The Brazilian year, which would be an 8.9% rise computer industry is preparing for record sales this year. from 2009. Sales last year rose 11.3% from 2008, according to the Brazilian automotive manufacturers’ association goal of the government is to raise the known as Anfavea. investment rate to 25% of GDP in the “Brazil is one of our most impor- counts a middle class of more than 120 coming years. tant growth markets in the world,” million people, has been the country’s “The public sector has created a said Martin Winterkorn, chairman of main bulwark to counter the retraction suitable institutional environment to Volkswagen AG, in a visit to the coun- of global trade. The heated domestic sustain the investments of private try. “That’s why we are now expanding market stimulates multinationals to in- companies with credit expansion and our productive capacity.´´ vest in the country and gives Brazilian long-term financing,” said Coutinho. Between June of last year and companies clout to invest abroad. Automobiles – The Brazilian au- March of this year almost all of the In the vision of Luciano Coutinho, tomobile industry reflects the growing large automotive manufacturers an- president of the Brazilian Development mass market, with large parts of the nounced significant investments in Bank (BNDES) that is the main source poor population rising into the middle their Brazilian factories. of financing for Brazilian industry, the country offers extremely profitable World Automobile Sales low-risk investment opportunities in at % change of 2008 and millions of units sold in 2009 least five areas: petroleum and natu- United States -17.64% t 10,9 ral gas production; infrastructure for China 52.10% s 9,9 Japan -6.5% t 4,8 electric power; shipping, transporta- Germany 25.25% s 4,2 tion and ports; civil construction; and Brazil 12.66% s 3,1 agribusiness (see report in this edition). France 2.82% s 2,6 Italy -0.96% t 2,4 Manufacturing industry is also likely to United Kingdom -10.69% t 2,2 receive special financing. India 28.32% s 2,1 Brazil’s rate of investment as a per- Canada -4.04% t 1,6 Russia -47.07% t 1,5 Forecast for 2010 centage of gross domestic product is South Korea 22.96% s 1,4 Fenabrave: 9.73% set to rise to 18.6% in 2010, accord- Spain -17.96 t 1,1 Anfavea: 6.0 to 7.0% ing to the BNDES. This approaches the Australia -4.55% t 0,9 Mexico -30.56% t 0,7 pre-crisis rate of 19% for 2008 and is Source: Jato Dinamics do Brasil and Fenabrave projected to reach 21.2% in 2012. The 12

Achievements.indd 12 4/17/10 1:22 AM Fiat re-started a Case New Holland vehicles, conceded by the government mains high this year, according to an factory to make agricultural machinery last year to stimulate consumption and index of confidence known as ICEI and last February, and the largest autoparts to avoid private investment drying up published in March by the National distribution center in Latin America in the supply chain. It was one of the Confederation of Industry (CNI). The at Sorocaba in São Paulo state. Fiat’s most efficient stimulus measures taken index reached 67.7 points, which is 8.9 expansion required R$1 billion within by the government. points above the historic average – an an investment plant budgeted at R$5 Counting parts suppliers, trucks index value higher than 50 indicates billion for Brazil. “The growth in our and passenger vehicles, the automo- that business leaders are confident. results is a direct consequence of eco- tive industry led Brazilian industrial pro- “Optimism continues high and reflects nomic growth in the country,” said duction with 16% growth in January the resumption of industrial activity af- Cledorvino Belini, president of Grupo 2010 compared with the same month ter the crisis,” said Renato da Fonseca, last year. The auto- executive manager in charge of the motive industry was study at the research unit of CNI. responsible for 20% Residential construction – Resi- of expansion among dential homebuilders are showing the 27 areas tracked the same enthusiasm as automobile by the federal geog- manufacturers. Homebuilding is fueled raphy and statistics by credit lines from the government- institute (IBGE). It owned Caixa Econômica Federal sav- was the best Janu- ings bank and by the “Minha Casa, ary for industry since Minha Vida” (My Home, My Life) pro- 1995. gram. The government started Minha Installed capacity Casa, Minha Vida last year, and the is forecast to expand program calls for building one million 14.6% on average homes for lower-income families. Votorantim Cimentos factory in Bowmanville, Ontario, Canada. Brazilian companies are once again investing abroad. in 2010, the larg- The Caixa Econômica Federal pro- est percentage vided R$47.05 billion in residential Fiat in Brazil. Belini was recently elect- seen in eight years, according to the financing contracts last year, a rise of ed president of Anfavea, the trade as- Sondagem Industrial report that tracks 102% from 2008. The lending benefit- sociation for the industry. the planning and investment decisions ted 896,762 families, according to the Daimler, the German company, an- of 723 companies. Expansion for the bank. nounced investment of 460 million eu- three-year period 2010-2012 is fore- MRV Engenharia, a listed Brazilian ros to raise annual production by 15% cast at 23.8%, according to the sur- homebuilder, for example, announced in Brazil. vey, which is published by an institute last March that it would invest R$81 The Brazil automobile industry ben- within the Getúlio Vargas Foundation, million to build 1,360 homes in Bauru, efited greatly from a tax exemption a business school and think tank. a city in Sao Paulo state, in a venture on industrialized products, specifically Optimism of business leaders re- linked to the Minha Casa, Minha Vida

Growth in Industrial Output Industrial Confidence Data in % annual change (between 0 and 200) 8 120 6 110 4 Optimism 2 100 Pessimism 0 90 - 2 - 4 80 - 6 70 1995 1997 1999 2001 2003 2005 2007 2009*10* Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Fev *Forecast 07 07 07 07 08 08 08 08 09 09 09 09 10 Source: FGV Source: FGV

13

Achievements.indd 13 4/17/10 1:22 AM stake of Votorantim Cimentos in Cim- por to 21.2%. Votorantim said Cimpor gives it access to markets in Europe, Asia and Africa. In addition to Brazilian companies that already have businesses abroad, some companies are now taking their first steps overseas. One such is Braskem, Brazil’s largest petrochemi- cals producer and the eighth largest in the world. Braskem bought three polypropylene factories from US com- pany Sunoco Chemicals in February for US$350 million, marking its first inter- national investment. “This acquisition gives Braskem its first step in its strategy to establish op- The Brazilian vehicle market is now the fourth largest in the world. This year, Brazilians are set to buy 3.4 million vehicles. erations in the largest and most com- petitive consumer market for resins,” program. of foreign direct investments. In the said Bernardo Gradin, president and MRV Engenharia has R$1.25 billion first two months of this year, a record CEO of Braskem. The company had in cash and aims to be building 70,000 US$5.4 billion flowed out in Brazilian net revenues of R$15.2 billion last year. homes a year in “the near future,” direct investments, influenced by the It has US$3.5 billion earmarked for in- said company president Rubens Me- JBS acquisition of Pilgrim’s Pride. This vestments outside of Brazil through nin. “We do not believe that there is compares with an FDI inflow of US$3.7 2016. a (real estate) bubble because the de- billion, according to data from Brazil’s An inverse movement may oc- mand is larger than the supply,” Menin Central Bank. For this year as a whole, cur as the Brazilian domestic market said. “Brazil has a huge housing deficit the expectation is for an FDI outflow of heats up. Gerdau, one of the Brazilian and 1.5 million new families are start- US$15 billion and an inflow of US$38 pioneers in internationalization and ed annually, but the annual supply (of billion. the largest producer of long steel in homes) is just 400,000 units,” he said. Demonstrating the appetite of Bra- the Americas, said it plans to commit MRV Engenharia had revenue of R$1.6 zilian companies for assets abroad, 80% of its R$9.5 billion in investments billion last year, a rise of 48% from the Votorantim Cimentos acquired, via for the coming five years to its home year earlier. an asset swap, the 17.3% stake that market. With mills in 14 countries, Foreign companies such as China’s France’s Lafarge held in Cimpor, the Gerdau has its eye on the future de- Sany Heavy Industries, a construction Portuguese cement producer. This mand generated by large projects such equipment maker, are arriving in Brazil expanded Votorantim Cimentos’ in- as Minha Casa, Minha Vida, the 2014 in the wake of the real estate boom. ternational presence to 20 countries World Cup, the 2016 Olympics, PAC The Chinese company said it will invest around the world. The acquisition last programs and the development of the US$100 million to build a factory in February came after a heated dispute sub-salt offshore oil fields. São Paulo state. between three Brazilian companies – “Brazil turned in the best result Internationalization – Large Bra- Votorantim Cimentos, Camargo Cor- among our businesses in the fourth zilian non-state companies such as rêa and Cia. Siderúrgica Nacional – for quarter of 2009,” said André B. Ger- Vale, Votorantim, Odebrecht and Sabó the stake in the Portuguese cement dau Johannpeter, president and CEO are among Brazilian multinationals producer. of the listed steelmaker. “The infra- that are once again investing signifi- Votorantim Cimentos, part of the structure projects, the availability of cant amounts abroad after being en- São Paulo-based Votorantim conglom- credit and the governmental programs couraged by performance in the do- erate, bought an additional 4% of to encourage home ownership and the mestic market. Cimpor shares from Cinveste for 154 automotive industry have leveraged The recent outflow of Brazilian di- million euros 20 days after the asset our sales of common and specialty rect investments surpassed the inflow swap with Lafarge. This raised the total long steels in the country.” 14

Achievements.indd 14 4/17/10 1:23 AM Special Report A BANK AS BIG AS BRAZIL

Banco do Brasil regained the top spot among Brazilian banks in 2009, earning the highest profit ever recorded by any of the country’s banks.

For Banco do Brasil, Brazil’s larg- history. This performance in the credit estate bonds, loan guarantees and ad- est and oldest bank founded in 1808, area meant that Banco do Brasil was vances on foreign trade transactions the recent international financial able to close out the year with assets such as forward exchange contracts crisis has turned out to be a golden of R$709 billion, making it once again (ACC) and advances on delivered ex- opportunity. The bank bet strongly the biggest bank in Brazil and Latin change (ACE). against the reigning pessimism, trust- America. The expansion of credit boosted ing in the future of the country and According to a report for the fourth financial revenues to R$65.3 billion, global markets – and the bet paid off. quarter of 2009, the bank’s total do- 11.9% up on 2008. Of that, no less It lent to people and companies that mestic loans reached R$283.6 billion, than R$41.7 billion came from credit needed credit, and in the end made meaning that of each R$100 loaned operations. a net profit of R$10.15 billion, results by the national financial system, R$20 Banco do Brasil’s credit portfolio 15.3% higher than in 2008 and the came from Banco do Brasil, which fi- grew by 35.2%, more than double highest profit for any bank in Brazil’s nances credit operations, private real the market’s 15.2% average growth. In addition to credit, Banco do BB Regains National Leadership Brasil is also the national leader in (Assets in R$ billions) other main segments of the banking 7.0 708.5 industry. The bank holds 33.2% of BB has grown 3.5x since December of 2002 the country’s cash deposits, 24.1% of 6.0 savings deposits and 25.8% of total 5.0 521.3 deposits. It conducts about 30% of all exchange operations for import and 4.0 export (September 2009 positions). 367.2 Such leadership can be seen in 3.0 296.4 other indicators. Banco do Brasil has 253.0 2.0 230.1 239.0 the country’s largest customer base, 204.6 with 52.7 million clients (over a quar- 1.0 ter of the Brazilian population) and owns the largest support network, 0.0 2002 2003 2004 2005 2006 2007 2008 2009 with 17,929 service points including = 36.0% 4,897 branches in 3,552 Brazilian mu- nicipalities. The bank closed out last 15

Achievements.indd 15 4/17/10 3:08 PM ment of immense oil reserves discov- Customer Confidence Boosts Funding Expansion (R$ billions) ered offshore under very deep water – the so-called sub-salt petroleum. This Total Funding Open Market Funding image also reflects “the consistent 498.4 process of internationalization of Bra- 480.6 153.6 160.8 zilian companies and the increasing 362.0 inclusion of the lower-income popula- = 37.7% 91.1 = 76.5% tion” into the consumer economy. Like Brazil, which always had a

Dec/08 Sep/09 Dec/09 Dec/08 Sep/09 Dec/09 reputation as the country of the fu- ture and has now become the country Savings Deposits Time Deposits of the present, Banco do Brasil is also 194.7 193.5 benefitting from this success. A survey 72.2 75.7 149.6 by Economática, a consulting firm, 55.0 shows that Banco do Brasil is in first = 37.8% = 29.3% place among banks in the Americas in terms of the ratio between profitabil- ity and equity, looking specifically at Dec/08 Sep/09 Dec/09 Dec/08 Sep/09 Dec/09 banks with assets exceeding US$100 billion. According to analyst Einar year with 35 million active current ac- in any crisis. This was thanks to its Rivero, the rate calculated for Banco counts, growth of 15.2% compared share composition and the support it do Brasil is 33.90%, while the North- to 2008. receives from the National Treasury. American bank with the best results This huge operation is in part the Deposits with the bank’s operation lies four places behind with a ratio of result of significant activity in merg- in the United States, for example, 19.82%. ers and acquisitions. In 2009, Banco jumped from US$380 million to US$6 “Those who choose to live the do Brasil formed an association with billion by the end of 2008. Naturally, present to the full; anticipate the fu- Banco Votorantim and bought the this figure fell later on, but volume still ture,” says the CEO Aldemir Bendine. Nossa Caixa bank, so adding 9.3 mil- remained over US$3.5 billion, almost He attributes the bank’s success to its lion clients and 1,756 service points to 10 times higher than at the beginning perspicacity during the global eco- become the leading banking estab- of the crisis. nomic turbulence. “At the time, the lishment in São Paulo, the country’s fall in available credit reduced the most economically developed state. Present and future - According country’s productive capacity to 80%, Banco do Brasil is a “mixed econo- to Banco do Brasil’s latest annual re- although businessmen continued my” company where the government port, “2009 will also be remembered open to doing business in Brazil. We holds the majority participation via the for the restoration of the bank’s role saw that as an immense business op- National Treasury with 53.65%. Other as an important public bank and an portunity.” shareholders include public and pri- important credit agent, as well as vate entities such as the Previ pension a promoter of development in the Positive action – In times of crisis, fund (10.36%), the Export Guarantee country. This posture was decisive for economic liquidity tends to fall dras- Fund (8.92%), the National Develop- Brazil to serenely get through one of tically. This reinforces the importance ment Bank’s BNDESPAR (2.42%), the the greatest crises yet faced by the of participation of public institutions Guarantee Fund PPP (2.33%), com- world economy.” such as Banco do Brasil. “We can’t panies (5.38%), private individuals The report comments that this wait for the private sector to grant in Brazil (5.01%) and foreign capital performance made the bank “the re- more credit than it is effectively willing (11.78%). The bank heads up a con- flection of a country that has great in- to provide, so public banks must be glomerate of 43 companies in which frastructure projects on the horizon,” called in to compensate for the drop it holds a minority or majority stake. such as those that will be necessary to in liquidity caused by the retraction There is no doubt that Banco do stage the World Cup football compe- in private credit,” said Miguel Bruno. Brasil benefitted from the “flight to tition in 2014 and the Olympic Games “This was seen in 2008 and 2009, quality” phenomenon that is usual in 2016, not to mention the develop- when the crisis in the United States ef- 16

Achievements.indd 16 4/17/10 1:23 AM The bank’s old headquarters in Rio de Janeiro, now beautifully restored as a Cultural Center.

fectively arrived in Brazil,” said Bruno, its credit portfolio for companies by Safe and sustainable - Banco do who holds a doctorate in economics almost 30% to R$125.3 billion, espe- Brasil blends its robust performance and is an advisor for special projects at cially for those needing cash flow sup- with safety and sustainability. The Ipea, the widely-respected Institute of port R$59.3 billion. bank’s policy is based on three foun- Applied Economics. Last year, Banco do Brasil once dations of the banking industry: pru- Economist Keyler Rocha, professor again demonstrated its historical lead- dence, sensible conservative behavior, at the University of São Paulo’s Col- ership in two fundamental segments and quality of credit, with the expan- lege of Economics, Business and Ac- of the Brazilian economy: foreign sion of credit in lines of lower risk, counting, noted that “Banco do Brasil trade and agribusiness. The bank sup- which offer better conditions in terms was encouraged to adopt a more ag- plied US$47.1 billion to the export of deadline and financial cost. gressive policy at that moment. While market and US$34.1 billion to the im- The bank gave priority to custom- the competition withdrew, the bank port market. The agribusiness credit ers with a positive credit history and occupied the space that was left in portfolio closed the year at R$66.4 a good relationship with the bank. the market.” billion, representing 59.1% of all agri- The result is that the institution main- The step taken by the bank was business credit in the country. tains default levels below those seen fundamental for Brazil to avoid the The bank is also the general leader in the national financial system as a risk of recession that hit the main among financial agents for financial whole, where the rate of operations world economies. “This result is very onlending from the National Devel- that are more than 90 days overdue important because Banco do Brasil opment Bank. Banco do Brasil by is 4.4%. At Banco do Brasil this per- was one of the main pillars supporting itself onlent R$12.3 billion, repre- centage is 3.3%. the anti-crisis policies adopted by the senting 21.1% of the total and the The bank’s mix of caution and ag- government in 2009,” noted Finance largest volume ever registered in such gressiveness gave it a level of higher Minister Guido Mantega, commemo- operations. profitability than its main national rating the bank’s excellent results. For the Brazilian Government, competitors. The recurring return on Following this policy, the bank ex- commenting on Banco do Brasil’s fig- shareholder investment rose from panded its personal loans by almost ures, the results show that “it is pos- 24.7% to 25.8% between 2008 and 90% to R$91.8 billion in the space of sible to make high profits while carry- 2009. The best result among compet- just one year, tripled vehicle financ- ing out positive economic actions for itors was below 24%. ing to R$20.7 billion and expanded the country.” This success in 2009 inspired some 17

Achievements.indd 17 4/17/10 3:08 PM ambitious goals for 2010. Banco do requirement is June 2011. Currently are all described in the Banco do Bra- Brasil wants to increase consumer the bank’s free float is 21.7%, but the sil’s latest report. In addition, the bank credit by 20% this year, compared bank plans to have up to 26% of its also plans increasing its participation to last year, and thus offer customers capital traded. in the capital market and is targeting easy financing in a year in which eco- For capitalization, the bank is foreign investors interested in Brazil. nomic growth is projected to return studying making a primary offering of “The global financial markets pro- strongly. new shares and also making some ex- vide the opportunity for raising funds The greater supply of financing isting shares available to investors (a directly via the stock market and will be underpinned by expansion of secondary offering). In addition to the these resources can then be internal- bank’s credit capacity and an increase share offerings, the bank has begun ized,” said Michael Bruno of Ipea. He in the bank’s capital. The bank plans the process of capitalization through said direct action in the stock market to issue shares and bonds to leverage the sale of bonds. In October last year, may be even more important in a between R$8 billion and R$10 billion. it sold US$1.5 billion in debt securities scenario of a reduction in banks’ in- This operation is likely to take place in abroad; raised another R$1 billion in come caused by falling interest rates. the first half of 2010, and will offer November and then in January sold “If Brazil is able to make a transition additional credit of between R$80 bil- a further US$500 million in five-year to an economy that has low inter- lion and R$100 billion. bonds and US$500 million in ten-year est rates, then capital markets and The capital expansion at Banco do securities. stock markets will receive a fantastic Brasil constitutes a security measure boost,” he said. for the national financial system, and Capital market - The increase in To grow in the capital market, the prevents high leverage of institutions financing, the 2010 capitalization and bank is considering the possibility of as happened to U.S. and European the business sustainability objectives acquiring a broker to operate directly banks in the sub-prime crisis. As de- termined by the Brazilian Central Bank, banks must maintain their Basel A Bank that’s Older than Brazil Index of capital adequacy at a mini- Banco do Brasil is the oldest finance farming and the first steps mum of 11%. The indicator is calcu- institution in Brazil that is still in towards industrialization. lated according to the bank’s assets operation. It was created on October In 1905, by when Brazil had and defines how the institution can 12th, 1808 by King John VI, of become a republic, the bank borrow – for example, a minimum Portugal, who fled from Napoleon approved a new statute. This Bonaparte and set up his court in determined that it should be a capital of R$11 allows the bank to Rio, with all his family. “mixed economy” institution with a borrow R$100. The bank was constituted through new distribution of capital, whereby Banco do Brasil closed 2009 with what amounted to the first public the government retained share- a Basel Index of 13.7% and expects offer of shares in Brazil, and played holding and administrative control. to increase that margin. The market an active role in the organization of Since then, Banco do Brasil has capitalization of R$8 billion would the economic system in the colony, become the country’s most important bring the index to close to 16% and which gained new status thanks to financial institution, financing give more comfort to the announced the presence of the king. In 1819, productive activity, facilitating for example, the Banco do Brasil imports and exports and issuing credit expansion. financed the construction of the first bonds. Until the Brazilian Central headquarters of the Rio de Janeiro Bank was created in 1964 Banco Free Float - Besides the effects Stock Exchange. do Brasil carried out activities that on credit and security in the finan- Three years later, after John helped promote the evolution of cial system, strengthening the bank’s VI returned to Portugal, his son the Brazilian banking system, today cash position via capitalization meets, Pedro I broke with the Portuguese considered one of the most modern more than a year ahead of schedule, crown and declared Brazil to be in the world. the rule of Bovespa’s Novo Mercado an independent monarchy. Banco Since then, Banco do Brasil do Brasil financed the construction has participated in and promoted (“New Market”) that requires the of ships that were then used in the transformation of Brazil from a Banco do Brasil to have 25% of its battles against Portugal, and also the largely agrarian economy into one of capital held by minority sharehold- construction of schools and hospitals the most modern economies in the ers in the free float, traded on stock in the new country. Later, it was to world. exchanges. The deadline to meet this 18

Achievements.indd 18 4/17/10 1:23 AM Growth in Net Interest Income A Very Comfortable Level of Provisions (R$ billions) (R$ millions)

33.1 19,070 18,617 17,759 24.5 = 34.9% 2,903 65.3 2,782 14,674 2,867 58.4 23.7 13,673 1,640 23.9 1,594

33.9 32.3 41.7 16,167 34.5 14,892 15,835 12,079 13,034

2008 2009 4Q08 1Q09 2Q0955.0 3Q09 4Q09 Interest Expenses Loan Income Other Interest Income Net Interest Total Provisions Additional Provisions Income Minimum Provisions

on the domestic and international ing customer management and ser- year, it supported over 513 events. fronts. “We want to repeat in the vice channels, including strategies for The sports activities catered to 51,700 area of capital markets the spectacu- emerging groups, and strengthening children and 12,500 athletes. lar growth that the bank has had in operations in value chains, coopera- Banco do Brasil also has important the area of wholesale credit,” Ivan tives and associations. cultural centers in Rio de Janeiro, São Miller, vice president of finance at About 70% of food consumed Paulo (the two largest cities in the Banco do Brasil, told reporters. by Brazilians comes from family country) and in Brasilia, the federal Rather than buying a brokerage farms, and last year Banco do Bra- capital. The Banco do Brasil Cultural firm the bank is also evaluating the sil disbursed R$18.3 billion for small Center in Rio de Janeiro, is located in possibility of using the structure of farmers. the bank’s former headquarters, an Banco Votorantim, where it owns The bank operates a strategy of imposing building at the old center of 50% of the capital. sustainable regional development the city, that has been magnificently According to the latest quarterly that helps small businesses develop. restored, and is today one of the coun- report for 2009, the entry into the In 2009, R$7.8 billion in operations tries most active and important focal capital markets had a trial run last were conducted with 1.1 million fam- points for cultural activities. In 2009, year when the bank coordinated ilies in 4,700 municipalities through- 282,000 students in primary and sec- operations of four large enterprises out the country. ondary education in 2,175 public and (Cielo, BR Foods, Gol and Marfrig), Last year, the bank also posted a private schools participated in educa- raising more than R$16 billion. It was record release of resources for pro- tional programs such as visits to ex- also contracted to participate in other grams such as “The Road to School” hibitions, theaters and cinema. Last operations totaling R$18.7 billion for and “Pro-Vias”, destined to purchas- year, the bank sponsored 871 cultural Natura, Banco Santander, Rossi Cyre- ing buses for primary school children events that received more than five la, CCR and Multiplan. Banco do Bra- and carrying out minor local road million visitors. sil has also participated in 32 issues works in municipalities. No other financial institution in the of fixed income securities, totaling For over 20 years, the Banco do world can boast a history that is as R$10.3 billion. Brasil brand has been associated with intimately tied to the modernization volleyball, the second most popu- of a nation as Banco do Brasil. Results Social responsibility – Projects lar sport in a country renowned for achieved in 2009 and the objectives such as greater activity in capital mar- football. Brazilian volleyball has won for 2010 show that this commitment kets have not caused the bank to for- world and Olympic medals. But in continues, and that Banco do Brasil get its social vocation. Among 2010 addition to promoting great champi- is the bank that intends to continue goals are expanding capacity for dis- ons, Banco do Brasil supports sport- closely related with the success of the tribution of products and services in ing events for children, adolescents, Brazilian economy, promoting pros- areas that are not yet served; improv- adults and amateur athletes. Last perity for the whole society. 19

Achievements.indd 19 4/17/10 3:08 PM A Major New International Player

One of the strategic priorities for Banco do Brasil in 2010 and going forward is to expand the services that it offers internationally.

Banco do Brasil (BB) has regained est foreign presence of all Brazilian ferred locations for Banco do Brasil its place as the largest bank in Lat- banks, with branches and represen- are the United States and countries in America and is mapping out its tative offices in 23 countries. in South America and Africa. There future in a scenario of economic Today 184 Brazilian companies are plans in place for Africa, where growth and low inflation, with ex- with a global presence are clients of Brazilian commodity companies al- panding jobs and incomes. Now the Banco do Brasil. These companies ready do a great deal of business, bank is prioritizing the expansion of rely on the institution to conduct and also for the European Union. its overseas operations, in particular their transactions, make payments to support the business activities of to their employees, and even to ob- Ready to invest in the U.S. – Brazilian clients who are increasing tain loans in local currency. When The North American market is fun- their activities in the international planning its international expansion, damental for those companies that market, not to mention foreign com- Banco do Brasil takes into account at seek a global presence. Besides be- panies that are looking to do busi- least three factors: the international- ing a main focus for Brazilian com- ness in Brazil. ization of large Brazilian companies; pany investments, the United States According to the bank’s yearly re- Brazil’s trade with partner countries; is Brazil’s second largest trading part- port, BB objectives for 2010 include and the existence of Brazilian expa- ner (2009 bilateral commerce was expansion of its international ac- triate communities that need the US$35.6 billion) and some 1.4 mil- tivities, together with strategic, busi- bank mainly to send money to and lion Brazilians live in the USA. ness and operational partnerships from Brazil. The bank has mapped out two overseas. BB already has the larg- Based on the above criteria, pre- paths to approach this market: ex- panding the number of branches and their range of products and ser- A Growing Presence in International Business ( US$ billions) vices, or acquiring an existing bank. Foreign Trade Foreign Funding In April of 2010, the U.S. Fed- eral Reserve gave authorization for 14.5 11.2 Banco do Brasil to operate in the US = 29.3% = 27.0% capital and retail markets. “Now we have the opportunity to buy banks, 26.1 25.2 3.9 open branches and operate vigor- 3.5 21.3 100.0% ously in the capital market,” said 4.4 4.4 2.0 16.8 100.0% 5.8 Allan Simões Toledo, BB’s Interna- 6.8 9.3 2.0 1.0 tional and Wholesale Business V P. 5.3 4.7 11.1 The bank’s top priority is to have 2.6 7.9 2.3 branches in places that have a major 3.4 6.3 concentration of Brazilians, such as 2.7 16.1% 29.4% the states of New York, Massachu- Dec/08 Dec/09 2008 2009 setts, Connecticut, New Jersey and Portfolio Volume (US$ billions) Individuals Issues Florida. FINIMP Pre-payment Special Repo Banco do Brasil had already re- BNDES - Exim ACC/ACE Corporate Interbank ceived Federal Reserve authorization 20

Achievements.indd 20 4/17/10 1:23 AM to maintain a subsidiary, BB Money zilian companies in Argentina with speaking ones such as Mozambique Transfers, to remit money. This has over 100,000 employees. and Angola. Brazilian giants such as been operating since June of 2009. In a move to increase its partici- Petrobras, Vale, Odebrecht and Ca- BB also obtained US$1 billion in pation in the Argentine economy, margo Corrêa have been working in January of 2010 through the sale of facilitate more trade transactions Africa for over a decade. bonds to provide credit for Brazilian and give greater support to Brazilian Over 370,000 Brazilians live in companies in the United States. companies that are operating there, Japan, where BB invested in retail The bank can offer these clients Banco do Brasil has bid to purchase banking in the 1970s and currently Portuguese-language support and Banco Patagônia, an Argentine serves 150,000 customers, who use has the advantage of knowing peo- bank that owns 155 branches with the bank to save their money and ple who live in the United States and 720,000 individual and 38,000 cor- make transfers. have already been clients: “We know porate customers. Brazilian trade with Japan last

A strong presence in Japan: (left to right) Banco do Brasil branches in Tokyo and Ibaraki

the needs of these communities of The purchase or creation of a year totaled US$9.6 billion. Bilat- Brazilians and can offer them specific bank with a retail structure reflects eral commerce with the so-called products.” the new phase of the Brazilian econ- “Asian Tigers” of Singapore, Hong omy. “If we are to cater to companies Kong, South Korea and Taiwan was Mercosul and Africa - The sec- in this concept, it’s not enough to US$15.1 billion, while China – Bra- ond largest colony of expatriate Bra- have just one branch,” said Toledo. zil’s largest individual trade partner zilians is in the neighboring country “Given the new dynamism of Brazil- – added another US$36.1 billion. of Paraguay, and comprises about ian companies, I must have a larger All this helps explain BB’s interest in 450,000 people. Paraguay is firmly network to offer credit and capture increasing its presence in Asia. The in the bank’s sights, not just because deposits in local currency. We have bank hopes to open a security house of the Brazilian residents but also to be able to make payments – when to trade stocks and bonds of Brazil- because Paraguay is a member of a company has a factory it has doz- ian companies. the Mercosul free trade bloc (other ens of suppliers and has to pay em- There are also significant com- members are Brazil, Uruguay, Ar- ployees. Then I must also have an en- munities of Brazilians in Portugal, gentina and Venezuela) with which hanced structure to give support to Spain and Italy, and the European Brazil did US$28.9 billion of busi- that level,” Toledo said, noting that Union is Brazil’s main trade partner ness in 2009. Paraguay was the site the bank can offer credit to all sup- when considered as a bloc. Last year, of BB’s first international branch, in pliers in the supply chain of Brazilian trade between Brazil and the EU was 1941. companies. US$63.3 billion. In Europe, the strat- Trade relations with Argentina Just as in Argentina, BB is studying egy is to create “BB Vienna” and are by far the most significant within acquisitions in Chile, Colombia, Par- branch out with a retail network to Mercosul: US$24 billion in bilateral aguay and Uruguay, as well as Afri- offer services and products tailored trade last year. There are 210 Bra- can countries, especially Portuguese- to Brazilians living in the Old World. 21

Achievements.indd 21 4/17/10 1:23 AM

The Same Brand and Quality in Various Areas of Activity

Banco do Brasil heads up a conglomerate of no fewer than 43 companies, and aims to broaden its relationship with its more than 53 million customers.

The Banco do Brasil (BB) group in- zilian economy. While low inflation has formed partnerships that add excel- cludes no less than 43 national and led to a reduction of interest rates and lence in services, while promoting much international subsidiary companies, to lower profit from banking spreads, wider distribution of its products. counting majority and minority partici- it also increases the consumption po- The strategy has been working, so pations, in areas ranging from financial tential of customers who can now buy that in 2009 the bank reinforced its affairs to industry and energy produc- additional bank products and services. leadership in several activities and en- tion. Banco do Brasil has revamped its busi- joyed strong growth. Business volume The group’s growth strategy is to ness model to better cater to clients’ in insurance, private pensions and sav- broaden its relationship with its more needs, expanding bank participation in ings plans, for example, rose by more than 53 million bank clients. “Besides strategic areas and forming partnerships than 30% last year and added nearly growing organically, we must optimize that add excellence to bank services and R$1 billion in commission, charges and our relationship with current clients,” offer much wider product distribution. corresponding net worth to the bank’s said Paulo Rogério Caffarelli, vice-pres- Banco do Brasil made some very profit. BB plans call for these areas to ident for Retail Business, who sees great important acquisitions last year, spe- generate nearly a quarter of group rev- potential for BB’s huge clientele to buy cifically to promote this greater rela- enues by 2013. new services. tionship with existing customers. One Brasilprev, its subsidiary in the private Broadening relationships is also es- example was the acquisition of Nossa pensions sector, closed the year with the sential given the stabilization of the Bra- Caixa, a traditional banking institu- largest net income in the market. And tion that belonged to the São in the savings plans segment, Brasil- Paulo State government, with cap’s reserves reached R$3.6 billion, an 5.7 million clients and 1,542 18.3% increase over 2008. The com- points of service. This repre- pany has been a revenue leader in the sented a huge step forward for market for 13 years. BB in São Paulo, which is Bra- The bank has established a business zil’s economically most impor- plan for associates companies dealing tant state. For similar reasons with insurance, private pensions and BB bought BESC and BEP, two savings plans. Partners will be chosen former state-owned banks in for their expertise in the area, and their respectively the states of Santa organizational flexibility to offer servic- Catarina and Piauí, as well as a es, while BB will hold an overall majority 50% stake in Banco Votoran- of shares. tim, a private institution. This model determines that Banco do Moreover, Banco do Bra- Brasil owns 100% of preferred shares, sil has revamped its business which do not carry the right to vote, model to serve customers bet- and 49.99% of ordinary shares, which ter and offer a wider range of have voting rights. This allows for Banco products and services. It has do Brasil to have a majority of total eq- expanded its participation in uity (75%). The bank understands that strategic areas outside the tra- it is not reasonable to own just 50% of Bank headquarters in Brasília: the national command center ditional banking sector and a company when 100% of the sales are 22

Achievements.indd 22 4/17/10 3:08 PM

BB CONGLOMERATE – OWNERSHIP STRUCTURE

BANCO MULTIPLO National Treasury 53.6502% PREVI 10.3681% BNDESPAR 2.4285% Individuals 5.3836% Businesses 5.0108% Foreign Capital 11.7875% Shares in Treasury 0.1101% Guarantee Fund PPP 2.3348% Export Guarantee Fund 8.9266%

CONTROLLED BB LEASING BB BI BANCO DO BRASIL COBRA BB 100% ON - 100% Total BB 100% ON - 100% Total AG VIENA BB 99.88% ON BB 100% ON - 100% Total 99.94% Total BB CARTÕES BI 0.0653% ON BB 100% ON - 100% Total BANCO USA HOLDING 0.0032 Total COMPANY INC. BANCO POPULAR DO BB 100% ON - 100% Total BB CORRETORA BRASIL BB DTVM BB100% ON - 100% Total BB 100% ON - 100% Total BB 100% ON - 100% Total BB MONEY BE SC VAL TRANSFERS INC. BB LEASING Co. LTD BB 100% ON - 100% Total BANCO DO BRASIL BE SC RED BB 100% ON - 100% Total SECURITIES LLC BE SC LEASING BB 100% ON - 100% Total BB 100% ON - 100% Total BB CONSÓRCIOS BAMB BB 100% ON - 100% Total BB 100% ON - 100% Total NOSSA CAIXA NOSSA CAIXA ADM CARTÕES CAPITALIZAÇÃO BB 100% ON - 100% Total BB 100% ON - 100% Total

ATIVOS S.A. BB SECURITIES BB TURISMO BB ALIANCA BB SEGUROS BB BI - 49% ON BAMB - 100% ON BAMB - 99% ON PARTICIPAÇÕES PARTICIPAÇÕES 74.50% Total 100% Total BB Leasing - 1% ON BB 100% ON - 100% Total BB 100% ON - 100% Total BAMB - 51% ON 100% Total 25.50% Total

RELATED COMPANIES / PARTICIPATION BB SEGUROS PARTICIPAÇÕES Strategic Participation BB ALIANCA PARTICIPAÇÕES Grupo Seguridade Strategic Participation

BRASIL CAP BRASIL PREVI ALIANCA DO BRASIL BB-BI 49.99% ON BB-BI 49.99% ON 100% ON 49,99% Total 49,99% Total 100% Total

BRASIL SAÚDE BRASIL VEÍCULOS BB-BI 49.99% ON BB-BI 40% ON 49,99% Total 70% Total

BB BI Strategic Participation Other Participation

SBCE CIELO EBP VISA VALE BB-BI 12.088% ON BB-BI 23.54% ON BB-BI 11.11% ON BB-BI 35.00% ON 12.088% Total 23.54% Total 11.11% Total 40.35% Total

Non-strategic Participation SBCE CIBRASEC TECBAN BB-BI 12.088% ON BB-BI 9.09% ON BB-BI 13.53% ON NEOENERGIA PRONOR 12.088% Total 9.09% Total 13.53% Total BB-BI 8.81% ON BB 1.77% ON BB 3.03% ON 11.99% Total 1.05% Total 3.03% Total BI 5.51% ON KEPLER WEBER 3.27% Total BB-BI 18.94% ON DTVM 29.51% ON 17.65% Total 12.02% Total BBDTVM 0.0245% ON 0.0228% Total ITAPEBI BB-BI 19% ON - 19% Total

BANCO DO BRASIL MANAGED Strategic Participation BB PREVIDÊNCIA BANCO VOTORANTIM MAPFRE NOSSA CAIXA Entidade fechada de Previdencia Social BB 49.99% ON - 50% Total BNC 49% ON - 49% Total FOUNDATION

Non-strategic Participation FBB

CADAM BB 56.19% PN - 21.64% Total SPONSORED 23 CASSI PREVI

Achievements.indd 23 4/17/10 1:23 AM and the 2016 Olympic Games. Also in A Growing Presence in Insurance and Cards the insurance sector in 2009, Banco Insurance Net Income (R$ millions) Credit Card Total Revenue (R$ billions)² do Brasil started negotiations with the federal government with the aim of ac- 11.7% 88.6 quiring a shareholding in the Brazilian 11.3% % Reinsurance Institute, now known as Insurance Ratio¹ - IRB-Brasil Re. Given the current excellent 992.2 66.2 state of the Brazilian insurance and re- 758.5 insurance market, and in particular the area of property risks, the bank could benefit from the institute’s experience in covering major risks.

2008 2009 2008 2009 Cards – In 2009, Banco do Brasil also = 30.8% = 33.9% expanded its share of the cards market, ending the year with 59.3 million debit (1) Insurance Net Income / BB’s Recurring Net Income (2) Includes Nossa Caixa; does not include numbers of BV cards issued (growth of 12.3%) and 28 million credit cards issued (growth of made over its counter. ance reflect the bank’s aggressive and 10.3%). Furthermore, the model gives the yet flexible strategy to win customers. According to the bank’s Retail Busi- company flexibility. With voting share According to the bank’s 2009 annual ness area, credit and debit cards in 2009 control remaining in private hands, the report, the net profit of insurance com- generated more than R$90 billion of company can behave as a private en- panies within the Banco do Brasil group business, growth of 40.3%. This was far terprise, like its competitors, without was R$708.8 million. Life insurance and higher than the overall market average, coming under the rigid legislation that others contributed roughly 16% of to- which itself saw significant growth at applies to public companies. tal insurance revenues and 44% of the 18.3%. With a market share of 20.3%, This is the case of a partnership be- consolidated net profit. Operations with the Banco do Brasil was responsible ing negotiated with Mapfre, a Spanish private pension plans contributed 52% for one out of every five reais billed on insurance company operating in the of BB revenues in the sector, and 36.4% cards in the country. automobile, life, personal, agribusiness of the net profit. and credit risk segments. The partner- Last year was very important for the Real Estate – The bank has recently ship will create the largest personal bank in this sector. A major reorganiza- entered the real estate credit market – insurance company in Brazil and the tion was launched in the insurance area last year total real estate lending by the second largest in property and automo- to increase its participation in the bank’s financial system was R$33 billion. This bile insurance. Once the partnership is profits. “The insurance market, private is seen as important progress, because operational, products will be sold both pensions and savings represent a strate- “real estate lending is a process that in the extensive network of Banco do gic area for the future of the company,” creates an exceptionally strong link with Brasil branches and through Mapfre’s the annual report said. the customer.” 10,000-plus existing brokers. From a market perspective, the area In addition to maintaining customers, The deal with Mapfre follows a year of insurance in Brazil has great poten- real estate credit will grow substantially in which Banco do Brasil made great tial to grow in the coming years. Driving thanks to government housing policies progress in the insurance market, where this expansion in the area of personal that are aimed to reduce the huge defi- it has achieved high profitability. In the insurance is the growth in per capita cit of decent-quality housing in Brazil, area of health insurance, Brasilsaúde income, coupled with the reduction in currently a shortfall estimated at around enjoyed growth of around 67% in its unemployment. For corporate insur- seven million family dwellings. The need dental plans portfolio, while the profit in ance the drivers are the vibrancy of the is greatest amongst families with aggre- the area of life insurance reached R$316 petroleum and maritime sectors, thanks gate income up to five times the mini- million in 2009, annual growth of more mainly to the exploration and develop- mum monthly wage - the equivalent of than 27%. Brasilveículos increased the ment of Brazil’s huge offshore sub-salt about US$1,500 per month. Even so, vehicle fleet insurance by more than oil fields, while insurance for major the Banco do Brasil operates real estate 20% between 2008 and 2009. events will naturally be driven by the financing for all segments of the market These results in the area of insur- 2014 World Cup football competition and population. 24

Achievements.indd 24 4/17/10 1:23 AM An Institution with its Roots in the Soil

Brazilian agribusiness is among the strongest and most productive in the world, and Banco do Brasil is the sector’s main source of credit.

A study by the Brazilian Ministry of food supply and improve the country’s ricultural credit card called “Cartão de Agriculture, Livestock and Supply fore- export earnings, creating a surplus to Crédito Ourocard Platinum Agronegó- cast that over the next 10 years Brazil finance other sectors. cio”. This generated R$4.4 billion of will see significant productivity gains This longstanding vocation means business and helped rural producers both in basic foodstuffs consumed in that Banco do Brasil has for many years finance their payment of inputs. the country and in agricultural raw been the national leader in agricultural Money lent by the Banco do Brasil materials produced for export. credit. According to the bank’s latest spread throughout the entire Brazil- Rice, for example, is likely to enjoy annual report, in 2009 the institution ian agricultural supply chain, benefit- a productivity increase of almost 5%, was responsible for 58.1% of this mar- ting producers both large and small. while production of potatoes, cotton, ket. At the end of 2009, the bank’s BB credit provided financing for pro- wheat, beans, corn, oranges, soy and agricultural credit portfolio stood at duction and for the sale of products, manioc are all likely to increase while R$66.4 billion, representing 22.1% of making it possible for farmers to store consuming less land area per unit of the bank’s total lending. their produce. It also financed indus- output. Rural credit provided by the BB was trial processing and helped stimulate The increase in productivity will re- extremely important in 2009. The bank the use of more rational and efficient sult from efforts in the countryside to provided working capital to support production methods that are more en- generate greater quantities of produce agribusiness activities and so acted as vironmentally sustainable. with better quality. These efforts are a counter-cyclical factor against the One such example is the agreement supported by the Banco do Brasil (BB), economic downturn. One of the high- recently signed with the JBS Group, the which since the 1940s has been a key lights of the bank’s portfolio of agri- world’s largest meat producing com- supporter of rural development poli- business products, according to the pany, to provide finance for its roughly cies destined to ensure an adequate latest annual report, was a special ag- 30,000 suppliers spread though Brazil. Under the terms of the agreement, BB will supply credit for invest- ments to restore degraded pasture land, build and renovate systems to breed cattle in confinement, and purchase machinery. The JBS Group guarantees the loans. Banco do Brasil is also respon- sible for carrying out government programs in all areas of agribusi- ness. This money also benefits family farmers, who produce some 70% of all food consumed in the country. Loans granted by Banco do Brasil via the National Program to Promote Family Farming (Pro- naf) totaled R$7 billion in 2009 and benefitted 836,000 small Brazil’s power agribusiness sector has always been supported by BB farmers. 25

Achievements.indd 25 4/17/10 1:23 AM Credit: The Most Powerful Weapon to Beat the Crisis INTERVIEW Ricardo Flores, Banco do Brasil vice-president for credit, control and global risk explains how the institution helped Brazil beat the crisis.

BME – Why was making credit RF – The Banco do Brasil and other and Banco do Brasil executives decid- available for consumers and compa- public banks irrigated the economy ed it was important to act to free up nies so important in helping Brazil ride with credit. BB thus took advantage the flow of credit? out the effects of the international fi- of opportunities to strengthen its rela- RF – The Banco do Brasil does not nancial crisis? tionship with its customers, win new take decisions in isolation. It con- Ricardo Flores – Expansion of ones and increase customer loyalty. stantly adhered to a basic guideline the credit supply helped steer the The results of this partnership strategy in terms of the relationship between economy in the opposite direction, were growth of 35.2% in the domes- risk and return, and it acted in har- away from the logic of retraction. tic credit portfolio last year, against an mony with other anti-cyclical mea- For companies, the immediate im- average growth of 15.2% for the Bra- sures taken by the federal govern- pact of the crisis was an increase in zilian financial system as a whole. This ment at three main levels: credit for the average time for holding stocks. allowed the Banco do Brasil to gain consumers and production; credit for At that moment, what the produc- three percentage points of market exports (to meet the demand gen- tive sector most needed was credit share in the period – from 17.1% in erated by the lack of external credit to finance companies carrying stocks December of 2008 to 20.1% at the lines) and liquidity for the interbank until demand recovered, and that was end of 2009. market. With the increasing severity what we did. At the other end of the of the international financial crisis, market we took action to encourage BME – How was the decision tak- the BB received a migration of depos- family consumption. The increase of en to increase the offer of credit? its that had previously been lodged credit for private individuals helped RF – The managers of a public with less well known institutions. This drive the domestic consumer market, company have an obligation to un- is the result of a well-known phe- and this had a direct effect on the derstand how to play a role in govern- nomenon called the flight to quality. level of business confidence. It is this ment priorities, without losing sight Using funds that it raised abroad, BB level of optimism (or pessimism) that of the need to generate a financial re- expanded its supply of credit for ex- leads businessmen to take decisions turn for shareholders. That was what ports and so increased its share of this to hire or fire, to increase or decrease we did. We sought to expand credit in market segment from 27.8% in 2008 stocks, and to invest or to hang back areas that our team judged carry least to 31.4% in 2009. Measures for con- and wait. Increasing the supply of risk and offer the best conditions, in sumer and production credit injected credit at the moment when economic terms of terms and financial cost. This a total of R$61.3 billion of credit into agents were hesitant was fundamen- strategy proved to be right, both from the Brazilian economy. In the inter- tal to minimizing the impacts of the the point of view of our majority and bank market, BB gave preference to crisis and to restoring the economy on minority shareholders. Proof of this operations with medium-sized banks, its growth trajectory. can be seen in our share price, which guaranteed by their credit portfolios, enjoyed a record increase. in particular consigned credit (with re- BME – How much did this policy payment deducted directed from the help explain the bank’s excellent fi- BME – What happened at key mo- borrower’s salary or pension) and ve- nancial results last year? ments when government authorities hicle finance, which carry lower risk. 26

Achievements.indd 26 4/17/10 3:08 PM Major Sporting Events Spell Big Business FUTURE 2 The 2014 World Cup and 2016 Olympic Games are Attracting Substantial Investments in Transportation and Other Infrastructure, Tourism and Civil Construction.

BY FERNANDO DAVID at the personnel who are in the rear- Olympic Committee and Brazil’s Asso- In the classroom, the conversation guard of serving tourists, like chamber- ciation for Infrastructure and Base In- – in English – is about Rio de Janeiro’s maids, waiters and taxi-drivers,” said dustries (Abdib). “The organization of tourist attractions. They’re just little Leonardo Cirino, director of marketing the World Cup and the Olympic Games phrases, but basic to everyday life for for an English course that has 600,000 has placed Brazil firmly on the radar taxi-driver Marcelo Luiz de Oliveira. pupils. In Rio, the public schools have for international business,” said Ralph “I’ve already learned a bit about the brought forward the start of English Lima Terra, Abdib’s vice-president. charges for each taxi trip,” he said, cel- classes: pupils now begin to learn the The 12 host-cities for the World Cup ebrating. Working as a taxi-driver for language aged six – previously they will have available around R$8.5 bil- 22 years, Oliveira now gives up three had their first contact with the English lion each one to meet FIFA’s demands, hours a week to do the short course. language at 11. while the Rio Olympics are budgeted He sees an opportunity with the pros- Businessmen’s expectations and the at R$28.8 billion. President Luiz Inacio pects of a growth in tourism in what actions of public authorities also reflect Lula da Silva said: “We have to ask not will be Brazil’s most important city for the climate of optimism which has be- how much Brazil will spend but how the 2014 World Cup and is host city for come widespread in Brazil, after con- much Brazil will gain from holding the 2016 Olympic Games. The taxi driv- firmation that the world’s two largest these events.” A study by the Ministry er’s investment has the backing of the sporting competitions will take place of Sports has come to the conclusion Brazilian Tourism Institute (Embratur), in the country. Direct investment in the that investment in the Olympics should which expects the number of foreign- World Cup and the Olympics together generate economic value of R$102.2 ers visiting Brazil to increase by 15%. will likely reach R$130 billion, accord- billion through the end of 2027. “We’re preparing products aimed ing to an estimate by the Brazilian The impact of tourism is long-term, according to the Institute of Applied Economic Research (IPEA). IPEA re- searchers analyzed the flow of tourists to Barcelona after the city hosted the 1992 Olympics and concluded that the city had an increase of 105% in night- stays compared to the previous period. During the Games the city received around two million tourists. Years later in 2001, there were more than three million. The choice of Brazil to host the world’s most important sporting com- petitions underlined the new and more prominent role of the country. Accord- ing to World Bank projections, the Brazilians celebrate the choice of Rio de Janeiro to host the 2016 Olympics. Brazilian economy, which is currently 27

Achievements.indd 27 4/17/10 1:23 AM capital of State and one of Brazil’s largest metropolitan areas, will invest R$1.2 billion in six Bus Rapid Transport lines (BRT), articulated buses that travel along dedicated lanes. The BRT was also the solution found to resolve travel difficulties in Rio de Ja- neiro, a city squeezed between the sea and mountains. Three BRT lines will go round the Tijuca Mountains – includ- ing Corcovado, where the Christ the Redeemer statue is located – that sepa- rate the North, South and West zones of the city. Renovation of the historic Mara- cana stadium, where the World Cup final will be held, has been budgeted Left: Author Paulo Coelho and President at R$500 million. “Maracana will be- Lula (l-r) celebrate: Brazil will host the World Cup football competition in 2014. come a multi-purpose arena, it will get Above: Maracanã Stadium in Rio de Janeiro, an overall roof and will have new bars venue for the final match. and restaurants,” said Marcia Lins, Rio’s Tourism secretary. set to be a major beneficiary. Prepara- In the area of security, the govern- tion for the Olympics and World Cup ment is betting on giving more value will demand a real revolution in sport- to the police as an instrument to re- growing at a rate of 5% a year, will ing and urban facilities in the 12 host duce criminality. In Rio de Janeiro, become the fifth largest in the world cities, in addition to major public works the implantation of Police Pacification in 2016, up from a current eighth rank. for transportation. Units (UPPs) in the favela shantytowns Research from the University of According to specialists, the great- is an innovative state government proj- California at Berkeley shows that the est efforts and investment will involve ect that is attracting attention. Seven growth of international trade is also transportation. R$8.5 billion will be UPPs have been set up serving around stimulated by the competitions. Coun- invested to modernize airports in cities 120,000 people – 10% of the popu- tries that host mega-events have an in- hosting the mega-events. The high- lation living in shantytowns. The UPPs crease of around 30% in business. “It speed train (TAV) project linking Rio have brought a permanent police pres- is as if these events signal that a coun- de Janeiro with Sao Paulo and Campi- ence and expulsion of drug-dealers. try is interested in doing business,” nas is also likely to become a reality. More than 90% of shantytown resi- said researcher Andrew Rose. The government has guaranteed that dents approve the UPP. Another 14 Another sector with good business work will be tendered in the first half UPPs are due to be installed through prospects is the Brazilian publicity mar- of 2010. The bullet train railroad will 2010. “The goal is to re-occupy territo- ket, the fifth largest in the world. The be 511 kilometers long, with eight sta- ries and free the resident from the dic- World Cup and the Olympics mean tions, and is likely to cost R$34 billion. tatorship of the rifle. And we’re having more people watching TV, reading “Brazil needs to create the conditions success,” said Jose Mariano Beltrame, newspapers and magazines, and so for fans to move around,” said Jerome security secretary for Rio. more companies interested in display- Valcke, the FIFA general secretary. The latest police occupation, a ing their brands. To understand what The federal government has also an- month ago, took place in a shantytown lies ahead, publicity professionals can nounced investment of R$11.5 billion in a strategic area less than five kilo- look back exactly four years ago: the in 47 projects for urban development meters from the venue where Olympic 2006 World Cup in Germany had be- in the 12 host cities. In Brasilia a Light archery and marathon events will take tween 26 billion and 32 billion specta- Rail Vehicle line (VLT in Portuguese) place. It’s the port area, a region which tors worldwide – a record. will be built connecting the airport to is being revamped and where a quarter The civil construction sector is also the main bus terminal. , of Olympic accommodation is planned. 28

Achievements.indd 28 4/17/10 1:23 AM Performance During Global Credit Crunch Shows Strength of Brazilian Banks FUTURE 3 The success of the Brazilian banking and financial system during the international credit crunch became a world reference. This accomplishment is largely explained by the combination of solid public financial institutions, competitive and healthy private sector banks and rigorous regulation of the system.

BY ROBERTO AMADO the ratings identi- Five Largest Brazilian Banks While the global credit crunch fies countries that By net profit in 2009 continues to unravel, the Brazilian fi- were “winners” nancial system offers consistent signs during the period Banco do Brasil Public R$ 10,148 million that it has fully recovered, winning of global econo- Itaú/Unibanco Private R$ 10,066 million Bradesco Private R$ 8,012 million solid international recognition into mic and financial Santander Private (Spain) R$ 3,104 million the bargain. One of the manifesta- turbulence, Leos Caixa Economica Federal Public R$ 3,000 million tions of this recovery was a recent said. Source: Febraban declaration by Moody’s, the ratings This assess- company. In February Moody’s confir- ment by Moody’s med its mark for Brazil of Baa3, the was well received by the market and This financial health and resistan- entry-level investment grading that reinforced arguments made by Henri- ce to the international credit crunch Brazil achieved in September 2009. que Meirelles, president of the Brazi- is based on a combination of factors. Moreover, Moody’s gave Brazil a po- lian Central Bank: “This demonstrates One was the rapid intervention of the sitive outlook, meaning the country is that Brazil has in fact emerged stron- Brazilian government at the begin- under review for a possible upgrade ger from the crisis. For a conservati- ning of the crisis in 2008 to ensure to a higher rating. ve ratings agency such as this one to that the market would not lack cre- “The capacity for absorbing sho- consider Brazil a winner is confirma- dit. For example, Brazil reduced the cks points to a significant improve- tion of the policies of President Lula,” compulsory deposits that banks must ment in the profile of Brazil’s sove- he said. lodge with the Central Bank. It also reign credit rating,” said Mauro Leos, Meanwhile Rubens Sardenberg, reinforced exports credit lines and Moody’s regional credit officer for chief economist for the Brazilian Fe- used part of its international reserves. Latin America. The improvement in deration of Banks (Febraban) said These measures started to be adop- that “the granting of investment ted in October 2008, a month after grade by Moody’s, though already ex- the crisis began. pected, was accompanied by an ex- “Our banking system escaped the ceptionally positive assessment of the global insolvency because it does not Brazilian economy, its fundamentals, have the same liberty as U.S. and Eu- the quality of its economic policy and ropean banks to speculate with de- the response of the country to the in- positors’ money,” said Paul Singer, an ternational financial crisis.” economist and national secretary at Moody’s recognized that “Brazil is the Labor Ministry for a unit promo- going to play a role of major impor- ting ‘economic solidarity’. “The Brazi- “Brazilian banking regulation is seen as tance in shaping the world economy lian government applied the same an- a model for the world,” says Henrique Meirelles. after the crisis,” Sardenberg said. ti-crisis policies as other governments 29

Achievements.indd 29 4/17/10 1:23 AM more, Brazil had plex financial system in Latin Ameri- Credit Growth (Index September 2008 = 100) already imple- ca, characterized by 30 years of an mented progra- inflationary process that generated 150 ms to clean up gains for banks from unremunerated Public 140 Banks its banking in- liabilities. The system also masked 130 dustry. The main management inefficiencies, including

120 one was Proer, making debatable loans. Private Banks the Portuguese Creation of the Proer was very 110 acronym for a contentious, but it effectively consti- 100 plan to stimulate tuted a manner for the government 90 and restructu- to anticipate financial market proble- Sep Nov Jan Mar May Jul Sep Nov Jan re the financial ms. It allowed the Central Bank to 08 08 09 09 09 09 09 09 10 Source: Bacen system follo- act preventatively, imposing formal wing the end of requirements in place of what pre- but it had stronger instruments avai- hyperinflation. Proer, created in 1995, viously were only suggestions. Other lable in the shape of the state-owned sought to resolve the problems of an measures were introduced to avoid banks – the Brazilian Development unstable banking system that had 22 speculation with depositors’ money Bank (BNDES, Banco Nacional de De- banks under intervention or in pro- and the leverage of securities. The senvolvimento Econômico e Social), cess of liquidation following the July compulsory deposit mechanism later Banco do Brasil and Caixa Econômica 1994 start of the economic stabiliza- came to be used to increase liquidity Federal,” Singer said. tion program known as the Real Plan. in the system, returning credit to the Market Regulation – What’s Brazil had at that time the most com- market.

Global Funds Restructure Portfolios to Target Brazilian Domestic Demand

At the start of March, J.P. said, noting that opportunities start of April. Morgan Asset Management exist in the civil construction, Other major funds are also launched, in London, the JPMorgan financial, consumer goods, turning their attention to the Brazilian Brazil Investment Trust, the only logistics, transportation, retail and domestic market. In an interview investment fund in the United communications sectors. at the end of March with Barron’s Kingdom that focuses exclusively According to Luparia, investors magazine, which belongs to the on companies with exposure to the who want to gain access to the Wall St Journal, portfolio manager Brazilian domestic market. “Brazil Brazilian domestic market should Will Landers of the BlackRock Latin today offers attractive opportunities look beyond just what they see in the America Fund, said that “commodities for investors,” said David Barron, MSCI Brazil Index, which is heavily are no longer the main driver for head of Investment Trusts at J.P. weighted to sectors of energy and investments in Brazil.” The UK fund Morgan Asset Management, in a commodities, and in particular just manages assets of US$8.5 billon that communiqué. two companies, Vale and Petrobras. focus on Latin America, and has 75% “There is a mistaken impression “In the MSCI there are just 69 of its holding in Brazil. that investment in Brazil revolves Brazilian shares in all, while (our) “Brazil emerged better from around iron ore, petroleum fund is targeting a sample of more the recent financial crisis than the and soybeans that are exported than 200 companies.” majority of countries because its to China. Brazilian exports Brazil represents 16% of the economy was not highly leveraged,” represent just 10.5% of GDP, MSCI Emerging Market Bond Index, said Landers. “The offer of credit in which now stands at US$1.77 the risk index for emerging markets Brazil is just 42% of GDP, compared trillion, compared with 60.6% calculated by JP Morgan Chase, with 169% in the United States.” for domestic consumption,” said while China represents 17%. A total Landers highlighted the sectors Sebastian Luparia, manager of of 26 emerging economies make up of consumer goods (drinks, food the fund. “Growth and domestic the index. The EMBI+Brazil, which and retail), financial, housing and consumption will dominate the measures Brazil risk, was holding infrastructure. portfolio of this fund,” the manager steady at around 170 points at the Pimco, the world’s largest global

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Achievements.indd 30 4/17/10 1:23 AM In other words, the much-criticized ciano Coutinho, president of BNDES. Credit/GDP Ratio Even After rigidity that the government histori- The Crisis Worsened in Sept/08 “Brazil’s public banks were funda- cally imposed on the financial system Growth of credit/GDP ratio (%) mental to combating the crisis,” said and the banks ended up being one 50 Coutinho. “The BNDES was respon- of the main instruments to tackle the sible for supplying 37% of all credit 45 international credit crisis and avoid in the economy between September contaminating the Brazilian market. 40 2008 and the end of last year. Banks According to Meirelles of the Cen- now are showing confidence about 35 tral Bank, the ability of the Brazilian economic growth and this permits monetary authorities to act quickly 30 a resumption of investments in the was fundamental to diagnosing the private sector,” Coutinho said. “We credit crunch and to making deci- 25 want to disburse less for investment sions to combat its effects. When the 20 in 2010, permitting the market to collapse of Lehman Brothers was an- 2002 2004 2006 2008 2010 complement long-term credit.” Source: Central Bank of Brazil nounced in September 2008, the Bra- The Brazilian banking industry saw zilian Central Bank said directly from 21.5% expansion in its net equity New York that it would begin lending compulsory deposits. The Brazilian for 2009, achieving an increase of its reserves. financial system had capital and the 15.3% in financial intermediation. Additionally, Meirelles said, while public sector had a strong financial Total credits rose 10.7% while net in- international banks just began redu- position, and the correct action of the come rose 14.7% to R$32.8 billion. cing their credit, Brazil could count on Central Bank had a multiplier effect The money going to savings accounts its foreign exchange reserves and the in the market, allowing the economy was R$2.61 billion in January, the to regain its equilibrium, the Central best for that month since 1997. All Bank president said. The supply of resources deposits totaled R$323.21 investment management firm domestic credit recovered and the billion this past January. The total based in California, that managed availability of credit in the Brazilian passed R$300 billion for the first time US$1 trillion of assets around the financial market is today completely ever last October. world as of December 2009, now sees Brazil in a very positive light. different. Banco do Brasil, the state-control- “The strength of the country’s Target public and assets – To- led listed bank, crowned 2009 with macroeconomic policies, coupled tal lending reached a new record of record net income of R$10.1 billion, with attractive local interest rates, R$1.44 trillion in February, according 15.3% higher than the prior year and make Brazil one of the most to the Central Bank. This was growth the largest net income ever obtained promising markets in the world of almost 17% through the prior 12 by a Brazilian bank, surpassing the in terms of earnings,” said Brigitte months. Forecasts made by banks 2009 record of Itaú Unibanco. Banco Posch, executive vice-president and and economists indicate that the total do Brasil’s total assets were R$708 portfolio manager at Pimco, in a report published in February. volume of credit in Brazil should reach billion last year compared with R$521 Investor Mark Mobius, president 53% of the gross domestic product billion for 2008. The rise in assets of Templeton Asset Management, at the end of 2010. By comparison, was 35.9%, maintaining leadership is another Brazil enthusiast. Mobius total credit stood at 40.7% of GDP in among Brazilian Banks. The total cre- told Bloomberg that the Brazilian February 2009. dit portfolio was more than R$300 economy is more sustainable than The Brazilian Development Bank billion at the end of December 2009, the Chinese. “Brazil doesn’t need to (BNDES) is also celebrating recent a rise of 33.8% in 12 months. import anything, it has tremendous record results. It disbursed R$143.3 This performance underscores natural resources, not just minerals but also agricultural. China needs billion in loans in the 12 months en- the success of a credit policy based to import oil, iron ore and food,” ded in February 2010. In last Februa- on higher volume and lower interest said Mobius, who manages US$34 ry alone, the amount lent was R$8.3 rates. “This experience is sustainable billion of assets in emerging billion, a rise of 66% compared with and creates a new paradigm in the economies. All these funds listed the same month a year earlier. “We Brazilian economy,” said Finance Mi- the 2014 World Cup and the 2016 have turned the page on the crisis nister Guido Mantega. “A state bank Olympics as factors that attract and the discussion today is the rate of can compete with a private one and investment to Brazil. growth in 2010 and 2011,” said Lu- even have a better result,” he said. 31

Achievements.indd 31 4/17/10 1:23 AM State-owned Caixa Econômica Fede- quarter of 2009, a drop of 5.2% must not be created. ral raised its market share for credit to from the R$1.91 billion from the “The Central Bank is alert; expe- 8.8% in 2009 compared with 6.5% same quarter in 2008, and reached a rience shows that problems arise at in 2008 and plans to invest to conti- market value of R$ 98.75 billion last times of euphoria,” Meirelles said, nue increasing its share. September. Brandão reiterated the adding that difficulties can come Maria Fernanda Coelho, president bank’s plan to grow organically after from the false perception that there of the Caixa Econômica Federal (CEF), losing the top spot among non-state are no risks during times of growth. said: “We are going to stimulate gro- banks following the merger of the Meirelles said that Brazilian banking wth in our market share, focusing on Itaú and Unibanco banks in Novem- regulation was for a long time seen lower-income customers.” Growth in ber 2008. as a problem that held back “the cre- 2009 was the result of an aggressive Banco Santander was ensured ativity of the financial system,” but plan, suggested by the government, good results thanks to the growth of after last year’s crisis it is considered a for lending by public banks to com- the Brazilian market and its solid fi- “model in the world.” pensate for the retraction of private nancial situation, even in times of an Financial Hub – Meirelles also is institutions during the international international crisis. The bank announ- involved, through the Central Bank, global crisis. ced the second highest profit in its in an ambitious project destined to As a result, CEF’s lending portfolio history, beating expectations and due transform São Paulo into an interna- jumped 55.3% last year to R$124.4 principally to expanding its capital in tional financial center. It is called the billion. The forecast is the portfolio Brazil. The Spanish-owned bank re- Brain Project - Brasil Investimentos & will close this year around R$160 ported net income of R$5.51 billion, Negócios (Brazilian Investments and million with growth of 28%. “The an increase of 40.8% from the results Businesses). Although it was created market has responded much better of 2008. by private industry, Brain depends on than expected,” said Coelho, adding Banco Santander said in a state- government decisions. The project that loans agreed so far this year re- ment to Spain’s securities regulator includes the creation of a market for present 10% of the bank’s budget for that “taking into consideration the currencies in Brazil, where until now 2010, which is R$50 billion. difficulties of the crisis,” the results only Brazil’s currency, the real, and the Robust Profits – Itaú Unibanco last year may be considered “the U.S. dollar are traded. It also opens is enthusiastic about the outlook for best in history.” This was thanks to up new possibilities for investments in 2010 after achieving profits excee- the market of the Brazilian subsidiary, stocks, given that it will be possible to ding R$10 billion in 2009, more than which contributed 1.50 billion euros. trade in securities of companies out- 29% higher than the year before. Together with smaller operations, this side of Brazil. “With the country growing 5.5% and took the surplus to an extraordinary Everything indicates that the Brazi- the domestic market exuberant, there 2.59 billion euros. lian financial system is ready to follow is space for everyone to grow,” said Banks in Brazil raised approxima- the path to globalization, expanding Silvio de Carvalho, finance director of tely US$3.5 billion in January alone, its limits of influence and activity. In Itaú Unibanco. The bank, focused on which is “notable performance when the ranking of the 500 most valuable the domestic market, expects 20% compared with the US$4.8 billion brands of banks in the world today, growth in credit this year. Silvio de raised in all of 2009,” according to eight are Brazilian banks. According Carvalho predicts a continuing reduc- Moody’s. The ratings agency said that to research carried out by “Global tion in non-performing loans. This re- with banks’ resuming appetite for 500 Banking Brands Index,” Banco flects “... an improved economy and credit, the alignment between capital Bradesco is the best placed, rising to expansion of the credit portfolio.” and funds has become a priority, and the 12th in the ranking last year from “Growth must be progressive “nowhere else is this as evident as in 42nd. The value of the Banco Brades- without being obsessive; it must be Brazil.” co brand rose to US$7.69 billion from on-going, but conducted with great The new outlook for the Brazilian US$4.1 billion. care,” said Lázaro Brandão, chairman financial system led Henrique Mei- The Itaú brand also became more of Banco Bradesco. “For this reason, relles, the Central Bank president, to valuable, rising to US$5.59 billion the bank is expanding geographi- draw attention to “the importance of from US$3.5 billion. Its brand jumped cally. This will give support and subs- financial institutions adhering to pru- to 21st in the ranking, up from 54th. tance.” Banco Bradesco reported net dent rules,” and keeping in mind that Banco do Brasil gained 10 positions, income of R$1.81 billion in the third “artificial mechanisms” of financing rising to the 35th in the rankings. 32

Achievements.indd 32 4/17/10 1:23 AM Brazil Accelerates Production in Sub-Salt Petroleum FUTURE 4 A major new oil field makes Brazil one of the biggest centers for offshore investments in the world. Projects totaling US$115 billion through 2020 are creating huge demand for equipment and great excitement throughout the global oil industry.

BY LUIZ GONZAGA S. NETO Brazil is speeding up the expansion of its oil production, after discovery of one of the largest offshore oil areas in the world in recent decades. Esti- mates of recoverable volumes of 10.6 billion to 16 billion barrels of oil equi- valent (BOE) have been confirmed in just three areas of the sub-salt layer located in the deep waters of the sou- th and southeastern Brazilian coast. With planned investments of US$30 billion by 2013 and US$115 billion by 2020, Brazilian oil giant Petrobras said it may bring forward from 2017 to Petrobras President José Sergio Gabrielli helps ring the closing bell at the New York Stock Exchange (NYSE) in 2009. 2015 its goal of producing more than one million BOE per day, just from the and the leading country in offshore oil new oil frontier. Chevron, Exxon, sub-salt fields. The new reserves are exploration. Shell, B P, BG Group, Galp, Repsol and making Brazil one of the largest cen- To develop sub-salt production, StatoilHydro, among others, are alrea- ters for oil investments in the world Petrobras has been bringing forward dy participating in exploratory blocks orders on a portfolio of orders that in- granted in the area, working alone or cludes the purchase of 58 drilling rigs in partnership with Petrobras. Petrobras Sub-Salt Production through 2018 and 153 vessels through Petrobras President José Sergio (x 1,000 BOPD) 1,815 2013 – 15 production platforms and Gabrielli said he believes the Brazilian 1,800 632 44 large ships plus support vessels, he- sub-salt discoveries open up a vast 1,600 licopters, etc. There are also massive market for the offshore industry worl- 1,400 1,336 463 amounts of equipment (pipes, com- dwide. “The capacity of suppliers to 1,200 1,183 pressors, cranes, etc.) and services. provide goods and services needed to 1,000 This scale of purchasing, with most of meet demands like the sub-salt fields 800 873 582 it destined for sub-salt production, has will affect the overall production of 600 160 been creating waves in the national resources needed for global develop- 400 214 422 and overseas offshore industry. ment in the coming years,” Gabrielli 200 62 Aside from the Petrobras supply said during the CERA Week conferen- 0 152 2013 2015 2017 2020 chain, almost all major multinational ce, sponsored by IHS Cambridge Ener- Sub-salt Petrobras oil companies are investing in explora- gy Research Associates (IHS CERA), in Sub-salt Partners tion of new oil and gas fields in Brazil’s March, in Houston, Texas. 33

Achievements.indd 33 4/17/10 1:23 AM According to the National Orga- if areas that have not yet been gran- fields in 2020, of which 632,000 nization of the Petroleum Industry ted are also considered, the total sub- BOPD will be produced by partner (ONIP), investments in the develop- salt field size could exceed 100 billion companies. The Petrobras forecast ment of production in the sub-salt barrels. Petrobras, however, does not is that total Brazilian oil reserves will fields will total US$45 billion between confirm these estimates. shortly rise from the current 14 billion 2009 and 2012 alone, 62% by Petro- Investments - British Petroleum BOE to 30 billion BOE, by summing bras and the remainder (US$17 billion) offered clear proof that it could not the initial proven sub-salt reserves. by private companies. stay out of this new oil frontier in Mar- Norwegian giant StatoilHydro, Potential – This volume of in- ch this year, when it announced the meanwhile, has made investments of vestment in the sub-salt fields can be US$7 billion purchase of assets of U.S. US$3.1 billion in Brazil since 2007 and explained by the potential and also company Devon Energy, including is seeking new licenses in the sub-salt the complexity of extracting oil and those in Brazil. The company stressed areas. “Brazil is important for Statoi- gas from deep underground benea- the strategic importance of its entry lHydro and the sub-salt fields form th a thick layer of salt some 200 km into Brazilian sub-salt exploration of. part of the company’s long-term pers- wide and extending 800 km along the “The acquisition of Devon’s assets pective,” said Kjetil Hove, director of Brazilian coast, between the states provides us with a broad portfolio the Brazilian Statoil subsidiary. of Espírito Santo and Santa Catarina. in the exciting environment of deep Production - In the 12 months Divided into three sedimentary basins waters in Brazil,” said Tony Hayward, through March 2010, Petrobras has – Santos, Campos and Espírito Santo chief executive of the company. BP’s been announcing successive new dis- – the fields can lie as deep as 7,000 entry into Brazil includes participation coveries and confirming previously- meters below sea level, and are loca- in 10 prospection blocks throughout published sub-salt estimates. Towards ted between 100 and 300 km from the country, including two newly dis- the end of March this year, encoura- the coast. covered ones in the sub-salt region – ged by the results of long-duration Overcoming these obstacles is jus- Itaipu and Wahoo fields in the Cam- tests (LDT) in the Tupi field, in the tified by the huge potential – possibly pos Basin. , the state-owned oil more than 100 billion barrels of oil. Chevron, for its part, has a US$5 giant announced that it would bring Haroldo Lima, director-general of the billion investment plan in Brazil, fo- forward the introduction of pilot field National Petroleum Agency (ANP), said cusing on sub-salt exploration opera- operation to produce 100,000 barrels that in areas where prospecting rights tions. “Our commitment is to develop this year. “We are doing everything have already been granted (just 28% new opportunities in an important ba- we can to anticipate entry of this pi- of a total of 149,000 square kilome- sin and enhance our portfolio of large lot field in October of this year,” said ters), “forecasts indicate a minimum projects,” said Chevron Vice President Guilherme Estrella, director of explo- of 50 billion barrels and numerous George Kirkland. ration and production at Petrobras. calculations point to up to 70 or 80 Petrobras expects to produce 1.8 By 2016, there will be 20 LDTs in the billion barrels.” Lima suggested that million barrels per day from sub-salt Santos Basin. The Tupi well in the BMS-11 blo- ck is operated by the consortium for- World-leading Project Foresees High Seas Gas Unit med by Petrobras (65%), the British BG Group (25%) and Portugal’s Galp A joint venture formed some Basin. (10%). Estimates of recoverable oil in time ago is planning to build a The floating GNLE unit, a floating natural gas liquefaction world first, will be installed next to blocks already granted for prospection plant 300 km off the Brazilian coast. floating oil and gas production units in the Santos Basin, just for the three It will be a technological alternative (FPSOs) and carry out processing areas already tested, are: Tupi field: 5 to shipping natural gas produced and liquefaction of up to 14 million to 8 billion barrels; Iara field: 3 to 4 in the sub-salt layers back to cubic meters per day of associated billion barrels; and Guará field: 1.1 to land. Formed by Petrobras (51.1% gas. “This is a really important 2 billion barrels. Production in the Ju- participation), the British BG Group, moment for the global oil industry; barte (Parque das Baleias) field in the Spain’s Repsol and Portugal’s Galp I have no doubt that this will be the is also being brought (16.3% each), the joint venture will first floating gas liquefaction unit,” operate in blocks BM-S-9 and BM- said Graça Foster, Petrobras director forward, as is the construction – in S-11 of the sub-salt area in Santos of gas and energy. record time – of eight platforms sche- duled to operate in the sub-salt fields 34

Achievements.indd 34 4/17/10 1:23 AM EPC Energy Consulting. Cenpes has partnerships with over 120 universities and research institutions in Brazil and 70 abroad. Seve- ral of these partnerships are geared specifically to sub- salt operations. One of the most important projects is the Thematic Network for Scientific Visualization - GRADE BR, the largest cluster of computers ope- rating on the grid in the southern hemisphere, whi- ch will require investments of US$115 million and link together some 260 resear- chers at R&D centers in the 14 most important Brazi- lian universities. Last year, Petrobras sig- Sub-salt petroleum: Vast oil fields lie more than 7,000m beneath the ocean surface. ned agreements with BH and Halliburton, among starting in 2013. One of the reasons for adopting others, for scientific research and co- Regulations – A new regulatory the production-sharing model is that operation that will result in building framework is currently being drawn sub-salt exploration offers low risks. and deploying two technology centers up by Congress. It is due to be appro- According to Estrella, 16 wells were in Rio de Janeiro focusing on sub-salt ved later this year, providing new rules drilled by Petrobras in the sub-salt fiel- fields, one from each company. “There that will apply only to blocks not yet ds in the Santos Basin, which concen- are significant opportunities in Brazi- granted for prospection. Among the trates almost all production, and the lian offshore,” said John A. O’Donnell, new rules is adoption of a production- success rate was 100%. “The disco- president for BH’s Western Hemisphe- sharing model; the creation of a sta- very of oil and gas in the sub-salt area re Affairs. Together with Cenpes, the te-owned company named Petro-Sal is the result of five decades of explora- technology centers now being set up that will manage the new oil fields; tion investments by Petrobras, which in Rio de Janeiro will constitute one of formation of the Social Fund to recei- generated increased knowledge of the most advanced petroleum techno- ve petroleum resources and use them Brazilian sedimentary basins,” the di- logy centers in the world. to fight hunger and implement social rector said. Training - The new Brazilian oil and educational projects; and the ca- Technology – The Petrobras Re- fields will require 250,000 new profes- pitalization of Petrobras. search Center, named the Leopoldo sionals through 2016. Petrobras and The model of production sharing, Américo Miguez de Mello Center but various ministries of the Brazilian go- applying just to the sub-salt and other frequently referred to by its acronym vernment have since 2003 developed strategic areas, specifies that Petrobras Cenpes, enjoys international recog- the Program for Mobilization of the shall be sole operator of the blocks to nition for its expertise in deep water Petroleum Industry (Prominp) to meet auctioned, although foreign compa- operations. With a budget of US$4 the labor needs for the entire produc- nies may join Petrobras in prospecting billion to fund technological innova- tion chain of oil and gas, nationwide. and production consortia. “The new tion in the coming decades, the cen- Prominp will train more than 200,000 regulatory model should encourage ter has contributed much to Petrobras people by 2013 in 185 occupational the formation of joint ventures with has becoming a world leader in deep categories in 13 states, representing Petrobras,” said Paulo Roberto Costa, water, accounting for 22% of wells an estimated investment of R$550 the Petrobras supply director. drilled in this segment, according to million. 35

Achievements.indd 35 4/17/10 1:23 AM Infrastructure Expansion Spurring Economic Growth PAC Brazil’s Faster Growth Program called “Programa de Aceleração do Crescimento - PAC”, involves mega projects in energy, land transportation and shipping, plus major investments in urban and social infrastructure.

Brazil’s gross domestic product may in recent years.” PAC 2 - Investments surpass that of the United Kingdom and Preliminary Forecast for Investment in Brazilian The PAC 1 investments, announced France by 2013 if the current Brazilian Infrastructure (R$ billions) in February of this year, totaled R$403 economic scenario holds good through AREAS 2011 After Total billion for the period 2007 to 2009. the coming years. There are even some /2014 2014 This was equivalent to 63% of the val- Better Cities1 57.1 – 57.1 people now predicting that Brazil will ue forecast through the end of 2010. Citizen Community2 23.0 – 23.0 overtake Germany to become the fifth My Home, My Life3 278.2 – 278.2 Counting only the works completed, largest economy in the world some Water and Power for All 30.6 – 30.6 the investments were R$256.9 billion, Transportation 104.5 4.5 109.0 time after 2020. This optimistic view of or 40.3% of the total. Energy 465.5 627.1 1.092.6 the Brazilian economy can be found in TOTAL 958.9 631.6 1.590.5 “The PAC reinforces the character ‘Convergence, Catch-Up and Overtak- Source: PAC Management Committee not only of physical infrastructure but (1)Water+sewage, urban mobility, asphalt. ing: How the balance of world economic (2)Health, crèches, pre-school, sports facilities, social infrastructure,” said Dilma Rous- power is shifting’, published by Pricewa- public areas. seff, chief of staff for President Lula. (3)Housing. terhouseCoopers in January of this year. “The Program is not only an acronym, Even if it seems exaggerated, the a list, or a building project, it is a human PricewaterhouseCoopers forecast housing while R$104 billion is targeted accomplishment.” gained support at the end of March for transportation, including highways, Unlike what happened in crises when the Brazilian government an- ports, railroads, airports and waterways. before 2009, the government main- nounced the second phase of the Faster Another R$57.1 billion is for cities (sani- tained its investments and simultane- Growth Program, or Programa de Acel- tation, metros, buses, etc.) and R$23 bil- ously expanded stimulus to the private eração do Crescimento (PAC). This sec- lion for the social area (health centers, sector through the PAC. This was done ond phase, PAC 2, involves projects that childcare facilities and urbanization of via long-term financing granted by the imply investments of a trillion reais, or slums, etc.). state-owned Brazil Development Bank approximately 30% of the country’s an- The PAC “raised the level of growth (BNDES – Banco Nacional de Desenvolvi- nual GDP, in the 2011-2014 period. in the country, created a new model of mento Econômico e Social. The first phase of the Program, PAC expansion that is more vigorous and The BNDES financing portfolio for 1, was launched in March 2007 and with more quality, and started sustain- PAC 1 totaled R$117.5 billion, which forecast investments of R$638 billion able development that helped Brazil resulted in total investments of R$208 through 2010. In the second phase, PAC overcome the crisis,” said Finance Min- billion after including the matching 2, approximately 70% of the spending ister Guido Mantega. funds from the companies financed. consists of new projects and the remain- “We proved (with the PAC) that “The bank consolidated its position as ing 30% are carried over from the prior it is fully possible to have economic an important financial agent of invest- Program. growth and income distribution at the ment projects in the PAC,” said BNDES Of the PAC 2 total, R$465 billions same time,” said President Luiz Inácio President Luciano Coutinho. is targeted for energy, which includes Lula da Silva, during the launching of After three years, the Program “has petroleum, natural gas, electricity and the Program. “This is the most impor- contributed to overcoming bottlenecks ethanol. Another R$278 billion is for tant thing that has happened in Brazil in infrastructure, improving the quality 36

Achievements.indd 36 4/17/10 3:08 PM Five large refineries are being built, with the support of the PAC, to meet the increased growth of output of Bra- zilian oil and natural gas. Investments of US$45 billion are forecast for the com- ing five years to build the refineries. The new plants will more than double Bra- zil’s refining capacity.

Ethanol – Brazil will produce 27.4 billion liters of sugarcane ethanol in the 2009/2010 crop year. An estimated 3.3 billion liters of the total will be exported, Another PAC project: A 216 MW gas-fired thermoelectric generator inaugurated in March with growth of almost 50% compared 2010 at Cubatão, São Paulo state, fruit of a R$1 billion investment. with 2006, according to the industry’s of life of the population and stimulat- Roncador field in the offshore Campos trade association known as Unica. ing economic activity,” said Paulo Go- Basin in Rio de Janeiro state in 2011. By the end of 2010 Brazil will have doy, president of a Brazilian trade group With capacity to produce 180,000 bar- a fleet of 12 million flex-fuel vehicles for basic industries and infrastructure rels a day of oil and six million cubic me- that can run on any mixture of gasoline known as Abdib. ters a day of natural gas, the platform is or ethanol, representing approximately being built in the Rio Grande shipyard 47% of the country’s fleet, according to Petroleum and natural gas – Pe- in Rio Grande do Sul, Brazil’s southern- Unica. The trade association estimates troleum and natural gas will spearhead most state. that 92% of the new cars sold in the Brazil’s growth in the coming years. The 200,000-population municipal- Brazilian domestic market today are Petrobras, the state-controlled oil gi- ity of Rio Grande is experiencing a mi- flex-fuel models, permitting the driver ant, will by itself invest US$220 billion nor industrial revolution after Petrobras to switch between ethanol and gasoline. through 2014. The emphasis will be on ordered eight platforms from the local A pipeline to transport ethanol is be- exploration and the beginning of large- shipyard. Local authorities estimate that ing built at an estimated cost of R$2.4 scale production for the sub-salt region the population will swell to 300,000 in billion to link the municipality of Sena- (see report in this edition). Investments the coming four years. Building of P-55 dor Canedo in the Brazilian Midwestern also include duplication of infrastructure alone is generating 3,500 direct jobs. state of Goiás with São Sebastião on the for natural gas in the country, building Brazil’s natural gas pipeline network coast of São Paulo state. The 542 kilo- of refineries and thermoelectric genera- has more than doubled in extension meters of new pipes will make possible tors and the resurgence of the Brazilian from 5,451 kilometers in 2003, thanks the shipment of as much as 13 million shipbuilding industry. to stimulus under the PAC, reaching cubic meters of ethanol annually. Pass- The semi-submersible P-55 platform, 9,219 kilometers in March of this year. ing through the principal sugarcane pro- for example, budgeted at US$1.65 bil- A total of R$29.6 billion was spent in ducing regions of Brazil, the pipeline will lion, will enter operation in the giant this sector during the period. transport ethanol to the largest ports in

PAC 1: Prepared Brazil for a Long Cycle of Growth Job Creation GDP % annual growth rate Net Creation of Jobs (thousands of workers)

PAC 1 PAC 2 10 MILLION JOBS IN THE FORMAL ECONOMY 1600 6 Average 1200 5 5.5% 4 800 Average 3 4.2% 400 2 0 1 Average 1.7% -400 0 1998 2000 2002 2004 2006 2008 2010* 2012* 2014* 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10* *Government forecast Source: IBGE *Government forecast Source: MTE/CAGED

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Achievements.indd 37 4/17/10 1:23 AM Another 17 transmission lines costing R$3 billion are under construction. In the logistics sector, Brazil is speed- ing up the modernization and expansion of its ports, highways, airports and rail- ways. Investments have already reached R$52 billion. “Private companies alone, including large investment funds, Pro- gram spending approximately R$20 billion on investments in the industry,” said Antonio Wrobleski Filho, an engi- neer and partner of Awro Logística e Participações. A R$439 million dry dock now nearing completion at the port of Rio Grande in Rio Grande do Sul state, designed to build offshore oil rigs and ship hulls. Inauguration was scheduled for May. Highways and Railways – The Brazilian government auctioned con- the wealthy southeastern Brazil. involves investments forecast at R$16 cessions to private companies for 3,282 billion. kilometers of highways between 2007 Electric power – Brazil today has Among large projects now under to 2009. electricity guaranteed to sustain its way in the industry is construction of The second section of the São Paulo growth in the coming years. The total of the Jirau hydroelectric generator on Beltway – Rodoanel de São Paulo – was spending concluded in the sector under the Madeira River in Rondônia state in inaugurated in April of this year. The PAC 1 was R$72.4 billion, out of a sector northwestern Brazil. Jirau will have the Beltway when finished will form a com- total of R$175 billion. Projects in electric- capacity to generate 3,300 megawatts plete ring to remove cargo traffic that ity generation increased installed capac- and will demand capital outlays of currently passes through Brazil’s largest ity by 5,964 megawatts. One hundred R$9.3 billion, of which R$5.4 billion by city, and so reduce traffic congestion. and nine electric generators were com- 2010. Grupo Suez, with a 50.1% stake, With 61.5 kilometers, the Beltway State pleted and 89 are under construction. heads the Brazilian Sustainable Energy 2 required investments of R$3.6 billion, An auction to build and operate the Consortium that won the concession with R$1.2 billion put in by the federal Belo Monte hydroelectric power sta- auction last year to build the genera- government via the PAC. tion on the Xingu River in the Brazilian tor. Major investments are being made Brazil’s railway network is once again Amazon state of Pará was scheduled for to transport the electricity from Jirau, receiving investment. After 20 years of May of this year. The generator, poten- including R$5.1 billion for 31 transmis- abandon, the PAC has already laid 356 tially the third largest in the world with sion lines totaling 7,368 kilometers that kilometers of track and more then 2,632 installed capacity of 11,233 megawatts, have already been already completed. kilometers are under construction. Espe- cially noteworthy in the Program in this area is the high speed train that will link Bullet Train to Link Brazil’s Two Biggest Capitals the two most important Brazilian state capitals, Rio de Janeiro and São Paulo. This is one of the biggest projects the TAV. The projected 511 km line included in the new PAC. At an will include 90 km of tunnels and is The line will run from Campinas in São estimated cost of US$19 billion, initially projected to carry 6.4 million Paulo state, cutting through the most Brazil’s first high-speed train (TAV passengers per year. important industrial region of the coun- in Portuguese) will run between the The project has attracted interest try (see box). country’s two largest state capitals, from various international consortia Rio de Janeiro and São Paulo, with including the French group Alstom, a Large conventional railways are an extension some 100 km northwest consortium of Chinese state com- under construction. One such is the from São Paulo to Campinas, a major panies and other Japanese corpora- TransNordestina, which will be 1,728 industrial and University City. The tions. The Brazilian government kilometers long with an estimated cost Brazilian government is preparing an programs to inaugurate the TAV in of R$5.4 billion. The railroad will move international tender, due to be pub- 2016, ready for the Olympic Games lished in the second half of this year, that are to be held that year in Rio grains, oilseeds, minerals and industrial to construct the line and operate de Janeiro. production from north-central Brazil to the two principal ports of Brazil’s North- 38

Achievements.indd 38 4/17/10 1:23 AM ern state of Pernambuco, the largest in Energy Transportation Ensure supplies from an energy matrix based on Consolidate and expand the logistics network, Latin America. This shipyard is working renewable and clean sources. Develop Sub-salt interconnecting various modes, ensuring quality flat out to deliver 10 new tankers or- petroleum. (R$ billions) and security. (R$ billions) dered by Transpetro. AREAS 2011 After Total AREAS 2011/14 After 2014 Total /2014 2014 Highways 48.4 2.0 50.4 Generation 113.7 22.9 136.6 Housing – The PAC has housing Railways 43.9 2.1 46.0 Transmission 26.6 10.8 37.4 Ports 4.8 0.3 5.1 and sanitation projects in 3,582 Brazil- Oil and gas 285.8 593.4 879.2 Waterways 2.6 0.1 2.7 ian towns and cities, benefiting more Merchant marine 36.7 0.1 36.7 Airports 3.0 – 3.0 Renewable 1.0 – 1.0 than 20 million families. The Brazilian Rural 1.8 – 1.8 Energy efficiency 1.1 – 1.1 highways civil construction industry has grown vig- Minerals research 0.6 – 0.6 orously, stimulated by the launching in TOTAL 465.5 627.1 1.092.6 TOTAL 104.5 4.5 109.0 2009 of the first phase of the program Minha Casa, Minha Vida – literally, My east, Pecém in the state of Ceará and The Brazilian shipbuilding industry Home, My Life. The goal of the program Suape in Pernambuco state. The railroad has been reborn after almost succumb- is to finance construction of one million should be completed in 2012 and will ing at the beginning of this decade homes for the low-income population. directly link four states Ceará, Pernam- from the lack of orders. Investments in The building of more than two mil- buco, Piauí and Alagoas. Indirectly, five offshore oil platforms, drilling rigs and lion homes at a cost of R$71.7 billion other five states will benefit. other ships for Petrobras are revitalizing is forecast for the second phase of the the industry. Just the orders from the PAC. “It is important that the govern- Ports and Shipbuilding – Brazil- first phase of the Program to Modern- ment reinforce Minha Casa, Minha ian ports are becoming more competi- ize and Expand the Fleet, known by the Vida because we need a large volume tive. Projects to expand and modernize acronym Promef-I and run by Transpetro, of building to reduce the housing defi- 18 ports are being carried out under a the shipping arm of Petrobras, envisions cit in the country,” said Roberto Kauff- national dredging Program included in the building of 218 large-sized ships, in- mann, president of a trade group for the the PAC that is investing R$1.6 billion to cluding 26 tankers. The Merchant Ma- homebuilding industry in Rio de Janeiro improve port access. rine Fund, or FNM, has destined R$11.2 known as Sinduscon/RJ. The federal government’s Special billion in financing for shipbuilders. Ports Secretariat, or SEP, is conducting an Three new shipyards are operating in Urban Mobility and Inclusion – international tender to contract dredg- Brazil and another two are under con- PAC projects are investing in the mod- ing works to deepen the Itajaí port in struction. Among the new shipyards is ernization and expansion of city subway the southern Brazilian state of Santa Ca- Estaleiro Atlântico Sul in the northeast- and bus systems in seven metropolitan tarina at a cost of R$64.3 million. Eleven regions, in part to prepare the country contracts for port services were opened to host the World Cup football competi- to international bidding in 2009. tion in 2014 and the Olympic Games in 2016 (see report in this edition). Homes are under construction in An Ethanol-Fueled 1,151 communities where almost two Power Station million low-income families live, and works to urbanize slums are underway. The world’s first flex-fuel thermo- the PAC and has installed capacity of electric power station, able to run on 87 MW. It has two GE turbines, each Urban projects in Rio de Janeiro state ethanol, was inaugurated in January rated at 43.5 MW, one of which was already total R$1.8 billion. “In the mu- of this year in Juiz de Fora (Minas adapted to be able to burn ethanol nicipality of Rio de Janeiro, all the works Gerais state) in the southeast of Bra- as well. will be finished by the end of this year. zil. This new-technology generator is “We are demonstrating that it is the result of a R$45 million conver- perfectly feasible to use ethanol in In the Alemão complex, a poor commu- sion to allow it to burn either of two this way,” said John Encham, the GE nity lacking basic services, approximate- fuels – ethanol or natural gas. It’s director for the products area. “This ly US$390 million is being spent,” said the result of a partnership between alternative is likely to enjoy increase Marcio Fortes, Brazil’s minister for cities. Petrobras and General Electric Ener- demand, and there is potential to gy (GE), a US company. The project sell this technology all around the Outlays include improving housing and was carried out within the scope of world.” sanitation, building homes and provid- ing a cable car, Fortes said. 39

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