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8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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1
Alexandre Tombini
Governor
October 2013
Brazil Economic Outlook
London
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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2
Main topics
Inflation
Growth
UMP Exit
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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4
5
10
15
20
Jan06
Jul06
Jan07
Jul07
Jan08
Jul08
Jan09
Jul09
Jan10
Jul10
Jan11
Jul11
Jan12
Jul12
Jan13
Jul13
%
Policy rate Swap reference rate - 360-day term
7.0
7.4
7.8
8.2
Nov12
Dec12
Jan13
Feb13
Mar13
Apr13
%
Source: BCB/BM&F
Monetary policy actions
BCB acted in early 2013 to mitigate second order effects of supply shocks. After
tapering signaling, BCB mitigate the ER pass-through risk
Communication
Policy rate
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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5Source: IBGE / BCB (Focus)
Inflation is receding
Jun 136.7
Aug 136.1
Dec 135.8
2
3
4
5
6
7
8
Jan13
Feb13
Mar13
Apr13
May13
Jun13
Jul13
Aug13
Sep13
Oct13
Nov13
Dec13
Yo
Y%
CPI Expected CPI (Focus)
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6
Other CPIs also decelerating
Source: FGV / Fipe
IPC-M Sep 13
5.37%
IPC-C1 Aug 13
5.36%
IPC-Fipe Sep 13
4.58%
Chained series of IPC-10, IPC-M and IPC-Br; Chained series of IPC-Fipe weekly data
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
Dec10
Feb11
Apr11
Jun11
Aug11
Oct11
Dec11
Feb12
Apr12
Jun12
Aug12
Oct12
Dec12
Feb13
Apr13
Jun13
Aug13
Oct13
Dec13
YoY
%
IPC-10, IPC-M and IPC-Br IPC-C1 IPC-Fipe
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
7/257Source: IBGE / BCB
Inflation within target bands
Ten consecutive years of inflation in target zone in 2013
0
2
4
6
8
10
12
14
16
18
Dec99
Dec00
Dec01
Dec02
Dec03
Dec04
Dec05
Dec06
Dec07
Dec08
Dec09
Dec10
Dec11
Dec12
Dec13
Dec14
Y
oY%
CPI Inflation Report (Sep 13)
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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* qoq sa
-0.6
-0.4
-0.3-0.2
-0.2
0.0
0.0
0.2
0.2
0.3
0.3
0.3
0.5
0.5
0.6
0.8
0.8
1.0
1.5
1.6
-1 0 1 2
Italy
Spain
RussiaEuro Area
France
Germany
Mexico
Poland
South Africa
USColombia
UK
Australia
Canada
Brazil
Chile
South Korea
Japan
Turkey
China
Real GDP QoQ Growth in 1Q13
-0.7
-0.3
-0.3-0.1
0.3
0.4
0.4
0.5
0.5
0.6
0.6
0.7
0.7
0.7
0.9
1.1
1.5
1.7
2.1
2.2
-1 0 1 2 3
Mexico
Italy
RussiaSpain
Euro Area
Poland
Canada
Chile
France
Australia
US
UK
Germany
South Africa
Japan
South Korea
Brazil
China
Turkey
Colombia
Real GDP QoQ Growth in 2Q13
Growth dynamics in 2013
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
9/259Source: IMF (WEO forecasts, April and July 2013)
Economic growth is expected to gather pace
* April.
-1.8
-1.6
-0.6
-0.20.3
0.9
1.7
1.7
2.0
2.02.5
2.5
2.8
2.9
3.0
3.15.6
7.8
-5 0 5 10
Italy
Spain
Euro Area
FranceGermany
UK
US
Canada
Japan
South AfricaRussia
Brazil
South Korea*
Mexico
Australia*
WorldIndia
China
2013
0.0
0.7
0.8
0.91.2
1.3
1.5
2.2
2.7
2.93.2
3.2
3.3
3.3
3.8
3.96.3
7.7
0 5 10
Spain
Italy
France
Euro Area
Japan
Germany
UK
Canada
US
South AfricaBrazil
Mexico
Russia
Australia*
World
South Korea*India
China
2014
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
10/2510Source: IBGE
-2.4-1.9
-1.4
1.5
4.7
3.6
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13
QoQ
S.A
(%
)
Gross Fixed Capital Formation
Stronger investment
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1.82.4
4.2
1
23
4
5
6
7
Feb12
May12
Aug12
Nov12
Feb13
May13
Aug13
YoY%
Employment Real Income Real Payroll
4
6
8
10
12
14
Aug02
Aug03
Aug04
Aug05
Aug06
Aug07
Aug08
Aug09
Aug10
Aug11
Aug12
Aug13
M
oM%s
a
55
75
95
115
Jan07
Jul07
Jan08
Jul08
Jan09
Jul09
Jan10
Jul10
Jan11
Jul11
Jan12
Jul12
Jan13
Jul13
Retail Sales Retail Sales (including automobiles and construction materials)
2007=100
5.4%
(YoY)
5.8%
(YoY)
Source: BCB/IBGE
Support for domestic demand
Unemployment Rate Employment and Labor Income
Credit OutstandingRetail Sales
16.1
7.7
05
10152025
303540
Feb08
Aug08
Feb09
Aug09
Feb10
Aug10
Feb11
Aug11
Feb12
Aug12
Feb13
Aug13
YoY%
Total Households (nonearmarked credit)
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160.1161.9
187.3
120
125
130
135
140
145
150
155
160
165
170
175
180185
190
2007 2008 2009 2010 2011 2012 2013*
milliontons
production of grains
Source: IBGE
2013/2012
= 15.7%
Estimated in August 2013
Record grain harvest expected in 2013
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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13
Reforms to boost growth
Tax reforms to simplify the tax system and reduce costs
Tax incentives for infrastructure and R&D investment bonds
Payroll tax cuts
Measures to increase competitiveness and investments
Building a skilled labor force (Science without Frontiers and
Pronatec Programs)
Concessions program revamped
Highways, railroads, ports and airports
Oil & gas
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14Source: IMF /FSI (latest available data)
Brazil has a sound financial system
11
12
13
13
14
14
14
14
14
15
15
16
16
17
17
18
10 12 14 16 18 20
Spain
Australia
Italy
Russia
India
Japan
Korea
France
United States
Canada
South Africa
United Kingdom
Mexico
Brazil
Turkey
Germany
Regulatory Capital to Risk-WeightedAssets
-74
-28
-22
-21
-16
-15
-15
-12
-10
-6
-3
-3
9
10
-100 -50 0
Italy
Spain
South Africa
Japan
United Kingdom
Australia
United States
India
Russian
Canada
Turkey
Korea, Republic of
Mexico
Brazil
( ProvisionsNPL) / Capital
28
36
38
44
47
48
51
76
77
80
88
111
141
183
0 50 100 150 200
India
South Africa
United Kingdom
Australia
Mexico
Canada
Japan
Turkey
United States
Italy
Russian
Korea,
Germany
Brazil
Liquid Assets to Short Term
Liabilities
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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15Source: BCB
Banks have a low share of external funding
Jul 13
Origin of Bank Funding
95.788.8
82.190.6
4.311.2
17.9
9.4
0%
20%
40%
60%
80%
100%
Public-owned Private-owned Foreign-controlled Total
Domestic External
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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16
376.0
0
50
100
150
200
250
300
350
400
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013*
US$billion
Source: BCB
International Reserves Net External Creditor
*Aug 2013
BrazilNet External Creditor
as of Oct 1st
-81.8
-110
-70
-30
10
50
90
130
170
210
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013*
US$billion
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17
External Debt of EMEs
Source: Datastream / IIF
21.4
21.4
27.9
29.6
29.8
31.4
34.9
44.7
48.8
20.9
21.4
28.7
25.6
30.2
29.5
32.7
43.9
48.3
15 25 35 45 55
India
Colombia
Indonesia
Brazil
Mexico
Peru
South Africa
Chile
Turkey
External Debt / GDP
2012 2013**IIF forecast.
9.4
13.6
13.6
16.1
16.6
23.9
25.9
26.0
27.7
9.4
13.3
13.5
16.2
19.4
22.5
25.2
24.1
27.1
5 10 15 20 25 30
Brazil
Peru
Colombia
South Africa
Chile
Mexico
India
Indonesia
Turkey
Short Term External Debt / Total
2012 2013**IIF forecast.
* Brazil data includes intercompany debt transactions and domestic debt in
hands of foreign investors
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18Source: IMF (Fiscal Monitor April 2013)
Low nonresident holdings of Gov. debt
6.7
8.9
14.317.6
19.4
23.5
29.1
29.6
31.9
32.0
32.1
33.2
35.1
61.3
63.5
72.2
0 20 40 60 80
India
Japan
South KoreaBrazil
Russian
Canada
Spain
Turkey
UK
South Africa
US
Mexico
Italy
Germany
France
Australia
2012 (% of Total Debt)
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19Source: UNCTAD
Brazil is leading recipient of FDI
197.9
114.7
85.7
82.7
50.6
48.6
48.5
46.9
43.3
42.8
40.8
35.2
32.5
30.6
29.2
0 50 100 150 200
USA
China
Belgium
Hong Kong
UK
Singapore
Brazil
Germany
Russian
Ireland
Spain
Australia
Switzerland
France
Saudi Arabia
2010
226.9
124.0
103.3
96.1
66.7
65.8
64.0
52.9
51.1
41.4
40.9
40.4
34.3
31.6
29.5
0 50 100 150 200
USA
China
Belgium
Hong Kong
Brazil
Australia
Singapore
Russian
UK
Canada
France
Germany
Italy
India
Spain
2011
146.7
119.7
72.5
65.3
62.5
58.9
54.4
48.5
47.2
44.1
39.6
27.3
26.4
22.6
19.3
0 50 100 150
USA
China
Hong Kong
Brazil
UK
France
Singapore
Australia
Canada
Russian
Ireland
India
Chile
Luxembourg
Belgium
2012
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20Source: UNCTAD
19.0
26.3
27.9
82.5
111.0
120.3
138.6
171.5
319.3
0 100 200 300 400
South Africa
Turkey
India
Indonesia
Mexico
Brazil
Colombia
Peru
Chile
FDI / CAD (in %, 2012)
-6.6
-6.5
-5.1
-4.0
-3.5
-3.5
-3.3
-3.2
-1.3
-8 -6 -4 -2 0
Turkey
South Africa
India
Chile
Peru
Colombia
Indonesia
Brazil
Mexico
CAD (12M Acc., %GDP)*
* June 2013
CAD comfortably financed by FDI
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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21
0
5
10
15
20
25
30
35
40
Jan12
Feb12
Mar12
Apr12
May12
Jun12
Jul12
Aug12
Sep12
Oct12
Nov12
Dec12
Jan13
Feb13
Mar13
Apr13
May13
Jun13
Jul13
Aug13
accum.
12mon
ths(US$billion)
Equities Fixed Income
Source: BCB
Capital flows
Flows increased even after tapering talk (May 22 2013)
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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22
FX interest rate swaps and FX repo program (launched on
Aug 22)
Goal: provide hedge to economic agents, liquidity to domestic FX market
and reduce excessive market volatility
Measures (weekly auctions during 2013):
FX interest rate swap auctions: USD2 billion
FX Repo: USD1 billion
The program succeeded in taming ER volatility and
providing FX hedge and liquidity
USD100 billion (equivalent) until the end of 2013,
considering issues before the program announcement
Timely Central Bank action to mitigate risks
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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23Source: BCB
Efforts to reduce risks are successful
* From Aug 22 through Oct 2.
1/ The Bloomberg U.S. Dollar Index tracks the performance of a basket of ten leading global currenciesversus the U.S. Dollar (JPY, MXN, AUD, GBP, CAD, SGD, CHF, CNH, KRW and EUR).
-17.9
-16.5
-15.9
-9.1
-7.8
-7.5
-6.7
-5.5
-3.7
8.6
-25 -15 -5 5 15
Indonesian Rupiah
Australian Dollar
Brazilian Real
Indian Rupee
Czech Koruna
Mexican Peso
Polish Zloty
Turkish Lira
South African Rand
Russian Ruble
% Change in 1M ATM ImpliedVolatility*
-4.2
-1.9
-0.2
0.0
1.41.4
1.6
1.7
1.7
2.2
2.2
2.3
2.5
2.6
2.6
3.5
4.1
4.26.4
11.1
Indonesian Rupiah
Bloomberg USD Index 1/
Mexican Peso
Turkish Lira
YenColombian peso
Norwegian Krone
Euro
Canadian Dollar
Chilean Peso
Swedish Krona
Swiss Franc
Poland Zloty
Russian Ruble
South African Rand
Indian Rupee
Sterling pound
Australian DollarNew Zealand Dollar
Real
BRL leads appreciation since the FXprogram*
-24.4
-21.9
-18.6
-18.0
-16.9
-12.5
-11.8
-11.4
-9.3
-7.9
-7.4
-6.3
-5.9
-5.2
-4.4
-3.0
3.8
5.6
-40 -20 0 20
South Africa
China
Brazil
Germany
Russia
Chile
United Kingdom
Turkey
Mexico
Belgium
Japan
France
Peru
Spain
Colombia
Ireland
Portugal
Italy
CDS USD SR 5Y Corp - % Change since
BCB's Announcement of Regular FX
Intervention in 2013*
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24
Alexandre Tombini
Governor
October 2013
Brazil Economic Outlook
London
8/13/2019 Apresentao do Presidente Alexandre Tombini em Londres 2013-10-03
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25
BCB Central Bank of Brazil
BM&F Brazilian Exchange Company
CAD Current Account Deficit
EME Emerging countries
FDI Foreign Direct Investment
FGV Getlio Vargas Foundation
Focus Brazilian Market Survey sponsored by BCB
IBGE Brazilian Institute of Geography and Statistics
IMF International Monetary Fund
UMP Unconventional Monetary Policy
UNCTAD United Nations Conference on Trade and Development
Glossary