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São Paulo | Rio de Janeiro | Brasília | Curitiba | Porto Alegre | Recife | Belo Horizonte London | Lisbon | Shanghai | Miami | Buenos Aires Durval de Noronha Goyos Jr. Senior Partner - Noronha Advogados Johannesburg, 18 August 2008. Brazilian Foreign Trade and Investment Flows

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NORONHA ADVOGADOS BRAZIL’S GLOBAL LAWYERS. São Paulo | Rio de Janeiro | Brasília | Curitiba | Porto Alegre | Recife | Belo Horizonte. London | Lisbon | Shanghai | Miami | Buenos Aires. Brazilian Foreign Trade and Investment Flows. Durval de Noronha Goyos Jr. - PowerPoint PPT Presentation

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São Paulo | Rio de Janeiro | Brasília | Curitiba | Porto Alegre | Recife | Belo Horizonte

London | Lisbon | Shanghai | Miami | Buenos Aires

Durval de Noronha Goyos Jr.Senior Partner - Noronha Advogados

Johannesburg, 18 August 2008.

Brazilian Foreign Trade and Investment Flows

1. Fundamentals of Brazil's Economy

2. Brazil's External Trade and Trade with Selected Partners

3. General Aspects of Brazil's Foreign Policy

POINTS OF PRESENTATIONPOINTS OF PRESENTATIONPOINTS OF PRESENTATIONPOINTS OF PRESENTATION

Map of Brazil

Economic Growth %

Source: Brazilian Institute of Geography and Statistics - IBGE * Central Bank estimate

Fundamentals of Brazil's Economy

0,00,51,01,52,02,53,03,54,04,55,05,56,0

2003 2004 2005 2006 2007 * 2008

Brazil's GDP (incorporating purchase power parity rating)

Source: CIA World Book

Fundamentals of Brazil's Economy

• Total GDP US$ 1.929 trillion

• GDP per capita US$ 9.700 (2007)

• GDP per capita US$ 9.108 (2006)

Brazil’s GDP in US$

Source: Brazilian Institute of Geography and Statistics - IBGE In yellow – IBGE’s new methodology . *Projection

Fundamentals of Brazil's Economy

2003 2004 2005 2006 2007 * 2008

GDPGDP

((BillionBillion))552 663.4 882 1,006 1,300 1,3781,378

PopulationPopulation

((MillionMillion))178.9 181.5 185.5 186.7 188.9 190.0

GDP per capita (Thousand)

3,10 3,66 4,77 5,41 6,91 7,25

Development of External Debt

YearYear Amount (US$ Billion)Amount (US$ Billion)

19981998 233,8233,8

19991999 241,5241,5

20002000 216,9216,9

20012001 209,8209,8

20022002 210,7210,7

20032003 214,9214,9

20042004 201,4201,4

20052005 191,3191,3

20062006 156,0156,0

20072007 4,3 4,3

* 2008* 2008 -18,8-18,8

Fundamentals of Brazil's Economy

Source: Central Bank * MAR/2008

Fundamentals of Brazil's EconomyBrazilian International Reserves

Year US$ Billion

2003 49,296

2004 52,935

2005 53,799

2006 85,839

2007 180,334

* 2008 202,185

Source: Central Bank *JULY/2008

49,3 52,9 53,8

85,8

180,3

202,2

0

50

100

150

200

250

2003 2004 2005 2006 2007 *2008

Fundamentals of Brazil's Economy Brazilian International Reserves

Source: Central Bank *JULY/2008

US$ Billion

Foreign Direct Investment in Brazil

Source: Central Bank.

Fundamentals of Brazil's Economy

Year Total

2001 21,0

2002 18,7

2003 12,9

2004 20,2

2005 21,5

2006 22,7

2007 36,0

* 2008 35,0

* Estimate

US$ Billion

Foreign Direct Investment in Brazil

21,018,7

12,9

20,2 21,5 22,7

36,0 35,0

0

5

10

15

20

25

30

35

40

45

50

2001 2002 2003 2004 2005 2006 2007 *2008

US$ Billion

Fundamentals of Brazil's Economy

Source: Central Bank. * Estimate

Brazil: Inflation rate %

12,5

7,8 6,8

3,5 3,2

5,5

0

5

10

15

20

2003 2004 2005 2006 2007 * 2008

Source: Central Bank * Estimate

Fundamentals of Brazil's Economy

Year Total

2002 4,7

2003 0,5

2004 14,3

2005 10,1

2006 34,9

2007 12,1

* 2008 28,0

Fundamentals of Brazil's EconomyBrazilian Direct Investment Abroad

Source: Central Bank*Estimate

US$ Billion

4,7

0,5

14,3

10,1

34,9

12,1

28,0

0

40

2002 2003 2004 2005 2006 2007 * 2008

Brazilian Direct Investment AbroadFundamentals of Brazil's Economy

US$ Billion

Source: Central Bank*Estimate

Cayman Islands

Bermuda

Denmark

British Virgin Islands

Bahamas

Spain

USA

Others

Fundamentals of Brazil's EconomyBrazilian Direct Investment Abroad:

Main Countries in 2007

Source: Central Bank

20%

15%

10%

10%9%

4%

3%

29%

Agriculture

Industry

Services

94%

2% 4%

Fundamentals of Brazil's EconomyBrazilian Direct Investment Abroad

By Sector in 2007

Source: Central Bank

• 2008 – Budweiser by Inbev (US$ 52 billion) 1

• 2008 – Mirab (Argentina) by Marfrig (US$ 36 million) 2

• 2007 – Swift Foods by Friboi (US$ 1.5 billion) 3

• 2007 – Chaparral Steel by Gerdau (US$ 4.2 billion)4

• 2007 - Acerías Paz (Colombia) by the Votorantim Group (US$ 491 million)5

• 2006 – INCO (Canada) by Vale do Rio Doce (US$ 13.4 billion)6

• 2005 – Loma Negra (Argentina) by Camargo Correa (US$ 1.025 billion) 7

Fundamentals of Brazil's EconomySome Brazilian Acquisitions Abroad

Sources: 1 Folha de São Paulo, 14 July 20082 Estado de São Paulo, 3 January 20083 www.jbs.com.br3 www.gerdau.com.br

5 Valor Econômico, 27 December 20076 www.vale.com.br7 www.camargocorrea.com.br

Fundamentals of Brazil's EconomyForeign Direct Investments: Outflows by Country

23

1816

35

42

43

45

90

217

115

82

79

79

63

50

25

0 50 100 150 200 250

USA

France

Spain

Switzerland

United Kingdom

Germany

Belgium

Japan

Canada

Hong Kong

Italy

Sweden

Holand

Russia

China

Source: Unctad, World Investment Report 2007

US$ Billion

Brazil

25

24

2019

27

43

43

69

6972

140

176

81

3936

29

29

0 50 100 150

USA

United Kingdom

France

Belgium

China

Canada

Hong Kong

Germany

Italy

Luxemburg

Russia

Sweden

Switzerland

Singapore

Spain

Mexico

US$ Billion

Fundamentals of Brazil's EconomyForeign Direct Investments: Inflows by Country

Source: Unctad, World Investment Report 2007

Brazil

Fundamentals of Brazil's Economy

Development R$ x US$

Source: Central Bank

1,77

1,57

2,042,13

2,19

2,332,66

2,65

0,00

0,50

1,00

1,50

2,00

2,50

3,00

29/7/2008

Fundamentals of Brazil's Economy

Development R$ x €

Source: Central Bank

3,73

2,632,87

3,54

3,61

3,67

2,64

2,68 2,61

2,52

0

0,5

1

1,5

2

2,5

3

3,5

4

30/9/2004

30/12/2004

30/3/2005

30/6/2005

30/9/2005

30/12/2005

30/3/2006

30/6/2006

30/9/2006

30/12/2006

30/3/2007

30/6/2007

30/9/2007

30/12/2007

30/3/2008

30/6/200829/7/2008

Source: Central Bank

Fundamentals of Brazil's EconomyDevelopment R$ x RMB

0,2322

0,2454

0,2653

0,2739

0,2709

0,29000,3227

0,3213

0,2425

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

29/7/2008

Source: Central Bank

Fundamentals of Brazil's EconomyDevelopment R$ x RAND

0,2097

0,20380,24690,2819

0,30540,3538

0,36910,4282

0,4722

00,050,1

0,150,2

0,250,3

0,350,4

0,450,5

31/12/2004

31/3/2005

30/6/2005

30/9/2005

31/12/2005

31/3/2006

30/6/2006

30/9/2006

31/12/2006

31/3/2007

30/6/2007

30/9/2007

31/12/2007

31/3/2008

30/6/200829/7/2008

World's Interest RatesJuly 2008

Country Nominal Rate Inflation Real Rate

Turkey 19% 11% 8%

Brazil 13% 6% 7%

Mexico 8% 4,8% 3,2%

South Africa 12,5% 9,5% 3%

India 9% 7% 2%

Euro Area 5% 4% 1%

Japan 0,70% 1,41% (0,7%)

China 4,5% 6,5% (2%)

USA 2,3% 4,3% (2%)

Russia 11% 13,9% (2,9%)

Source: World Bank

Fundamentals of Brazil's Economy

Main problems yet to be solved

taxes are not competitive;

interest rates are very high;

Brazilian currency overvalued.

Fundamentals of Brazil's Economy

Fundamentals of Brazil's EconomyBrazil's Current Account

Source: Central Bank

US$ Billion

19

95

19

96

20

01

20

05

Jan

20

07

Jan

20

08

Ju

n2

00

8

- 12,194

- 13,341

- 7,653

5,249 13,579

2,438

-17,402

-18,103

-25

-20

-15

-10

-5

0

5

10

15

Automotive ProductionYear Cars and light

commercial vehicles

Trucks Buses Total

2003 1,721.110 78,938 26,990 1,827.038

2004 2,181.131 107,338 28,758 2,317.227

2005 2,375.142 117,892 35,266 2,528.300

2006 2,471.224 106,001 33,809 2,611.034

2007 2,794.679 136,980 38,785 2,970.444

* 2008 3,592.000 127,104 44,520 3,763.624

Source: National Automotive Industry Association - ANFAVEA * estimate

Fundamentals of Brazil's Economy

• 2005 – 1.85 million barrels a day

• 2006 – Brazil achieves self sufficiency in oil

• 2007 – Discovery of Tupi oilfield with estimated 10 billion of barrels of oil. The

discovery could double the Brazilian reserves.

• 2008 – Discovery of Carioca oilfield with estimated 70 billion barrels of oil.

Discovery puts Brazil's oil reserves among the world's largest 1

• 2010 – 3.4 million barrels a day 2

Fundamentals of Brazil's Economy

Source: 1- Financial Times, July 8 20082- Petrobrás estimate

Oil Production

World's Oil Reserves

1 Saudi Arabia 264

2 Iran 130

3 Iraq 105

4 Kuwait 100

5 UAE 95

6 Brazil 90

7 Venezuela 80

8 Russia 75

9 Libya 37

10 Kazakhstan 37

11 Nigeria 35

12 USA 27

Source: The Economist – Financial Times

Fundamentals of Brazil's Economy

In Billion of Barrels

Fundamentals of Brazil's Economy

• 500 million litres/year

• Increase in cultivated area by 67,000 hectares

• Creation of 20,000 direct jobs and 60,000 indirect jobs

• Investments in production chain estimated at around USD 150 million/year

• CO2 emission reduction by 3.5 million tons/year

Ethanol Production

Source: Sugar Cane Industry Union - UNICA

Fundamentals of Brazil's Economy

Source: Brazilian Ministry of Mines and Energy

Sources of Energy

86%

14%

55%

45%

0

20

40

60

80

World Brazil

Renewable Non-Renewable

Aeroplane Trade (US$ Million FOB)

20022002 20032003 20042004 20052005 20062006 20072007

ExportsExports 2,799.2 2,050.0 3,371.3 3,302.8 3,442.5 4,367.5

ImportsImports 685.0 591.3 888.3 967.7 1,234.5 1,593,2

BalanceBalance 2,114.2 1,458.6 2,482.6 2,335.1 2,208.0 2,774.30

Flow of Flow of CommerceCommerce

3,484.2 2,641.3 4,260.0 4,270.5 4,676.0 5,960.70

Source: Development, Industry and Trade Ministry - MDIC

Fundamentals of Brazil's Economy

• The ship industry in Brazil is rebuilding itself after years of depression. By 2012, 26 new ships will be delivered to Transpetro (Petrobras Transports) with the contracts in that respect worth US$ 2,5 billion.

• In 2007 direct jobs in the Brazilian ship industry increased by 40,000.

• By October 2007, the total of the loans from BNDES* was in the amount of R$ 3,6 billion in relation to the ship industry.

• In 2008, The Brazilian Fund of Merchant Marine approved US$ 989,8 million for new investments.

• The estimated income of the ship industry is R$ 4,5 billion, from building ships to building oil platforms.

*BNDES - Brazilian Development BankSource: Construction Industry National Syndicate

Fundamentals of Brazil's EconomyShip Industry

Fundamentals of Brazil's Economy

Steel :

• In 2007, Brazilian production reached record levels, closing at 40 million tons, up from 30,9 million of 2006.

• The estimate for 2008 is an increase of 10,8%, with a production of 37,6 million of tons.

Cement :

• In 2008, according estimates Brazil will produce 50.500 millions tons of cement, an increase of 10% from 2007.

Source: Brazilian Cement Association and Brazilian Iron Institute

Base Industries

Classes A/B

Class C

Classes D/E

39%

46%

15%

Brazil's Social Development: Division by Classes in 2007

Source: Ipsos Public Affairs and the financial institution Cetelem.

86,2 million people

28 million people

72,9 million people

Fundamentals of Brazil's Economy

0

5

10

15

20

25

30

35

40

45

50

2005 2006 2007

Fundamentals of Brazil's Economy

Source: Ipsos Public Affairs and the financial institution Cetelem.

Brazil's Social Development: Growth of Class C % of Population

34% 36%

48%

5

6

7

8

9

10

11

12

13

14

2002 2003 2004 2005 2006 2007 2008

April

May

June

Fundamentals of Brazil's EconomyUnemployment rate in Brazil

Months of April, May and June – 2002 to 2008

Source: Brazilian Institute of Geography and Statistics - IBGE

Source: Development, Industry and Trade Ministry - MDIC * Up to June 30 2008

US$ Billion Brazilian Trade

Year Exports

US$ FOB

Imports US$ FOB

Balance

US$ FOB

Flow of Trade

US$ FOB

2004 96,67 62,83 33,84 159,51

2005 118,52 73,60 44,93 192,12

2006 137,80 91,35 46,45 229,15

2007 160,64 120,62 40,02 281,27

* 2008 90,64 79,29 11,34 169,94

Brazil's External Trade and Trade with Selected Partners

Brazilian Trade US$ Billion

0

100

200

300

2004 2005 2006 2007 * 2008

Exports Imports Balance Flow of Trade

Source: Development, Industry and Trade Ministry - MDIC * estimate

Brazil's External Trade and Trade with Selected Partners

Year Exports

US$ FOB

Imports US$ FOB

Balance

US$ FOB

Flow of Trade

US$ FOB

2004 24,67 15,99 8,68 40,66

2005 27,03 18,23 8,80 45,26

2006 31,04 20,20 10,84 51,24

2007 40,42 26,73 13,69 67,15

* 2008 22,14 16,63 5,51 38,77

Brazilian Trade with The European UnionUS$ Billion

Source: Development, Industry and Trade Ministry - MDIC * June 2008

Brazil's External Trade and Trade with Selected Partners

0

10

20

30

40

50

60

70

80

2004 2005 2006 2007 * 2008

Exports Imports Balance Flow of Trade

US$ Billion Brazilian Trade with The European Union

Source: Development, Industry and Trade Ministry - MDIC * estimate

Brazil's External Trade and Trade with Selected Partners

Brazilian Trade with China

Year Exports FOB Imports FOB Balance

FOB

Flow of Trade

FOB

2004 5,44 3,71 1,73 9,15

2005 6,83 5,35 1,48 12,18

2006 8,40 7,99 0,41 16,39

2007 10,74 12,61 -1,86 23,36

* 2008 7,40 8,94 - 1,54 16,35

US$ Billion

Source: Development, Industry and Trade Ministry - MDIC * June 2008

Brazil's External Trade and Trade with Selected Partners

Brazilian Trade with ChinaUS$ Billion

-202468

101214161820222426283032

2004 2005 2006 2007 * 2008

Exports Imports Balance Flow of Trade

Source: Development, Industry and Trade Ministry - MDIC * estimate

Brazil's External Trade and Trade with Selected Partners

Brazilian Trade with South Africa

Year Exports FOB Imports FOB Balance

FOB

Flow of Trade

FOB

2004 1,03 0,26 0,77 1,29

2005 1,37 0,34 1,03 1,71

2006 1,46 0,43 1,03 1,89

2007 1,75 0,52 1,23 2,27

* 2008 0,83 0,39 0,44 1,22

US$ Billion

Source: Development, Industry and Trade Ministry - MDIC * June 2008

Brazil's External Trade and Trade with Selected Partners

Brazilian Trade with South AfricaUS$ Billion

0

1

2

3

2004 2005 2006 2007 * 2008

Exports Imports Balance Flow of Trade

Source: Development, Industry and Trade Ministry - MDIC *estimate

Brazil's External Trade and Trade with Selected Partners

Main Products in Bilateral Trade Brazil – South AfricaUS$ Million

Source: Development, Industry and Trade Ministry - MDIC * June 2008

Brazil's External Trade and Trade with Selected Partners

Brazil's Exports US$ FOB Brazil's Imports US$ FOB

Refined Soy Oil 72,98 Anthracite 55,60

Chicken Cuts and offal, frozen

65,01 Rhodium, Raw or powdered

41,85

Other vehicles 49,75 Other Vehicles Motors 24,20

Other Cane Sugar 47,50 Ferro-manganese 19,13

Trucks Body 38,38 Tebuthiuron 17,75

Road tractors for semi-trailers

32,63 Other Hydrocarbon 13,48

USAArgentinaChinaNetherlandsGermanyVenezuelaSouth AfricaItalyJapanMexicoChileOthers

Brazilian Flow of Trade

Source: Development, Industry and Trade Ministry - MDIC June/2008

Brazil's External Trade and Trade with Selected Partners

Sources of Brazil’s Imports

USAChinaArgentinaGermanyNigeriaJapanChileFranceSouth KoreaItalyOthers

Source: Development, Industry and Trade Ministry - MDIC June/2008

Brazil's External Trade and Trade with Selected Partners

Europe Union

USA

MERCOSUR

AFRICA

ASEAN

Others

19%

35%

24%

10%7%5%

Flow of trade between Brazil and selected economic blocs

Source: Development, Industry and Trade Ministry - MDIC June/2008

Brazil's External Trade and Trade with Selected Partners

0

10

20

30

40

50

60

70

80

2004 2005 2006 2007 *2008

Exports Imports Balance

Source: Brazilian Confederation of Agriculture and Livestock - CNA*Estimate

Brazil's Agribusiness Trade

Brazil's External Trade and Trade with Selected Partners

US$ Billion

Brazilian Agribusiness

ProductsPosition between main exporters

% of Total Global Exports

Orange juice 1º 81%

Poultry 1º 35%

Sugar 1º 33%

Coffee 1º 30%

Tobacco 1º 27%

Bovine Meat 1º 24%

Ethanol 1º 13%

Soy 2º 32%

Soy Oil 2º 28%

Pork 3º 11%

Cotton 3º 5%

Source: International Relations and Trade Institute - Icone Brasil

Fundamentals of Brazil's Economy

Destinations Agribusiness Exports

(US$ million) 

Var. % 07/06 (b/a)

TotalExp. (c)

 Increased Value%

 

  2006 (a) 2007 (b) Basic  Semi Manufactured

1.EU  16.153  21.232  31,44  40.357  57,43  14,53 28,04

2. USA 7.370  6.840  -7,19  25.065  19,55  19,70  60,75

3. China 3.802  4.691  23,38  10.749  67,69  29,23  3,09

4. Russia 3.156  3.402  7,80  3.741  64,37  30,72  4,92

5. Argentina 1.571  1.917  21,97  14.417  11,19  6,31  82,50

6. Japan 1.491  1.768  18,57  4.321  58,42  14,65  26,93

Main Destinations for Brazil's Agribusiness Exports

Source: Brazilian Confederation of Agriculture and Livestock - CNA*Estimate

Brazil's External Trade and Trade with Selected Partners

EU

USA

CHINA

Russia

Argentina

Japan

Main Destinations for Brazil's Agribusiness Exports

Brazil's External Trade and Trade with Selected Partners

Source: Brazilian Confederation of Agriculture and Livestock - CNA*Estimate

0

50

100

150

200

250

300

350

400

Brazil USA RussiaFederation

EuropeUnion

India China Canada Argentina

Area availabla for expansion Area already utilized

394

328 188

269

176

220

169138

76 71

66

81

132

88

116

60 42

964531 44

27

Source: FAO/IBGE

Fundamentals of Brazil's Economy

Potential Areas for Agricultural Expansion

General Aspects of Brazil's Foreign Policy

Brazil’s prevailing foreign policy doctrine recognizesthe vulnerability of the country in a number of areas:

• Economic;

• Technological;

• Political;

• Commercial; and

• Military.

Source: Ministry of External Relations of Brazil

General Aspects of Brazil's Foreign Policy

Brazil’s present foreign policy doctrine recommends

alliances with other major developing countries such as:

• China;• India;• Russia; and• South Africa

In order to minimize such vulnerabilities.

Source: Ministry of External Relations of Brazil

Address:Rua Alexandre Dumas, 1630CEP: 04717-004 São Paulo SP Brasil

Phone: (55-11) 5188-8090Fax: (55-11) 5184-0097(55 11) 5184-2471

NORONHA ADVOGADOS

Located in one of the main financial centers of the city, the São Paulo office is the head office of Noronha Advogados and the oldest, having been opened in June 1978.

It concentrates the highest number of professionals and is the centre for the firm’s administrative and financial departments. The São Paulo office houses an efficient and up-to-date library and computer network, fully connected to the other offices, in Brazil and abroad.

Contact:         Durval de Noronha Goyos JúniorBento Delgado Kardos

NORONHA ADVOGADOS

Durval de Noronha Goyos Jr.Durval de Noronha Goyos Jr.

[email protected]