BBVA Foundation
Conference Round-table
Latin American Social and Economic Perspectives
BRAZIL: THE REALITY OF A
NEW STAGE OF DEVELOPMENT
Madrid, February 27th, 2003
Octavio de Barros - BBV Banco Chief economist
Octavio de Barros- Director of Research and
Macroeconomic Studies of BBV Banco
Economics Director for FEBRABAN - Federação Brasileira das Associações
de Bancos (Association of Brazilian Federation of Bank)
Member of the Senior Economic Council of FIESP- Federação das Indústrias
de São Paulo (Federation of Industries of the State of São Paulo)
Member of the Senior Council of the São Paulo State Association of
Economists
Member of the Economics Council of AMCHAM-SP - American Chamber of
Commerce-São Paulo
Member of GIE- Grupo de Investidores Estrangeiros (Group of Foreign
Investors)
Member of the Advisory Board of Investe Brasil (a government-International
Chamber of Commerce and private sector partnership)
Board Member of SOBEET- Sociedade Brasileira de Estudos de Empresas
Transnacionais (Brazilian Society for Studies of Transnational Companies)
Guyana
Suriname
Venezuela
French
Guyana
Colombia
Ecuador
Brazil
Peru
Bolivia
Argentina
Chile
Paraguay
Uruguay
THE
MARKETS
CONCEDE
THE BENEFIT
OF THE
DOUBT TO
LULA
RANKING OF SELECTED LATIN AMERICAN COUNTRIES IN WORLD
GDP - (PURCHASING POWER PARITY CRITERIA)
2001
9th
12th
22nd
26th
31st
36th
51st
BRAZIL
MEXICO
Source: IMF
Prepared by: BBV Banco
ARGENTINA
COLOMBIA
CHILE
VENEZUELA
PERU
BEST PERFORMING COUNTRIES IN LATIN AMERICA
(LAST-10 YEAR AVERAGE GDP GROWTH %)
1993 - 2002
(in %)
CHILE
4,91
PERU
4,27
BOLIVIA
3,38
BRAZIL
2,96
MEXICO
2,86
2,36
COLOMBIA
PARAGUAY
1,89
ECUADOR
1,86
URUGUAY
DEVELOPED COUNTRIES LAST 10 YEARS
AVERAGE GDP GROWTH
0,56
USA: 3,23%
EUROPEAN UNION: 2,10%
JAPAN: 0,94%
VENEZUELA 0,21
ARGENTINA 0,21
0,0
0,5
Source: IMF
Prepared by: BBV Banco
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
RECENT DEVELOPMENTS OF
BRAZILIAN ECONOMY AND THE
MAIN CHALLENGES FOR LULA’S
NEW GOVERNMENT
THE MARKETS CONCEDE THE BENEFIT OF THE
DOUBT TO LULA
Brazil:
The new president Lula begins with a market friendly attitude.
The government is surprising with orthodox measures
(autonomy of the Central Bank, structural reforms and
responsible fiscal management). The most robust democracy in
Latin America is consolidating its institutions. Balance of
payments perspectives are good and a potential virtuous circle
is probable.
THE MARKETS CONCEDE THE BENEFIT OF THE
DOUBT TO LULA
Brazil:
The new government in Brazil seems to be more orthodox than ever
imagined, but external uncertainties are still delaying the economic recovery
related to the potential virtuous circle
The new administration in Brazil, held by Mr. Lula, is showing an impressive
commitment to a strong orthodox fiscal and monetary policy. Their aim to reform the
social security system and also to give the Central Bank the necessary operational
autonomy to hold the monetary policy is also contributing to calm markets down.
However, the country risk is still high, showing an important resistance to break the
1.200/1.300 basis points level. That's mainly due to the uncertainties regarding the
external environment (war and low US economic growth) and also to the low tradability
in emerging markets. The problem is that these uncertainties, if long-lasting, may lead
to some pressure over the Brazilian economy, forcing the new government to take a
hard decision: frustrate part of its voters with more orthodox measures or fall to a
more populist administration, facing all the known risks related to this option. The
initial signals of the new administration suggest that the first option will probably
prevail. The main challenge of Lula is to keep restoring confidence over Brazil despite
all this wild external environment.
AVERAGE GDP GROWTH (2001 - 2003) IN SELECTED LATIN AMERICAN
COUNTRIES - INCLUDING FORECAST BBVA FOR 2003
(in %)
3,00
2,98
2,66
2,00
2,38
1,00
0,00
-1,00
-2,00
-2,73
-3,25
-3,00
-4,00
CHILE
Source: WorldBank / BBVA Madrid
Prepared by: BBV Banco
MEXICO
BRASIL
ARGENTINA
VENEZUELA
GDP GROWTH BY DECADE IN BRAZIL
1951 - 2010
Annual Average
(in %)
8,0
7,0
6,0
7,2
6,1
5,0
GDP GROWTH FORECASTS
(selected periods)
2001 - 2005:
2,5%
2006 - 2010:
4,5%
5,1
4,0
3,5
3,0
2,0
2,2
1,0
1,3
0,0
50´s
60´s
Source: IBGE
Prepared by: BBV Banco (*) forecast
70´s
80´s
90´s
00´s (*)
RECENT ECONOMIC GROWTH IN BRAZIL
2000 - 2003
(in %)
5,0
4,0
4,40
3,0
2,0
1,50
1,70
1,90
1,0
0,0
2000
Source: IBGE
Prepared By: BBV Banco (*) Forecast
2001
2002 *
2003 *
Source: BCB
Prepared By: BBV Banco; Market Forecast
2,11
21/02/03
28/01/03
0,34
04/01/03
11/12/02
17/11/02
0,20
24/10/02
0,48
30/09/02
1,00
06/09/02
13/08/02
3,56
20/07/02
26/06/02
0,50
02/06/02
3,74
09/05/02
3,66
15/04/02
22/03/02
26/02/02
3,52
02/02/02
09/01/02
1,20
16/12/01
22/11/01
3,79
29/10/01
05/10/01
11/09/01
4,14
18/08/01
25/07/01
3,50
01/07/01
07/06/01
4,50
14/05/01
2,00
20/04/01
3,00
27/03/01
4,00
03/03/01
07/02/01
MARKET EXPECTATIONS FOR GDP GROWTH IN 2003
BRAZIL
4,44
3,59
3,35
1,17
Standard Deviation
2,80
0,80
2,50
0,60
2,04
0,40
1,87
1,74
1,50
GROSS DOMESTIC PRODUCT IN BRAZIL
(YEAR over YEAR) %
1999 - 2002
6,0%
5,0%
5,14%
4,0%
4,1% 4,1% 4,12% 3,9%
3,0%
3,8%
3,3%
2,38%
2,0%
2,1%
1,0%
1,0%
0,8%
0,0%
0,6%
-0,3% -0,4%
-0,8% -0,6%
Source: IBGE
Prepared By: BBV Banco (*) Forecast
2002-IV *
2002-III
2002-II
2002-I
2001-IV
2001-III
2001-II
2001-I
2000-IV
2000-III
2000-II
2000-I
1999-IV
1999-III
1999-II
1999-I
-1,0%
MARKET EXPECTATIONS FOR GDP GROWTH
BRAZIL - 2002 - 2006
% BY YEAR
4,00
3,50
3,54
3,68
3,00
3,02
2,50
2,00
2,04
1,50
1,51
1,53
* 2001
2002
1,00
Source: BCB (*) final figure
Prepared By: BBV Banco; Market Forecast
2003
Up to: 21.02.03
2004
2005
2006
INDUSTRIAL PRODUCTION - ANNUAL GROWTH (%)
1992 - 2002
(%)
8,0
7,5
7,6
6,6
6,0
4,0
3,9
2,0
2,4
1,8
1,7
1,6
0,0
-2,0
-0,7
-2,0
-3,7
-4,0
1992
1993
Source: IBGE
Prepared by: BBV Banco
1994
1995
1996
1997
1998
1999
2000
2001
2002
INDUSTRIAL PRODUCTION IN 2002 - ANNUAL GROWTH SELECTED COUNTRIES
%
8
7,3
6
4
2
2,4
2,1
0,1
0
-0,5
-2
-0,6
-1,5
-2,0
-4
-3,6
-6
-8
-10,6
-10
-12
South
Korea
Brazil
Source: Bloomberg
Prepared by: BBV Banco
Chile
Spain
Mexico
USA
Japan
Germany
United Argentina
Kingdom
ANNUAL INFLATION RATE
BRAZIL IPCA IN % - 1990 - 2003
2500,0%
2477,1%
2000,0%
1500,0% 1621,0%
1119,1%
1000,0%
916,4%
500,0%
Government target
472,7%
22,4%
9,6%
5,2%
1,7%
8,9%
6,0%
7,7%
12,5%
8,5%
1995
1996
1997
1998
1999
2000
2001
2002
2003
0,0%
1990
1991
Source: IBGE
Prepared by: BBV Banco
1992
1993
1994
INFLATION TARGET AND MARKET EXPECTATION FOR IPCA
2002 - 2006
13,00%
12,00%
Superior
Limit
Teto da Meta
Market
expectation
in 02/21/03
em 21/02/03
de Mercado
Expectativa
12,53%
12,18%
Superior
limit
Teto da Meta
11,00%
Adjusted new target
Nova Meta Ajustada
10,00%
9,00%
8,50%
8,00%
8,09%
7,00%
6,50%
6,00%
5,00%
5,50%
6,25%
6,35%
5,50%
5,52%
5,50%
4,00%
3,00%
3,50%
2,00%
2002
Source: BACEN
Prepared by: BBV Banco
2003
2004
2005
2006
MARKET EXPECTATIONS FOR IPCA IN 2003
BRAZIL
4,00
Standard deviation
11,60
12,18
11,47
3,08
3,00
10,60
10,20
2,00
10,08
1,52
9,60
1,00
8,60
8,32
1,10
0,56
7,60
0,00
6,60
6,18
6,00
5,60
4,88
4,31
4,60
4,05
3,94
Source:BACEN
Prepared by: BBV Banco
21/02/03
06/02/03
22/01/03
07/01/03
19/12/02
04/12/02
19/11/02
01/11/02
17/10/02
02/10/02
17/09/02
02/09/02
16/08/02
01/08/02
17/07/02
02/07/02
17/06/02
31/05/02
15/05/02
29/04/02
12/04/02
27/03/02
12/03/02
25/02/02
07/02/02
23/01/02
3,60
MARKET EXPECTATIONS FOR IPCA IN 2003
(TOP-13: CONSENSUS GROUP) 2002 - 2003
%
11,50
11,60
fev/03
11,90
jan/03
12,00
10,88
10,00
8,86
8,00
6,00
5,94
5,03
3,80
3,80
4,00
4,00
4,20
mar/02
abr/02
mai/02
jun/02
jul/02
4,00
2,00
SOURCE: CONSENSUS PRIVATE GROUP
PREPARED BY: BBV BANCO
dez/02
nov/02
out/02
set/02
ago/02
0,00
MARKET EXPECTATIONS FOR IPCA
BRAZIL - 2002 - 2006
% YEAR
12,53
11,50
12,18
9,50
8,09
7,50
7,67
6,35
5,50
5,52
3,50
*
2001
2002
Source: BCB (*) final figure
Prepared By: BBV Banco; Market Forecast
2003
Up to: 21.02.03
2004
2005
2006
INCOME DISTRIBUTION INDEX: EVOLUTION OF GINI INDEX AND
INFLATION (IPCA 12-MONTH)
1992 - 2001
IPCA 12m (%)
Gini Index
0,603
90,0
2477,1
0,61
0,598
0,60
0,592
60,0
Gini Index
0,590
0,588
0,59
0,584
IPCA
30,0
1119,1
0,577
916,4
0,575
0,576
0,58
0,574
22,4
0,572
9,6
5,2
1,7
8,9
12,5
6,0
7,7
0,0
0,57
1992
1993
Source: IBGE
Prepared by: BBV Banco
1994
1995
1996
1997
1998
1999
2000
2001
2002(*)
REAL INTEREST RATES IN BRAZIL
1991 - 2003
54,50
53,9
Before
Stabilization
Inflation targeting
with Floating Rate
Regime
Real Plan
44,50
Mexican
Crisis
39,2
34,50
28,8
26,2
28,0
24,50
24,4
21,3
27,5
Russian Crisis
aug/98
Asian Crisis
jul/97
14,50
14,3
8,4
4,8
Source: BCB and IBGE
Prepared By: BBV Banco
Jan/03
Jul/02
Jan/02
Jul/01
Jan/01
Jul/00
Jan/00
Jul/99
Jan/99
Jul/98
Jan/98
Jul/97
Jan/97
Jul/96
Jan/96
Jul/95
Jan/95
Jul/94
Jan/94
Jul/93
Jan/93
Jul/92
Jan/92
Jul/91
4,50
"EX ANTE" REAL INTEREST RATES - SELIC NOMINAL RATE DEFLATED
BY THE PROSPECTIVE INFLATION RATE (IPCA 12M) (%) (1) 1998 - 2003
(%)
40,0
35,0
33,3
32,8
Floating exchange
rate regime
30,0
20,0
14,0
11,2
10,7
11,6
10,7
10,0
9,5
Jul/02
Jan/02
Jul/01
Jan/01
Jul/00
Jan/00
Jul/99
Jan/99
Jul/98
Jan/98
(1) Using market forecasts after jan03
Source: BCB e IBGE
Prepared by: BBV Banco
Jan/03
0,5
0,0
11/01/02
18/01/02
25/01/02
01/02/02
08/02/02
15/02/02
22/02/02
01/03/02
08/03/02
15/03/02
22/03/02
29/03/02
05/04/02
12/04/02
19/04/02
26/04/02
03/05/02
10/05/02
17/05/02
24/05/02
31/05/02
07/06/02
14/06/02
21/06/02
28/06/02
05/07/02
12/07/02
19/07/02
26/07/02
02/08/02
09/08/02
16/08/02
23/08/02
30/08/02
06/09/02
13/09/02
20/09/02
27/09/02
04/10/02
11/10/02
18/10/02
25/10/02
01/11/02
08/11/02
15/11/02
22/11/02
29/11/02
06/12/02
13/12/02
20/12/02
27/12/02
03/01/03
10/01/03
17/01/03
24/01/03
31/01/03
07/02/03
14/02/03
21/02/03
MARKET EXPECTATIONS FOR THE FX (EXCHANGE RATE)
BRAZIL - END OF 2003
R$/US$
3,80
0,52
0,42
3,40
3,20
2,71
0,48
2,80
2,63
Source: BCB
Prepared By: BBV Banco; Market Forecast
3,67
Standard Deviation
3,60
3,60
0,32
0,22
0,12
3,00
2,94
3,71
3,64
3,63
3,48
0,19
0,12
0,18
3,21
0,02
3,03
2,78
2,69
2,60
2,65
THE CURRENCY DEPRECIATION IN 1999 PLAYED AN IMPORTANT
ROLE IN CHANGING RELATIVE PRICES
1994 - 2003
JUNE 1994 = 100
135,0
132,9
125,0
Floating Rate
Regime
116,7
115,0
104,6
105,0
98,7
100,0
95,0
91,2
90,4
83,3
80,0
78,8
72,6
75,0
Out/02
Jan/03
Mai/02
Dez/01
Jul/01
Fev/01
Set/00
Abr/00
Nov/99
Ago/98
Mar/98
Out/97
Mai/97
Dez/96
Jul/96
Fev/96
Set/95
Abr/95
Nov/94
Jun/94
Source: IBGE and FGV
Prepared by: BBV Banco
Jan/99
71,2
69,8
65,0
Jun/99
85,0
102,0
99,3
TRADE BALANCE SURPLUS IN 2002 IS COMPARABLE TO THOSE
IN THE THE BEGINNING OF 1990’S
1989 - 2003
US$ MILLIONS
17.000
16.117
15.242
12.500
13.304
10.752 10.579
13.120
14.000
10.488
8.000
3.500
2.643
-1.000
-1.252
-3.464
-5.600
-5.500
-748
-6.751 -6.608
-10.000
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003*
Source: BRAZILIAN CENTRAL BANK
Prepared by: BBV Banco (*) Forecast
RATIO OF BRAZILIAN EXPORTS TO GDP
1991 - 2003
(in %)
13,0
13,0
11,4
11,0
9,0
7,0
13,4
9,2
9,0
8,9
9,1
8,0
7,8
6,6
6,6
6,5
1997
1998
6,1
5,0
1991
1992
1993
1994
Source: MDIC
Prepared and (*) Forecast by: BBV Banco
1995
1996
1999
2000
2001
2002
2003*
RATIO OF BRAZLIAN TRADE (EXPORTS + IMPORTS) TO GDP
1991 - 2003
(in %)
25,0
23,0
23,2
23,8
22,3
21,0
19,0
18,1
17,0
18,4
15,0
14,5
13,0
14,9
14,1
13,0
13,7
14,0
13,8
1997
1998
12,9
11,0
9,0
7,0
1991
1992
1993
1994
Source: MDIC
Prepared and (*) Forecast by: BBV Banco
1995
1996
1999
2000
2001
2002
2003*
BRAZILIAN EXPORTS - PRICES AND QUANTITIES
1997 - 2003
AUG/94 =100
180,0
172,9
160,0
162,3
149,4
140,0
136,4
120,0
100,0
122,8
110,2
114,0
100,7
93,9
80,0
81,9
84,6 81,6
77,9 78,0
60,0
1997
1998 1999 2000
2001 2002 2003(*)
40,0
QUANTUM
QUANTITIES
Source: FUNCEX
Prepared and (*) Forecast by: BBV Banco
1997 1998 1999
2000
PREÇO
PRICES
2001 2002 2003(*)
BRAZIL AS A GLOBAL TRADER : BRAZILIAN EXPORTS BY
DESTINATION IN US$ MILLIONS
1997 - 2002
100%
13.541
13.092
10.187
11.969
11.267
15.643
16.802
14.778
14.865
8.884
80%
10.819
60%
40%
14.511
20%
11.411
12.430
14.742
13.731
7.730
5.613
5.735
6.329
6.389
6.282
5.928
1997
1998
1999
18.659
15.113
6.949
8.794
6.366
8.339
8.911
2000
2001
2002
0%
Demais
Países
Other Countries / Middle
east
Source: MDIC
Prepared by: BBV Banco
Asia
Ásia (-Oriente Médio)
União Européia
European Union
NaftaNafta
América
Latina (without
(-México)Mexico)
Latin America
IMPORTANCE OF BRAZILIAN EXPORTS IN THE US MARKET
(IN %) 1990-2002
(in %)
1,60
1,49
1,50
1,40
1,34
1,32
1,30
1,26
1,25
1,20
1,15
1,14
1,10
1,01
1,05
1,00
1990
1991
Source: WTO and BCB
Prepared by: BBV Banco
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
%
IMPORTANCE OF THE UNITED STATES TO BRAZILIAN EXPORTS
(% OF TOTAL EXPORTS)
1990 - 2002
27,0
25,74
25,0
24,70
24,17
24,30
23,0
22,23
21,0
20,34
19,23
19,0
19,06
19,37
18,67
17,50
17,0
1990
1991
Source: WTO and BCB
Prepared by: BBV Banco
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
CHINA IS BECOMING MORE IMPORTANT FOR BRAZILIAN
EXPORTS - 1998-2002
Ranking of exports destination
2001
01 - USA
02 - Argentina
03 - Netherlands
04 - Germany
05 - Japan
06 - China
07 - Mexico
08 - Belgium - Luxemburg
09 - Italy
10 - United Kingdom
4th
2002
01 - USA
02 - Netherlands
03 - Germany
04 - China
05 - Mexico
06 - Argentina
07 - Japan
08 - Belgium - Luxembourg
09 - Italy
10 - United Kingdom
6th
12th
14th
1998
Source: CENTRAL BANK
Prepared by: BBV Banco
15th
1999
2000
2001
2002
IMPORTANCE OF CRUDE OIL IMPORTS IN THE TOTAL BRAZILIAN
CONSUMPTION 1990 - 2002
(in %)
48,00
47,48
45,74
46,78
45,35
43,00
43,90
42,09
41,42
39,75
38,00
34,91
33,00
28,00
29,13
25,45
23,00
24,09
22,24
18,00
1990
1991
Source: ANP
Prepared By: BBV Banco
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
PRICE INDEX OF SOME COMMODITIES EXPORTED BY BRAZIL
1995 - 2003
Base Jan 1998: 100
118,1
120,00
Metalic Commodities
(17,2% of total exports)
110,00
106,1
104,44
100,9
101,72
100,00
94,40
90,00
80,00
85,2
84,5
76,80
Agricultural Commodities
(18,6% of total exports)
70,00
76,54
73,78
65,8
63,9
Source: BLOOMBERG
Prepared by: BBV Banco
Jan/03
Jul/02
Jan/02
Jul/01
Jan/01
Jul/00
Jan/00
Jul/99
Jan/99
Jul/98
Jan/98
Jul/97
Jan/97
Jul/96
Jan/96
Jul/95
Jan/95
60,00
IMPORT-SUBSTITUTION PROCESS - CORRELATION BETWEEN THE
DOMESTIC INDUSTRIAL PRODUCTION AND THE IMPORTS OF
INTERMEDIATE GOODS AND RAW MATERIAL
1996 - 2002
(Industrial Production - 1991 = 100)
(Imports Aug/96=100)
130,00
160,0
127,61
Imports of intermediate
goods and raw material
(12-month moving
average index)
126,00
122,00
129,38
149,0
140,0
Correlation
87,9%
123,6
120,19
124,1
120,0
118,6
118,00
113,7
100,0
114,96
114,00
Correlation
27,4%
112,78
Domestic Industrial Production
(12-month moving average index)
89,2
Source: FUNCEX and IBGE
Prepared by: BBV Banco
Oct-02
Jul-02
Apr-02
Jan-02
Oct-01
Jul-01
Apr-01
Jan-01
Oct-00
Jul-00
Apr-00
Jan-00
Oct-99
Jul-99
Apr-99
Jan-99
Oct-98
Jul-98
Apr-98
Jan-98
Oct-97
Jul-97
Apr-97
Jan-97
Oct-96
Jul-96
Apr-96
80,0
Jan-96
110,00
BRAZIL’S CURRENT ACCOUNT DEFICIT SHARPLY DECREASED IN
2002 (1996 - 2003)
US$ MILLIONS
33.416
31.000
30.452
27.000
25.336
23.000
23.503
24.225
23.212
19.000
15.000
11.000
7.756
7.000
5.800
3.000
1996
1997
1998
Source: Brazilian Central Bank
Prepared and (*) forecast by: BBV Banco
1999
2000
2001
2002
2003*
12-MONTH ACCUMULATED CURRENT ACCOUNT DEFICIT
BRAZIL (AS A % OF GDP) 1996 - 2003
6,0
(% of GDP)
5,27
5,0
5,03
4,77
4,61
4,24
4,0
4,08
3,77
3,08
3,0
3,00
2,58
2,31
2,0
1,67
1,90
1,02
1,0
1,15
Dez/03
Jul/03
Set/02
Abr/02
Nov/01
Jun/01
Jan/01
Ago/00
Mar/00
Out/99
Mai/99
Dez/98
Jul/98
Fev/98
Set/97
Abr/97
Nov/96
Jun/96
Jan/96
Source: Brazilian Central Bank
Prepared and forecast by: BBV BANCO
Fev/03
0,36
0,0
CURRENT ACCOUNT DEFICIT RATIO TO TOTAL TRADE
(EXPORTS + IMPORTS) - 12 MONTH ACCUMULATED FLOWS
1995 - 2002
(in %)
32,65%
31,00%
30,70%
27,01%
26,06%
27,00%
26,68%
23,25%
23,00%
20,40%
21,85%
19,06%
19,00%
Floating Exchange Rate Regime
14,73%
15,00%
14,50%
12,50%
11,00%
10,14%
Dez/02
Set/02
Mar/02
Dez/01
Set/01
Jun/01
Mar/01
Dez/00
Set/00
Jun/00
Mar/00
Dez/99
Set/99
Jun/99
Mar/99
Dez/98
Set/98
Jun/98
Mar/98
Dez/97
Set/97
Jun/97
Mar/97
Dez/96
Set/96
Jun/96
Mar/96
Dez/95
Source: Brazilian Central Bank
Prepared by: BBV Banco
Jun/02
7,21%
7,00%
BRAZILIAN GROSS EXTERNAL DEBT IS DECLINING
(EXCLUDING INTERCOMPANY AND IMF LOANS)
1993 - 2004
US$ BILLIONS
230,0
219,0
210,0
216,7
214,9
201,1
190,0
193,1
190,9
183,8
178,1
170,0
159,3
150,0
153,3
145,7
130,0
1993
1994
1995
Source: Brazilian Central Bank
Prepared by: BBV Banco (*) Forecast
1996
1997
1998
1999
2000
2001
2002 *
2003 *
TOTAL FOREIGN INTEREST PAYMENTS
1995 - 2003
US$ MILLIONS
18.000
17.621
17.101
17.095
16.000
15.321
15.276
14.650
14.000
13.498
12.000
10.000
12.389
10.427
8.000
1995
1996
1997
1998
1999
2000
2001
Source: BACEN
Prepared by: BBV Banco (*) Forecast based on a US$ 22 billion total amortization for 2003. Official
figure is US$ 15,2 billion based on an original US$ 27,0 billion amortization.
2002
2003*
BRAZILIAN EXTERNAL DEBT SERVICE AS A PERCENTAGE OF
TOTAL EXPORTS 1995 - 2003
(in %)
1,50
1,40
1,20
0,98
0,97
0,92
0,91
0,90
0,85
0,91
0,87
0,74
0,76
0,66
0,61
0,55
0,60
0,52
0,45
Aug-03
Apr-03
Dec-02
Aug-02
Apr-02
Dec-01
Aug-01
Apr-01
Dec-00
Aug-00
Apr-00
Dec-99
Aug-99
Apr-99
Dec-98
Aug-98
Dec-03 (*)
Source: Brazilian Central Bank
Prepared by: BBV Banco (*) Forecast
Apr-98
Dec-97
Aug-97
Apr-97
Dec-96
Aug-96
Apr-96
Dec-95
0,30
GROSS EXTERNAL DEBT RATIO TO EXPORTS
1990 - 2002
5,50
5,03
5,00
4,73
4,50
4,29
3,77
4,00
3,93
3,80
3,88
3,77
3,78
3,73
3,50
3,41
3,00
1990
1991
1992
Source: BACEN
Prepared By: BBV Banco
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
GROSS EXTERNAL DEBT RATIO TO EXPORTS (EXCLUDES IMF)
1990 - 2002
5,00
4,84
4,63
4,50
4,25
3,77
4,00 3,93
3,80
3,77
3,78
3,73
3,42
3,50
3,39
3,41
3,00
1990
1991
Source: BACEN
Prepared By: BBV Banco
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
NET EXTERNAL DEBT RATIO TO EXPORTS
1990 - 2002
4,50
4,27
3,85
4,00
3,61
3,69
3,62
3,50
3,13
3,00
3,27
2,79
3,11
2,94
2,51
2,51
2,50
2,31
2,00
1990
1991
Source: BACEN
Prepared By: BBV Banco
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
NET EXTERNAL DEBT RATIO TO EXPORTS (EXCLUDES IMF)
1990 - 2002
4,50
4,09
4,00
3,76
3,61
3,65
3,62
3,50
2,79
3,13
3,00
3,12
2,94
2,51
2,77
2,51
2,50
2,31
2,00
1990
1991
1992
Source: BACEN
Prepared By: BBV Banco
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
NET EXTERNAL DEBT RATIO TO EXPORTS (EXCLUDES
INTERCOMPANY LOANS AND IMF) 1990 - 2002
4,00
3,76
3,62
3,45
3,50 3,61
3,30
3,13
3,00
2,79
2,94
2,84
2,51
2,51
2,50
2,48
2,31
Source: Bacen
Prepared By: BBV Banco
2,00
1990
1991
Source: BACEN
Prepared By: BBV Banco
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
BRAZILIAN PRIVATE AND SOVEREIGN ISSUES IN
INTERNACIONAL CAPITAL MARKETS 1996 - 2003
US$ billions
12,5
12,078
11,237
10,0
9,314
8,695
8,246
7,5
6,84
7,84
6,667
6,138
5,987
6,121
5,777
5,29
5,458
4,991
4,978
5,0
4,007
3,752
4,238
3,765
3,053
3,347
3,243
2,87
2,286
2,5
1,413
0,936
1,167
0,147
Source: ANBID, Jornal Valor Econômico
Prepared by: BBV Banco (* up to feb 24, 2003)
1 tri/03(*)
4 tri/02
3 tri/02
2 tri/02
1 tri/02
4 tri/01
3 tri/01
2 tri/01
1 tri/01
4 tri/00
3 tri/00
2 tri/00
1 tri/00
4 tri/99
3 tri/99
2 tri/99
1 tri/99
2 tri/98
3 tri/98
2 tri/98
1 tri/98
4 tri/97
3 tri/97
2 tri/97
1 tri/97
4 tri/96
3 tri/96
2 tri/96
1 tri/96
0,0
BRAZILIAN BALANCE OF PAYMENTS : USES AND SOURCES
2003
US$ 27,8 billion
30,0
25,0
20,0
15,0
Amortizations
22,0
Loans and
Issues
13,8
10,0
5,0
0,0
Current Account
Deficit
5,8
Uses
FDI
14,0
Sources
Prepared an Forecasted by BBV Banco
Current Government estimate sets amortization for 2003 in US$ 27,0 billion. But the external debt
buyback observed last year probably has reduced this level to US$ 22,0 billion.
ANNUAL FLOWS OF FOREIGN DIRECT INVESTMENT TO BRAZIL
US$ MILLIONS 1995 - 2003
US$ MILLIONS
36.000
Annual average of
privatization in total flows
(% of total)
25,5%
32.000
32.779
28.000
28.856
28.579
3,5%
24.000
22.457
20.000
18.992
16.000
16.565
14.000
12.000
10.791
8.000
4.000
4.404
0
1995
1996
Source: Brzilian Central Bank
Prepared by: BBV Banco (*) Forecast
1997
1998
1999
2000
2001
2002
2003*
GROSS BRAZILIAN INTERNATIONAL RESERVES
2002-2003
US$ Millions
42.397
End-of Period Forecast - Dec/2003
US$ 50,0 Billion (includes IMF)
Net reserves: US$ 11,9 billion
41.000
40.062
38.678
38.519
38.000
37.236
37.145
35.840
35.380
35.000
25/02/2003
11/02/2003
28/01/2003
14/01/2003
31/12/2002
17/12/2002
03/12/2002
19/11/2002
05/11/2002
22/10/2002
08/10/2002
24/09/2002
10/09/2002
27/08/2002
13/08/2002
30/07/2002
16/07/2002
18/06/2002
04/06/2002
21/05/2002
07/05/2002
23/04/2002
09/04/2002
26/03/2002
12/03/2002
26/02/2002
Source: Bloomberg
Prepared by: BBV Banco
02/07/2002
32.419
32.000
S&P COUNTRY RATINGS - 2003
S & P Standard & Poor's
AAA
AA+
AA
AAA+
A
Investment Graded Countries
Austria (s), France (s), Germany (s), Luxembourg (s), Netherland (s), Norway (s),
Singapore (s), Switzerland (s), United Kingdom (s), USA (s), Denmark (s), Finland (n),
Ireland (n), Canada (s).
Australia (s), Belgium (s), New Zelanda (s), Sweden (p), Spain (s).
Bermuda (s), Italy (s), Portugal (p), Taiwan (n), Botswana
Japan
Iceland (s), Hong Kong (s), Kwait
Cyprus (e), Malta (n) , Slovenia (s), Greece (s)
Chile (p), Israel (s),Czech Republic (s), Hungary (s), Estonia (p),Barbados, South
Korea (p), Qatar (a)
BBB+ Poland (p)
BBB Malaysia (s), China (s), Oman (s), Tunisia (s)
Thailand (s), Croatia (n) South Africa (s) , Trinidad Tobago (p), Mexico (s), Slovakia
BBB(p), Lithuania
A-
BB+
BB
BBB+
B
BCCC+
CCC
SD
Source: S & P
Prepared by: BBV Banco
Non Investment Graded Countries
Philippines (s), El Salvador (s), Egypt (n)
India (s),Colombia (n), Costa Rica (s), Moroco (s), Kazakhstan (s), Panama (s),
Guatemala (n), Russia
Jordan (s), Peru (s), Bulgaria (s), Dominican Republic (s)
Bolivia (n), Jamaica (n),Senegal, Romania (p), BRAZIL (n), Belize(n)
Mongolia, Papua New Guinea, Ukraine
Pakistan (s), Turkey (n), Suriname, Lebanon (n)
Ecuador (p), Venezuela (s)
Indonesia (n), Uruguay (n)
Argentina (s), Paraguay (s)
p - positive
n - negative
s - stable
MOODY´S COUNTRY RATINGS - 2003
MOODY'S
Aaa
Aa1
Aa2
Aa3
A1
A2
A3
Baa1
Baa2
Baa3
Investment Graded Countries
Austria (s), France (s), Germany (s), Luxembourg (s), Netherlands (s), Sweden (s),
United Kingdom(e), USA (s), Denmark (s), Norway (s), Finland (s), Spain (s), Ireland
(s), Sweden (s), Canada (s), Greece (s), Australia, Singapore (s), Portugal (s), Italy
(s), Japan (s), Belgium (s)
Bermuda (s),
Taiwan (s), Slovenia (s), Cayman (s)
Czech Republic, Estonia , Hungary
United Arab Emirates (s), Cyprus (s), Israel (s), Poland
South Korea (s), Malta (n), China (s), Hong Kong (p), Bahamas(p)
Chile(s), Malaysia, Macao (s)
Barbados(s), Oman (s), Mauritius (s), Mexico, South Africa (s)
Saudi Arabia (p), Tunisia, Croatia**, Thailand, El Salvador, Trinidad Tobago
Non Investment Graded Countries
Ba1
Philippines (s), Egypt (s) , Bahraim (s), Moroco (n), India, Costa Rica (p), Panama
Ba2
Ba3
Colombia (n), Belize(e), Russia, Dominican Repúblic (s), Fiji (s), Guatemala (s)
Jordan (s), Peru (s), Jamaica (s)
B1
Viet Nam (s), Turkey (s), Bolivia (s), Bulgaria (s), Papua New Guinea (s),Romania
B2
B3
Caa1
Caa2
Ca
Source: Moody´s
Prepared by: BBV Banco
Honduras (s), Nicaragua (s), Lebanon (n), Paraguay (s), Ukraine (s), Turkmenistan
(s), BRAZIL (n),
Indonesia (p), Pakistan (s), Uruguay (n)**
Venezuela, Cuba (s)
Ecuador (s)
Argentina (s), Republic of Moldova
BRAZILIAN COUNTRY RISK (EMBI+) AND ALL OTHER EMERGING
MARKETS (EXCLUDING BRAZIL AND ARGENTINA) 2000 - 2003
BASIS POINTS
2.390 2.443
2.400
2.100
EMBI+ Brazil
EMBI+
Brasil
1.800
1.715
1.622
1.500
1.228
1.243
1.199
1.200
1.027
900
818
876
673
568
600
EMBI+
EMBI+All
Allother
other emerging
emergeing markets
markets
(excluding Brasil
Brazil and
Argentina)
(excluídos
e Argentina)
717
575
661
705
574
414
10/06/00
02/07/00
24/07/00
15/08/00
06/09/00
28/09/00
20/10/00
11/11/00
03/12/00
25/12/00
16/01/01
07/02/01
01/03/01
23/03/01
14/04/01
06/05/01
28/05/01
19/06/01
11/07/01
02/08/01
24/08/01
15/09/01
07/10/01
29/10/01
20/11/01
12/12/01
03/01/02
25/01/02
16/02/02
10/03/02
01/04/02
23/04/02
15/05/02
06/06/02
28/06/02
20/07/02
11/08/02
02/09/02
24/09/02
16/10/02
07/11/02
29/11/02
21/12/02
12/01/03
03/02/03
25/02/03
300
898
Source: Bloomberg
Prepared by: BBV Banco
482
Source: JP MORGAN
Prepared by: BBV Banco
1.300
1.190
1.034
529
08/11/02
05/12/02
02/01/03
29/01/03
25/02/03
1.800
27/06/02
25/07/02
21/08/02
17/09/02
14/10/02
173
17/01/02
13/02/02
12/03/02
08/04/02
03/05/02
30/05/02
124
06/08/01
31/08/01
01/10/01
26/10/01
22/11/01
19/12/01
300
23/02/01
22/03/01
19/04/01
16/05/01
13/06/01
10/07/01
12/10/00
08/11/00
05/12/00
02/01/01
29/01/01
29/05/00
26/06/00
21/07/00
17/08/00
15/09/00
DIFFERENCE BETWEEN BRAZILIAN COUNTRY RISK AND ALL OTHER
EMERGING MARKETS (EXCLUDING BRAZIL AND ARGENTINA)
2000 - 2003
BASIS POINTS
1.783 1.787
1.229
917
800
742
761
349
282
-35
-200
BRAZILIAN COUNTRY RISK - RECENT TREND (EMBI+)
2002 - 2003
(basis points)
2.443
2.400
2.200
2.000
1.745
1.800
1.585
1.600
698 points
1.439
1.328
1.400
1.308
160 points
1.200
1.247
146 points
111 points
Source: BLOOMBERG
Prepared by: BBV Banco
21/02/03
24/02/03
17/02/03
11/02/03
05/02/03
30/01/03
24/01/03
20/01/03
14/01/03
08/01/03
02/01/03
27/12/02
20/12/02
16/12/02
10/12/02
04/12/02
28/11/02
22/11/02
18/11/02
12/11/02
06/11/02
31/10/02
25/10/02
21/10/02
15/10/02
09/10/02
03/10/02
27/09/02
1.000
CORRELATION BETWEEN COUNTRY RATING AND RISK MEASURED BY
PRESENT EMBI+ FOR ALL EMBI+ COUNTRIES SHOWS BRAZIL´S RISK IS
ABOVE THAT PROJECTED 2002 - 2003
(Rating Scale)
A
Countries which the country risk are
above the ones suggested by the rating
Catar
Korea
y = -0,006x + 13,091
R2 = 0,6166
237
BBB+
89
173
Poland
BBB-
Russia
Mexico
317
Philippines
527
Bulgaria 374
232
BB
415
358
Colombia
693
BRAZIL
548
1247
Panama
Morocco
Turkey
402
Ukraine
B+
Peru
Ecuador
1512
691
1379
Venezuela
B-
Countries which the country risk are
bellow the ones suggested by the rating
930 basis points - is the risk
suggested by the rating for Brazil
CCC
0
200
400
Source : Bloomberg / JP MORGAN / S&P
Prepared by: BBV Banco
600
800
(Country Risk)
1000
1200
1400
1600
BASIS POINTS
1600
R$/US$
1510
1420
1330
1240
1150
1060
970
880
790
700
610
520
430
340
250
160
35
70
1,946
-20
3,900
17/01/01
01/02/01
16/02/01
05/03/01
20/03/01
04/04/01
20/04/01
07/05/01
22/05/01
07/06/01
22/06/01
09/07/01
24/07/01
08/08/01
23/08/01
10/09/01
26/09/01
11/10/01
26/10/01
12/11/01
27/11/01
12/12/01
28/12/01
15/01/02
30/01/02
14/02/02
01/03/02
18/03/02
02/04/02
17/04/02
02/05/02
17/05/02
04/06/02
19/06/02
05/07/02
22/07/02
06/08/02
21/08/02
05/09/02
20/09/02
07/10/02
22/10/02
06/11/02
21/11/02
06/12/02
23/12/02
08/01/03
23/01/03
07/02/03
24/02/03
BRAZILIAN CURRENCY AND EMERGING MARKETS COUNTRY RISK
(EXCLUDING BRAZIL AND ARGENTINA) 2001 - 2003
Source: BLOOMBERG/EMBI+
Prepared by: BBV Banco
3,616
3,700
3,500
3,300
3,100
EMBI+ (excluding Brazil
and Argentina)
DIFERENÇA
822
2,900
2,700
CÂMBIOrate
Exchange
2,500
2,300
2,100
1,900
WHY SHOULD WE BELIEVE IN A DOWNWARD TREND OF THE
BRAZILIAN COUNTRY RISK IN THE SECOND QUARTER OF 2003 ?
 The Brazilian trade balance will be reaching US$ 18,0 billion trade surplus
(12-month) by May/June.
 The Brazilian current account deficit will be almost zero in the mid-year.
 The government will have reached all the fiscal IMF targets of the first
quarter and will be signaling that the second quarter targets will also be
well achieved. So, the country will be able to draw the second IMF
disbursement. That’s about to happen in the beginning of May.
 We expect the operational autonomy of the Central Bank to be approved by
May.
 The budget proposal for 2004, to be sent to Congress in April, will be
showing a primary surplus of 4,25% of GDP and the targets for 2005 and
2006 will also be set at 4,25% of GDP.
WHY SHOULD WE BELIEVE IN A DOWNWARD TREND OF THE
BRAZILIAN COUNTRY RISK IN THE SECOND QUARTER OF 2003 ?
 The credibility and the reputation of the Central Bank will be reinforced with the
persistence in a tightening monetary policy. We do not expect any reduction in interest
rates until April / May. Maybe a new hike might be necessary. Inflation will be showing
its first signals of reduction and market expectations of IPCA will also be dropping at
that moment.
 The political support of the government will probably be expanded due to the formal
coalition with PMDB that might even held a seat in one of the Ministries or even play an
important role in the Congress, for example, as the government leader in the Lower
House or even both things.
 High receptiveness in Congress is expected to favour the future approval of structural
reforms. Strong support from all governors of states is assured as far as structural
reforms are concerned.
 Possible change in the Brazilian outlook by rating agencies in April or May.
 Positive surprise with a lower volume of external debt amortizations, consequence of
corporate and sovereign de-dollarization (buy back) process in 2002.
 Much better degree of roll-over of domestic debt in bonds is expected.
WHY SHOULD WE BELIEVE IN A DOWNWARD TREND OF THE
BRAZILIAN COUNTRY RISK IN THE SECOND QUARTER OF 2003 ?
So we are betting on April or May as a good time for an
important adjustment in the country risk. We believe that
markets will anticipate this good events and probably we will
see the country risk below 1000 basis points already by midMay. Of course this scenario depends on the outcome over
the Iraq war. But even in the case of war, the combination of
such good news will necessary put a downward pressure in
the country risk.
FISCAL ADJUSTMENT AND
THE NEED OF REFORMS
BRAZILIAN SOCIAL SECURITY DEFICIT (INSS)
PUBLIC AND PRIVATE (% OF GDP)
1995 - 2003
6,0%
Public Sector
5,30%
Setor Público
Private
Setor Privado
Sector
5,00%
5,0%
4,60%
3,90%
4,0%
4,1%
4,2%
5,70%
4,2%
4,2%
1,3%
1,5%
2002
2003(*)
3,7%
3,54%
3,10%
3,0%
3,8%
4,70%
5,50%
3,5%
3,5%
3,0%
2,0%
1,0%
0,8%
0,0%
0,1%
0,04%
0,4%
1995
1996
1997
Source: Ministery of Social Security
Prepared by: BBV Banco (*) Forecast
1998
1,0%
1999
0,9%
2000
1,1%
2001
BRAZILIAN NET PUBLIC DEBT RATIO TO GDP
(IN % OF GDP) 1994 - 2007
70,0%
Hypothesis
Selic (end of period %)
R$/US$ (end of period)
GDP Growth (%)
Primary Surplus (% of GDP)
IGP-M (%)
2003
21,5
3,25
1,90
4,25
14,5
2004
17,0
3,40
2,90
4,25
10,0
2005
1 4,0
3,67
3,30
4,25
8,0
2006
12,0
3,89
3,05
4,00
6,0
2007
10,0
4,05
3,80
4,00
4,0
54,9%
55,0%
63,6%
55,9%
54,7%
50,7%
48,9%
53,8% 53,1%
52,2% 51,1%
41,7%
40,0%
33,2%
32,8%
28,1%
Source: Brazilian Central Bank
Prepared by: BBV Banco
Dez/07
Jul/94
Out/94
Jan/95
Abr/95
Jul/95
Out/95
Jan/96
Abr/96
Jul/96
Out/96
Jan/97
Abr/97
Jul/97
Out/97
Jan/98
Abr/98
Jul/98
Out/98
Jan/99
Abr/99
Jul/99
Out/99
Jan/00
Abr/00
Jul/00
Out/00
Jan/01
Abr/01
Jul/01
Out/01
Jan/02
Abr/02
Jul/02
Out/02
Jan/03
Abr/03
Jul/03
Out/03
Jan/04
Abr/04
Jul/04
Out/04
Jan/05
Abr/05
Jul/05
Out/05
Jan/06
Abr/06
Jul/06
Out/06
Jan/07
Abr/07
Jul/07
Out/07
25,0%
Source: Brazilian Central Bank
Prepared by: BBV Banco
2,53
31/01/03
21/02/03
58,74
10/01/03
20/12/02
08/11/02
29/11/02
Standard deviation
18/10/02
06/09/02
27/09/02
16/08/02
26/07/02
56,09
14/06/02
05/07/02
47,13
24/05/02
47,91
12/04/02
03/05/02
53,89
22/03/02
49,53
08/02/02
01/03/02
18/01/02
52,23
28/12/01
16/11/01
07/12/01
26/10/01
14/09/01
05/10/01
24/08/01
03/08/01
22/06/01
13/07/01
50,00
01/06/01
20/04/01
11/05/01
46,00
09/03/01
30/03/01
26/01/01
16/02/01
MARKET EXPECTATION FOR THE NET PUBLIC DEBT
(AS % of GDP) 2003
62,00
60,99
59,03
58,00
56,45
56,25
54,59
54,00
5,00
4,39
4,00
3,00
2,57
2,00
1,00
1,49
CONSOLIDATED PUBLIC SECTOR PRIMARY SURPLUS IN BRAZIL
1995 - 2005
5,0%
4,25% 4,25% 4,25%
4,0%
3,50%
3,0%
3,75%
3,91%
3,23%
2,0%
1,0%
0,36%
0,24%
0,0%
-0,09%
-0,92%
-1,0%
1995
1996
1997
Source: Brazilian Central Bank
Prepared by: BBV Banco (*) Forecast
1998
1999
2000
2001
2002
2003(*) 2004(*) 2005(*)
PRIMARY SURPLUS REQUIRED FOR STABILIZE
DEBT/GDP RATIO: FX VS. INTEREST RATES
PRIMARY SURPLUS (% GDP) REQUIRED FOR STABILIZING THE DEBT/GDP RATIO
Exchange Rate (R$/US$)
Real Interest Rate
(Implicit on debt)
Initial level: Dec/02
55,9%
3,00
3,10
3,30
3,50
3,70
3,90
6,0%
7,0%
8,0%
9,0%
10,0%
11,0%
12,0%
-1,4%
-1,0%
-0,7%
-0,4%
0,0%
0,3%
0,6%
-0,7%
-0,4%
-0,1%
0,3%
0,6%
0,9%
1,3%
0,6%
0,9%
1,2%
1,6%
1,9%
2,2%
2,5%
1,8%
2,2%
2,5%
2,8%
3,2%
3,5%
3,8%
3,1%
3,5%
3,8%
4,1%
4,5%
4,8%
5,1%
4,4%
4,7%
5,1%
5,4%
5,7%
6,1%
6,4%
Notes:
a) Real GDP growth: 2,0%
b) Does not consider privatizations or hidden liabilities
c) Red figures show levels of primary surplus below current levels (4,25% of GDP)
Prepared by: BBV Banco
AVERAGE MATURITY OF THE DOMESTIC DEBT - NATIONAL TREASURY
1999 - 2003
(months)
40,0
35,4
35,0
35,3
30,9
30,0
25,0
21,6
20,0
13,1
15,0
8,2
10,0
5,0
7,9
5,0
Source: Brazilian Central Bank
Prepared by: BBV Banco
Dez/02
Set/02
Mai/02
Jan/02
Set/01
Mai/01
Jan/01
Set/00
Mai/00
Jan/00
Set/99
Mai/99
Jan/99
Set/98
Mai/98
Jan/98
Set/97
Mai/97
Jan/97
Set/96
Mai/96
Set/95
Mai/95
Jan/95
Set/94
Mai/94
Jan/94
Jan/96
2,3
0,0
CORRUPTION PERCEPTION INDEX (*) 2002
TRANSPARENCY INTERNATIONAL
17
Country rank
7,5
* Relates perception of the degree of corruption as seen by business people and
risk analysts and ranges from 10 (very honest) to 0 (highly corrupt).
32
5,1
40
45
45
45
4,5
4,0
4,0
57
57
3,6
3,6
59
4,0
62
67
3,5
3,4
3,0
70
71
2,8
2,7
81
81
81
2,5
2,5
2,5
89
89
89
2,2
2,2
2,2
98
Source: Transparency International
Prepared By: BBV Banco
Paraguay
Haiti
Ecuador
Bolivia
Venezuela
Nicaragua
Guatemala
Honduras
Argentina
Panama
El Salvador
Dominican Rep.
Mexico
Colombia
Peru
Jamaica
Brazil
Costa Rica
Uruguay
Chile
1,7
BBV BANCO - BASIC SCENARIO - SELECTED INDICATORS
2002 AND 2003
Real GDP Growth in %
2002 - 2003
Consumer Price Index (IPCA) in %
2002 - 2003
12,5%
1,9%
1,7%
10,5%
2002
2003
2002
Nominal Exchange Rate - BRL
average - R$ / US$
2002 - 2003
2003
Nominal Exchange Rate - BRL
end of period - R$ / US$
2002 - 2003
3,53
3,43
3,25
2,93
2002
2003
2002
Prepared and forecast by BBV BANCO
2003
BBV BANCO - BASIC SCENARIO - SELECTED INDICATORS
2002 AND 2003
Consolidated public debt to gdp
(% of GDP)
2002 - 2003
Country Risk - EMBI+
end of period - basis points
2002 - 2003
1.439
55,9%
54,7%
800
2002
2003
2002
Current Account Balance
(US$ biliion)
2002 - 2003
2003
Nominal Basic Interest Rate
end of period - in %
2002 - 2003
25,0%
-5,8
-7,8
21,5%
2002
2003
Prepared and forecast by BBV BANCO
2002
2003
SITUATION OF PENDING STRUCTURAL REFORMS
Microeconomic reforms
•Tax reform: Lula is showing ability to deal with state governors (the main
opposition to a large reform) and enhance their commitment to a tax reform.
•Labor reform: Lula still keeps his intention of reforming the labor market
although discussions over the reform may last longer.
•Cost of capital reforms: measures to reduce the cost of capital in Brazil,
including a new bankruptcy law.
Institutional reforms
• Social Security reform: the main proposal in Congress is to unify the public and
the private regimes for new public workers. Fiscal benefits under this proposal
(PL-9) will only take effect in 35 years but the signal is great and other measures to
reduce the social security deficit will be taken.
• Central Bank’s legal Autonomy: proposal to Introduce fixed mandates for the
presidency and directors within different periods of the electoral process will be
sent to Congress by next quarter.
• Judiciary reform: constitutional amendment aims at reducing corruption and
increasing procedural efficiency and speed. Project is underway in the Senate.
• Political reform: provides greater stability to the governmental party and regulates
electoral campaigns finance sources. There are several projects under discussion
in Congress. Important limitation of the number of operating political parties .
BBVA Foundation
Conference Round-table
Latin American Social and Economic Perspectives
BRAZIL: THE REALITY OF A
NEW STAGE OF DEVELOPMENT
Madrid, February 27th, 2003
Octavio de Barros - BBV Banco Chief economist