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Perspectives for the Brazilian Economy and the Role of BNDES Andre Carvalhal

Perspectives for the Brazilian Economy and the Role of BNDES Andre Carvalhal Head of International Capital Markets June 2010 – São Paulo. BNDES Highlights. Founded on June 20th, 1952 100% state-owned company

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Perspectives for the Brazilian Economy and the Role of BNDES Andre Carvalhal

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  1. Perspectives for the Brazilian Economy and the Role of BNDES Andre Carvalhal Head of International Capital Markets June 2010 – São Paulo

  2. BNDES Highlights • Founded on June 20th, 1952 • 100% state-owned company • Key instrument for implementation of Federal Government’s industrial and infrastructure policies • Support to micro, small and medium-sized companies • Main provider of long-term financing in Brazil • Emphasis on financing investment projects • EXIM activities • Equity investor through BNDESPAR

  3. Group Structure As of Dec 31, 2009 Consolidated Assets R$ 386.6 billion US$ 222.0 billion BNDES Finances long-term investments BNDESPAR FINAME BNDES Limited Equity Participation Finances capital goods production and purchases Internationalization of Brazilian companies

  4. Main Instruments Financing of: • Complete business projects • Export of goods and services • Machinery and equipment Equity Investment • Stocks and debentures • Venture Capital • Seed Capital Funds • Private Equity Funds

  5. BNDES IDB IBRD CAF US$ millon 31/12/2009 31/12/2009 30/06/2009* 31/12/2009 Total Assets 222,050 84,006 275,420 15,887 Shareholders' Equity 15,867 20,674 40,037 5,287 Net Income 3,868 794 3,114 235 Loan Disbursements 71,589 11,424 18,564 5,292 Total Loans 162,917 58,049 105,698 11,687 Capitalization 7.1% 24.6% 14.5% 32.9% ROA 2.3% 1.0% 2.4% 2.4% ROE 25.0% 4.0% 8.0% 6.2% Founded 1952 1959 1945 1968 BNDES vs. Multilateral Banks IDB = Inter-American Development Bank IBRD = The International Bank for Reconstruction and Development (World Bank) (*) Unlike other institutions, 12-month fiscal year ends June 30th CAF = Corporación Andina de Fomento Capitalization = Shareholders’ Equity / Total Assets ROA = Return On average Assets ROE = Return On average Equity

  6. Perspectives for the Brazilian Economy • The Brazilian economy can grow much faster than the average in developed countries • Investments will be driven by four main sectors:oil & gas, electric power, logistics and housing • Opportunities for intensive strategies in innovation and social and environmental sustainability • Main challenges: increase aggregate investment/GDP rate, and boost competitive progress in the manufacturing industry

  7. GDP may grow 5% p.a. in the 2010-2014 period GDP:Annual Real Variation (%) * * 2009 and Avg 2010-14: BNDES' Forecasts. Sources:IBGE and BNDES. Source:IBGE.

  8. Investment has strong growth path Forecast of Investment Ratio 2009-2012 (% of GDP) Source: BNDES. Elaborated by: APE/BNDES

  9. BNDES was responsible for 37% of total credit increase since sep/08 BNDES Approvals and Disbursements1(US$ billion) *last 12 months up to January 2010 Source: BNDES. *considering the average exchange rate for each year

  10. Disbursements by Business Sector

  11. Number of Operations Disbursements 2009 Operations 390,729 US$ 72 billion Petrobras medium micro and small other individuals large Exchanged to US dollar on disbursement date

  12. Equity Investment Portfolio • Equity investments: evaluation uses lowest value among acquisition cost or market value • Market appreciation valued at US$ 53 billion as of Dec 31st, 2009 US$ million (*) estimated value based on projections of economic value

  13. Investment Outlook: Positive Prospects US$/R$ = 1.80 Source: BNDES Forecast

  14. Investments in Infrastructure were not affected by the crisis Source: BNDES

  15. Investment in Industry: Domestic-led sectors have already recovered from the crisis Source: BNDES

  16. Challenges for Infrastructure • PAC (Growth Acceleration Program) • 2014 World Cup • 2016 World Olympics • Pre-salt • Environmentally sustainable projects

  17. PAC Program PAC Investments: 2007 - 2010 BRAZIL AGENDA US$ billion % of Share Focus on infrastructure: PAC (Growth Acceleration Program ) 157.8 55 ENERGY: SOCIAL & URBAN: 98.1 34 LOGISTICS: 33.5 12 TOTAL 289.4 100.0 Source: Presidency of Republic (www.pac.gov.br) FX: 1.7412 (Dec.09) • ENERGY • Electric Energy - Generation - Transmission - Distribution • Oil & Gas • Renewable Energy • LOGISTICS • Highways • Railroads • Ports • Airports • Waterways • Merchant Marine • SOCIAL & URBAN • Electricity for Everyone • Sanitation • Urbanization • Subways • Water Resources

  18. BNDES is an Important Supporter of PAC BNDES Portfolio in PAC US$ billion % of Share 56.5 73.4 ENERGY: SOCIAL & URBAN: 5.0 6.5 LOGISTICS: 15.5 20.1 TOTAL 77.0 100.0 FX: 1.7306 (Apr.10) Disbursements by Region BNDES in PAC • 327 projects: - Supported Projects: US$ 57.3 Bn - Eligible Projects: US$ 13.1 Bn • 17 Prospective Projects: US$ 6.7 Bn % of Share 73.4 6.5 20.1 100.0 18

  19. PAC 2 • US$ 883.3 billion in investments as of 2011: • US$ 532.7 billion in the 2011-2014 period and US$ 350.9 billion after 2014: • US$ 633.3 billion for energy • US$ 60.5 billion in transport, including railways and the High-speed Train (TAV) • Assorted social investments: • US$ 10 billion in urban mobility • US$ 12,8 billion in the Citizen’s Community program • My House, My Life (MHML)  goal of 2 million homes • Other programs include A Better City, Water for Everyone and Electricity for Everyone US$/R$ = 1.80

  20. 2014 World Cup • For the 2014 World Cup, FIFA requires investments to the tune of US$ 6.4 billion • BNDES ProCopa Programs • Arenas • Up to US$ 2.7 billion to build and remodel stadiums and urbanization investments in surrounding areas. • Tourism • Up to US$ 556 million to build, remodel, expand and modernize hotels. US$/R$ = 1.80

  21. 2016 Olympics • Brazil has a great opportunity to improve its urban infrastructure and generate employment • Investment in: transport, urban mobility, hotels, tourism, communications, security, stadiums and electric energy: • US$ 16 billion in investments in the Olympics will produce an impact US$ 56.8 billion by the end of 2027* • All these investments will have relevant impacts on a wide array of production chains as well as on the expectations of the private sector. *government’s forecast US$/R$ = 1.80

  22. Pre-salt • Pre-salt - Great opportunity for Brazil: growing long-term demand for the complex goods and services supply industry • Strategic goals for the goods and services supply industry: • Competitive and sustainable expansion of its supply capacity • Developing higher aggregate value segments • Generating higher-skilled employment • Maintaining the steady increase in local goods & services The BNDES will foster investments throughout the entire oil and gas production chain, aiming at building a competitive global supplier of goods and services in the Oil & Gas sector.

  23. Impacts from Petrobras investments on the production chain (2009-2013) • US$ 111.6 bn in investments may generate industrial production of almost US$ 202.2 billion • Total investments represent 22% of the pre-salt. Therefore, such impacts are still underestimated and have room for growth. Source: Petrobrás and IBGE. Elaborated: APE/BNDES US$/R$ = 1.80

  24. Resume and qualify long-term planning (energy, logistics, environment, IT infrastructure, ...) Promote and stimulate domestic savings in order to provide long-term funds for investment (banks and capital market) Develop capacity for innovation and competitiveness in the manufacturing industry, and promote global presence of Brazilian companies (vs. significant challenge due to exchange rate appreciation) Increase opportunities for social mobility (job expansion, development/improvement in education) and reduction of the inequality in income distribution Promote innovation and development of renewable energy sources The Brazilian Government, specifically the BNDES, is committed to supporting investments, particularly in energy and infrastructure Brazil’s Long Term Challenges

  25. Thank you! Brazilian Development Bank - BNDES To contact us: www.bndes.gov.br/english/

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