27.09.11

1. 27.09.11 Paulo Safady Simão CBIC President City of Cape Town - South Africa

2. NATIONAL AND INTERNATIONAL REPRESENTATIVE FOR BUSINESS ENTITIES IN THE CONSTRUCTION INDUSTRY AND REAL ESTATE MARKET

3. TRADE UNIONS, BUSINESS ASSOCIATIONS, AND CHAMBERS 62 26 entities Construction segments Road projects states and FD Real estate market Sanitation

4. GENERAL INFORMATION BRAZIL

5. COMPOSITION OF GDP GROWTH In 2010, the Brazilian economy grew 7.5%, with a significant contribution from Civil Construction, elevating, further, the expansion of fixed investments in relation to GDP. Source: Brazilian Institute for Geography and Statistics (IBGE.) Prepared by the Ministry of Finance.

6. GDP GROWTH RATES In the period 2011-2014, the consolidation of investments (driven by construction) and increased domestic demand is expected to spur average annual economic growth of 5.1%. Source: Brazilian Institute of Geography and Statistics (IBGE). Preparation and estimates by the Ministry of Finance.

7. GDP GROWTH – DEMAND Domestic demand will continue to be the principal driver of inclusive and sustainable economic expansion. Source: Brazilian Institute of Geography and Statistics (IBGE). Prepared and estimated by the Ministry of Finance.

8. GROWTH WITH POVERTY REDUCTION POPULATION IN POVERTY (%) Sustainable growth associated to inclusive policies produced a 52% reduction in poverty in the period 2003-2010. Source: Getúlio Vargas Foundation (FGV). Preparation and estimates by the Ministry of Finance.

9. MIDDLE CLASS ACCOUNTS FOR MORE THAN HALF OF BRAZILIAN POPULATION DISTRIBUTION OF ECONOMIC CLASSES IN BRAZIL (% POPULATION) Enhanced income distribution has added 29 million to middle class (Class C). Note: Monthly household per capita income by class at 2009 prices: Class A/B: more than R$ 4,800.00; Class C: R$ 1,115.00 – R$ 4,800.00; Class D: R$ 804.00 – R$ 1,115.00; Class E: up to R$ 804.00. Source: Getúlio Vargas Foundation/National Household Sample Survey (FGV/PNAD). Prepared and estimated by the Ministry of Finance

10. RECENT GLOBAL FINANCIAL CRISIS BRAZIL “The stability of the economy and of the country’s democratic institutions as well as frank dialogue between government and civil society were decisive in successfully confronting the crisis” • A development strategy based on investment • and mass consumption (domestic market) was adopted; and ... • Monetary policy • Reserve requirement • Reduced interest rates • Foreign trade (reserves) • Fiscal policy • Reduced taxes on production • Investments in construction

11. CREDIT TRANSACTIONS BY FINANCIAL SYSTEM IN 2009 (AT THE HEIGHT OF THE CRISIS) Steering of funds at low cost was decisive for maintaining credit levels at the height of the global crisis. Source: Brazilian Central Bank (BACEN). CBIC Database.

12. ECONOMIC OUTLOOK • Economic stability; • Average growth of approximately 4.0% per year; • Growth driven by internal demand and by investments in infrastructure and housing; • Investments projected to grow by at least twice the rate of GDP in the coming 4 years; • Notwithstanding forecasts pointing to a renewed global downturn, domestic demand remains robust, international reserves and reserve requirements are higher than in 2008, and the fiscal situation is stronger. Fontes.: Ministério da Fazendfa, CBIC

13. GENERAL INFORMATION CONSTRUCTION

14. THE CONSTRUCTION INDUSTRY IN CONTEXT • Represents approximately 19% of national industrial output; • More than 2.5 million formal workers; • More than 100,000 licensed companies; • Accounts for nearly 38% of fixed investments in Brazil.

15. CHARACTERISTICS • Product with an extended maturity time; • Requires long-term financing; • Principal current funding sources: FGTS (Government Severance Fund) and Savings Accounts; • Funding not contingent on market interest rates; • Still marked by a high degree of informality.

16. VARIATION IN GDP OF BRAZIL AND THE CONSTRUCTION INDUSTRY Source: Brazilian Institute for Geography and Statistics (IBGE) and Brazilian Central Bank (BACEN).

17. REAL ESTATE MARKET

18. PROVISIONS OF LAW NO. 10931/2004 • Law No. 10931 represented a milepost for the real estate segment by establishing a new regulatory framework for real estate brokers and agents, namely: • A special tax regime aimed at promoting the adoption of detached assets system; • Regulation of the payment of undisputed amounts; • Consolidation of statutory liens in real estate financing agreements.

19. Increased Employment levels Increased demand for real estate Reduced interest rates LAW NO. 10931/2004 Increased funding for real estate market VIRTUOUS CYCLE FOR REAL ESTATE MARKET Lower costs

20. GROWTH IN REAL ESTATE CREDIT 2002 – 2010 (financing volume)8 Source: Brazilian Central Bank (BACEN), Brazilian Association of Real Estate Credit and Savings (ABECIP), and Federal Savings Bank (CEF) – FGTS Channel. CBIC Database.

21. HIGH QUALITY REAL ESTATE CREDIT Brazilian Savings and Loan System (SBPE) – Agreements with more than 3 outstanding installments signed after 1998 Mortgage Guaranty + Fiduciary Lien Fiduciary Lien Source: Brazilian Central Bank and Brazilian Association of Real Estate Credit and Savings (ABECIP)

22. EXPANSIOM OF CREDIT BY SEGMENT Low participation of real estate credit Source: Brazilian Central Bank (BACEN).

23. REAL ESTATE FINANCING AS A PERCENTAGE OF GDP Source: Brazilian Central Bank (BACEN) and Brazilian Association of Real Estate Credit and Savings (ABECIP).

24. REAL ESTATE FINANCING AS A PERCENTAGE OF GDP Weight of housing credit in Brazilian GDP (%) ABECIP projections indicate that real estate credit could reach 11% by 2014. Source: Brazilian Central Bank (BACEN) and Brazilian Association of Real Estate Credit and Savings (ABECIP)

25. RECENT MEASURES • Finance Bill: • Establishment of Finance Bill (Law No. 12249 of 2010); • Elimination of tax on required reserve (BCB Circular No. 3513 of 2010). • Rules on Resource Steering for Savings (CMN Resolution No. 3932 of 2010): • Permission for temporary and partial entry of portfolios assigned for securitization – deduction of 1/36 in value of assigned portfolios; • Prohibition as of March 2010 on accounting entries of Real Estate Receivable Certificates (CRIs) not backed by real estate in financing agreements executed for the purpose of resource steering.

26. RECENT MEASURES • Implementation of Positive Registry (Law No. 12414 of 2011): • Enabled constitution of credit histories for individuals and legal entities, reducing asymmetries in information between creditors and debtors. • Financial Transaction Tax (IOF) on private security transactions conducted in periods of less than 30 days: • Reduced to zero IOF on private security transactions (Decree No. 7412 of 2010); • Restricted zero IOF rate to transactions involving debentures, finance bills, and CRIs ( Decree No. 7487 of 2011).

27. RECENT MEASURES • “Incentives for Long-Term Financing” (Law No. 12431 of 2011) • Reduce to zero IT on non-resident investments in long-term private bonds.

28. COMPOSITION OF REAL ESTATE CREDIT MARKET – FINANCIAL AGENTS Source: Bank of Brazil.

29. ADDITIONAL GROWTH INDICATORS ... HOUSING NEEDS (millions of units) 5.81 Cumulative shortage - 2009 23.49 2010 - 2022 Source: Civil Construction Industry Trade Union of São Paulo (SINDUSCON-SP), São Paulo State Federation of Industry (FIESP), Getúlio Vargas Foundation (FGV). CBIC Database.

30. ADDITIONAL GROWTH INDICATORS ... • DEMOGRAPHIC BONUS (increase in economically active population). Absolute Age Pyramid MEN WOMEN Source: Brazilian Institute of Geography and Statistics (IBGE).

31. MY HOME, MY LIFE PROGRAM

32. LOW-INCOME HOUSING – RECENT HISTORY

33. SOCIAL INTEREST HOUSING • Governments and society do not always attach due importance to the lack of housing, as a result of which a number of countries (developing nations) have yet to adequately addressed the issue. • In Brazil, civil society, lawmakers, and government have approached the issue from the standpoint of modern construction concepts; • In a short time, the housing question was introduced on organized civil society’s agenda.

34. SOCIAL INTEREST HOUSING • Dignified Housing Project (CBIC); • My Home, My Life Program (organized civil society and governments). IT IS ESSENTIAL TO UNDERSCORE THE IMPORTANCE OF CIVIL SOCIETY PRESSURE IN PRIORITIZING GOVERNMENT ACTION

35. THE PROJECT

36. PMCMV – STAGE 1 HOUSING PACKAGE GOAL: To implement the National Housing Plan by building 1 million homes for families with a monthly income of up to 10 minimum salaries • Increase home ownership for low-income families • Families with monthly incomes of up to 3 minimum salaries – full subsidy with insurance waiver • Families with monthly incomes of 3 to 6 minimum salaries – increase of partial subsidy for financing through reduced insurance costs and access to Credit Guarantee Fund (Fundo Garantidor) • Families with monthly incomes of 6 to 10 minimum salaries– incentives to buy through reduced insurance costs and access to Credit Guarantee Fund (Fundo Garantidor) Source: My Home, My Life Program

37. OTHER FINANCING ARRANGEMENTS ASSOCIATED TO THE PROGRAM • Urban infrastructure; • Technological development of companies.

38. CHARACTERISITCS AND DISTINGUISHING FEATURES

39. PMCMV – CHARACTERISTICS • Attuned to housing shortfall; • Substantial funding for subsidies; • Production by private sector; • Tax deductions on final product; • Direct subsidies for families; • Financing for technological development of companies; Source: My Home, My Life Program

40. PMCMV – CHARACTERISTICS • For households with an income of up to 3 minimum salaries, construction companies serve as developers (not responsible for sales). • In some localities, the maximum values established at the federal level have proved insufficient, with local governments stepping in to provide necessary resources. • The Program has prioritized full formality of the entire process • properly registered properties, • licensed construction companies, and • registered workers with employment cards. Source: My Home, My Life Program

41. CONSEQUENCES AND OUTCOMES

42. CONTRACTS UNDER PMCMV 1 ALIGNMENT OF PROGRAM WITH GUIDELINES The first stage was completed on 12/31/2010 and 1,005,028 housing units were contracted Source: Federal Savings Bank. Database.

43. CONTRACTS UNDER PMCMV 1 ALIGNMENT OF PROGRAM WITH REGIONAL DEFICIT Source: Federal Savings Bank. Database.

44. ECONOMIC ASPECTS – PMCMV GROWTH IN CONSTRUCTION WORKFORCE Source: Annual Registry of Social Information/General Registry of Employed and Unemployed Persons (RAIS/CAGED), Ministry of Labor and Employment. Database.

45. POLITICAL AND SOCIAL ASPECTS – PMCMV • Citizenship (option for “excluded”) • More effective occupation of urban land (orderly settlement of urban areas); • Healthy living through enhanced hygiene and safety/security (reduced public expenditures on health, security, and education); • Compliance with legal and constitutional commitments in meeting the basic needs of the population.

46. FUTURE OF PROGRAM

47. GROWTH ACCELERATION PROGRAM 2 – PAC2 Incorporated in PAC Source: PAC 2 Report

48. PMCMV – STAGE 2 • Incorporated in National Housing Plan (Plano Nacional de Habitação – PLANHAB) and PAC; • Transition of Urban Development Department (GIDUR/CAIXA) processes through adoption of improved finishing specifications (over 140,000 units encompassed); • Greater protection to women head of households; • Increased focus on sustainability (solar energy)

49. PAC PROJECTED INVESTMENTS Based on PAC 2 Report of March 2010 Source: Civil House of the Office of the President Source: PAC 2 Report

50. PMCMV – STAGE 2 Increase in number of housing units: • One million to two million units contracted through 2014.