Analysts predict that the Brazilian economy will be between the 6th largest global
economy during the next 40 years, reaching a GDP of more than USD 6,000 Billion
5,870
GDP (USD Billion) in 2050
Russia
3,603
7th
Germany
35,288
3,782
35,165
UK
2nd
European
Union
2,061
3,148
6,673
Italy
5th
France
United
3rd States
Japan
44,453
27,803
India 4th
6,074
China
1st
6th
Brazil
Source:
Goldman Sachs; MBAC team analysis
2
Brazil has the capacity to face the global crisis and a high growth potential,
especially, because its internal market and exports’ share characteristics
Brazilian Trade Balance (BRL Bi)
Brazilian GDP Growth (%)
3.2%
3.8%
2.8%
Net Balance
2.3%
30
20
GDP 3Q11 Agribusiness
Industry
2011
Brazilian Exports Share by
Nation
9%
256
226
U.S.A
18%
Services
Developing
2010
2011
27%
Exports Imports
64%
Others
Euro Zone
Brazilian Exports Share by Product
45%
36%
32%
29%
55%
65%
68%
71%
2008
Source:
Bloomberg; IIF; FMI; MBAC team analysis
2009
2010
2011
Commodities
Others
3
During the last 10 years, Brazilian average annual GDP growth was much higher
than developed economies, which helped the unemployment rate decrease
GDP annual growth (%)
Unemployment Rate (%)
Avg.
Growth
12%
10%
Jan/
2012
12%
10%
10.4%*
8%
8.3%
8%
6%
5.5%
2011*
2010
2%
2011*
2010
2009
2008
2007
2006
2005
2002
-6%
2004
0%
-4%
2003
-2%
2009
1.1%
2008
0%
2007
4%
2006
1.8%
2005
2%
2004
6%
2003
3.2%
2002
4%
-2%
Brazil
Source:
Note:
EU
USA
Bloomberg; IIF; FMI; MBAC team analysis
(*) Last UE unemployment position from Dec/11
Brazil
EU
USA
4
With the major global events FIFA World Cup in 2014 and Olympics Games in 2016,
the inflow of Foreign Direct Investment is growing and the trend is to continuing
Foreign Direct Investment (BRL Bi)
CAGR: 42%
220
134
96
90
52
38
2006
2007
2008
2009
2010
Planned Investments in Infrastructure 2010-2013
BRL Billion
Sectors
2011*
%
Electric Energy
Telecommunications
92
67
33.6
24.5
Sanitation
Railway
39
29
14.2
10.6
Highway Transport
33
12
Source:
Bloomberg; BNDES; IIF; FMI; MBAC team analysis
5
Brazilian domestic market is becoming more and more strong, mainly because of
reduction in poverty and increase in the economic middle class
Distribution of the Population by economic
classes in Brazil
13
20
Potential Market
66
94
96
73
2003
2009
Classes A and B
Class C
Classes D and E
The increase of the
purchasing power of the
population is driving the
domestic market to high
levels
From 2003 to 2009, nearly 29 million people entered the
Class C (middle class), which the income range from
USD$ 12,500 to USD$ 53,000/Y
Source:
Exame Magazine (29/Dec/2011); FGV Rio
6
Brazilian mid-sized cities are gaining strength in the national scenario, creating new
potential regions and developing new markets
Noth/Northest
of Santa
Catarina
Campo
Grande
Greater
Vitória
Greater São
Luis
João
Pessoa
Average annual growth of the economy (in %)
Greater
São Luis
João Pessoa
5.8
5.8
5.7
5.7
5.7
Gross domestic product in 2008 (in billion of dollars)
Brasilia
Greater
Vitória
Campo Grande
46.4
8.1
74.2
24.5
19.5
Rio de Janeiro
Population in 2010 (in million inhabitants)
São Paulo
Noth/Northest of
Santa Catarina
1.3
0.8
2.0
1.5
1.3
The average family’s purchasing power in these cities is getting high
Source:
Exame Magazine (29/Dec/2011); MBAC team Analysis
7
During the last 40 years, the Brazilian workforce became more capable and more
prepared to face the national economic development
Average years of schooling
(people aged 10 years or more)
1960
2
7.2
2009
% of illiterate
(people aged 15 years or more)
39%
10%
1967
2009
Number enrolled in higher education
1967
426,000
6 million
2010
Source:
Exame Magazine (29/Dec/2011); IBGE; OCDE; CNI; CGEE
8
Brazil still has room for improving legal system considering the high bureaucratic
organization when compared to other nations, …
Brazilian Business Environment GAP
Characteristic
Average time to open a new business
Procedures to open a company
Hours spent paying taxes
Average tax burden
Number of agencies involved in environmental
permit
Source:
Exame Magazine (29/Dec/2011); IBGE
Brazil
Other Nations
120 Days
14 Days in
Developed Nations
15 Procedures
6 Procedures in Mexico
2,600 hours
385 hours in
Latin America
>34%
18% in India
20
5 in Norway
9
…. however, the development of a more prepared workforce and the high economic
opportunities have encourage a high increase in formal and profitable business
Number of formal business in Brazil
Companies Growing by Acquisitions
(Revenues USD)
3.5 billion
4.8 million
1 billion
837 million
237 million
34,000
2007
1967
2009
Sales of the 500 biggest companies
2011
ANHANGUERA
35 Acquisitions
2007
2011
HYPERMARCAS
23 Acquisitions
Global Player - VALE
(in 2010 dollars)
60.4 billion
1.3 trillion
22.9 billion
33.1 billion
11.8 million
188 billion
1973
2010
Source:
2007
2011
Gross Revenues
Exame Magazine (29/Dec/2011); Biggest and Best; World Bank; Vale website
2007
2011
Net Profit
10
Brazilian infrastructure still the biggest economic challenge. The current
transportation system highly impact logistic costs …..
LOGISTIC
System
Main Risks
Consequences
• Poor maintenance
• Inadequate vehicles
• Heavy traffic
• High freight costs
• Over weight vehicles
• More pollution emission and high fuel
consumption
Railroad
• Low density and difficult mesh
integration
• Inadequate system in Center-West and
North-East regions
• Lower average speed
• Requirement of new transportation and
multi-system terminals
• Restrict and inefficient system utilization
Maritime
• Low access to highway and railroad
systems
• Shallow water
• Poor warehouse infra-structure
close/into ports
• Ports over capacity
• High “Demurrage” costs
• Large ports dependence
Highways
11
…. and the energy availability as well as the urbanization infrastructure (sanitation &
public services) still impact the cities development
Urbanization
Energy
% of the Brazilian population living in cities
45%
1960
Brazilian houses with access to energy
84%
43%
2010
20% of the population
has no access to
minimum sanitary
conditions
25.5 million
households are not
connected to the
sewage system
Poor transportation system
Source:
1967
People living in
Northern Brazil
suffered an average
of 50 blackouts in
2010
Exame Magazine (29/Dec/2011); IBGE; Aneel
99%
2009
Business and
households went
nearly 77 hours
without power in the
North region in 2010
12
Brazil has resources required to meet the domestic and global demand increase,
becoming one of the most valuable economy in the world
Brazil
Energy
Food
Minerals
• Second largest ethanol
• The larger extension of
• Large iron , bauxite and
and biodiesel producer
• Hydropower energy
85% of supply
• Substantial oil reserves
on the “pré-sal” basin
arable land of the world
– 200 MM ha
• Weather diversity,
allowing two crops per
year
• Grain production may
increase 26% by 2021
• First on exports of 5
main commodities
manganese reserves
• 90% of the world’s
niobium resources
• Significant REE,
tantalum deposits
• Improving copper ,
nickel production
Water
• 16% of the world’s
freshwater reserves,
which is determinant for
the supplement of:
− Cities
− Agribusiness
− Industrial expansion
Potential Global Supplier
Source:
Exame Magazine (28/Dec/2011); World Bank; MBAC team analysis
13
Brazilian fertilizer market holds one of the country’s highest investment opportunity.
In 2011, consumption achieved record levels - 70% of consumption imported.
Real problem is a lack of potash resources.
Fertilizer Consumption & Supply
35
20.9%
Million Tonnes of NPK
22.7%
30
53.6%
25
12.2%
10.3%
20
39.2%
15
% of land available for
agriculture
10
10.7%
14.5%
4.2%
Consolidated
Consolidating
5
4.7%
New Agricultural Frontier
0
2006
2007
2008
Production
Source:
2009
2010
2011
0.1%
0.1%
Imports
IBGE; WWF; ANDA; MBAC team analysis
14
Looking to face the Brazilian fertilizer market opportunity, MBAC holds three project
strategic located in central Brazil
SANTANA (PHOSPHATE)
Strategically located: border of
AM
PA
Para and Mato Grosso State.
North-West Brazil.
low capex project located in the
TO
BA
MT
GO
Brasilia
São Paulo
ARAXÁ (PHOSPHATE AND REE/Nb)
centre of Brazil’s largest
agricultural region that will
MG
SP
provide near-term cash flow, with
Rio de Janeiro
start-up expected in Q4 2012,
producing 500 ktpa of SSP.
Excellent logistic advantage.
Phosphate and Rare Earth Elements/Niobium
deposit
Arraias SSP project is a unique,
PI
Meeting animal feed phosphate
and fertilizer demand in the
ITAFÓS (PHOSPHATE)
MA
BRAZIL
ITAFÓS – Arraias SSP project is fully funded and currently under construction.
Santana and Araxa are both exciting projects providing continued upside potential
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