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Brazil’s economic perspectives in crisis times

Brazil’s economic perspectives in crisis times. Dr. Rolf-Dieter Acker BASF S.A., São Paulo, Brazil Deutsch-Brasilianische Gesellschaft e.V. September 25 th 2009. EU27 12 tn (+1,1%). NAFTA 12 tn (+2,2%). Asia 10 tn (+3,9%). SA 1,9 tn (+2,9%). Brazil 1.072 bn. Argentina 223 bn.

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Brazil’s economic perspectives in crisis times

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  1. Brazil’s economic perspectives in crisis times Dr. Rolf-Dieter Acker BASF S.A., São Paulo, Brazil Deutsch-Brasilianische Gesellschaft e.V. September 25th 2009 INTERNAL

  2. EU27 12 tn (+1,1%) NAFTA 12 tn (+2,2%) Asia 10 tn (+3,9%) SA 1,9 tn (+2,9%) Brazil 1.072 bn Argentina 223 bn In a global context the South American macroeconomy has a minor position Nominal GDP 2008 in € (CAGR 08-20) USA 10 tn Germany 2,5 tn Japan 3,3 tn China 2,9 tn Brazil as the dominating country in South America ranks globally on 9th position Source: ZZS, IMF INTERNAL

  3. South America will remain growing above World’s GDP and faster than in the last years. Brazil will maintain its position as the major economic force World Ø 3.1% SA Ø 3.1% EmergingAsia Peru Colombia Asia Pacific w/o Japan Chile Argentina SA Ø 4.5% South America Brazil Eastern Europe Growth of GDP 07-20 in % p.a. Ecuador World Ø 3.1% Venezuela Uruguay NAFTA Oceania Western Europe Circle Size reflects GDP 2020 w/o inflation Japan Circle Size reflects GDP 2020 w/o inflation Growth of GDP 95-07 in % p.a. Growth of GDP 95-07 in % p.a. • Brazil represents roughly half of the continent’s population and 56% of total GDP • Within the region, top six countries account for 96% of total GDP • Despite differences in growth rates, the economic power distribution doesn’t change • Chile exhibits steady growth INTERNAL

  4. GDP Growth between 1990 and 2008 1990 2008 Developing Asia 7,7% p.a. South America 3,3% p.a. Advanced Economies 2,5% p.a The most significant challenge in South America’s past was the macroeconomic volatility “ Having growth rates like OECD countries and fluctuations like Asia” INTERNAL

  5. Did you know that…. • Embraer is No 3 in the world in production of commercial airplanes. Pentagon bought 58 patrolling airplanes form Embraer for USD $7 billions • The Frankfurt Stock Exchange works with Brazilian software • Petrobras is world leader in deep water exploration • Odebrecht (Brazilian company) is world leader in hydroelectric machinery construction • Germany imports Brazilian ITA VS30 rockets for use in experiments of micro gravity • South America produces more than 3 million cars and Brazil ranks 6th globally INTERNAL

  6. Important industries in South America are relevant in global markets Relevance of South America in some global markets (2007) Global Ranking Personal Care Automotive Bioethanol 4% (%South America in World GDP) Soybean Poultry Mining Beef Pulp Natural Gas (reserve boe) 1º Automotive (Global car sales-units) 2º Pulp (production Mt) 1 Crude Oil 3º (reserve boe) Decorative Painting (worldwide consumption Mt) 4º Personal Care (worldwide consumption Bn USD) Crop production 2 5º (production tons) Poultry (production Mt) 6º Mining (production USD) 7º Beef (production Mt) Biofuels * CAGR 2007 - 2020 (production M Liters) 1 With recent discoveries in Venezuela and in Brazil (pre-salt), South America could represent 30% of crude oil reserves in the world. (Source: BCG) 2 South America has currently only 11% of total potential arable land farmed INTERNAL

  7. Industrywise Brazilian exports are highly diversified, but mainly based on natural resources Exports 2008 USD 198 bn INTERNAL

  8. Regarding FDI confidence Brazil outpaces many established economies Source: ATK FDI Confidence Index 2008 INTERNAL

  9. Amongst BRIC countries Brazil shows a stable upwards trend regarding FDI Services Agriculture Industrial FDI Target Sectors China Brazil Russia India Recent FDIs are targeting strong sectors like agriculture and sectors to be improved like industrial INTERNAL

  10. Efficiency gains in agricultural industry boosted business throughout South America, especially in Brazil and Argentina 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09* 146% 143 * 123,2 120,7 119,1 Production (million tons) 142 130,5 100,3 113,5 82,4 81,1 78,4 76,0 96,7 68,4 83,0 76,6 27% 57,9 73,6 68,3 Area (million hectares) 48* 47,4 48,8 47,3 43,9 47 46,0 40,2 37,9 37,8 37,8 39,1 38,5 38,5 37,0 36,9 36,6 35,6 35,0 Related crops: ( soybean, corn, wheat, peanuts, rice, barley, cotton, oat, bean, sunflower, castor seed, sorghum) * expected for 08/09 season Source: Conab INTERNAL

  11. Sustaining the agriculture importance, South America has the highest potential of arable land Potential arable land w/o deforestation Arable Land per Region Million Hectares 89 Oceania 56 Europe (North+South+West) 115 America North Europe East + Russia + Middle East 137 11 Asia 413 Latin America * Considering Pasture as potential arable land. Source: FAO , 2005. Not considering areas dominantly under forest ecosystems. INTERNAL

  12. Most important crop areas in South America are far away from amazonian rainforest Amazonian rainforest Intense Agricultural Use Urbanized Areas Source: Embrapa INTERNAL

  13. Biotech penetration in agricultural industry 95 Million Hectares 157 Million Hectares 34 Million Hectares 30 Million Hectares Soybean 70% (in Brazil 60% In Argentina 95%) Cotton 46% Maize 24% Canola 20% Source: Clive James 2009 INTERNAL

  14. In 2009 the economic dip in South America will be less harsh compared to other regions Real GDP Growth ’08-’09 (%) Brazilian GDP depends only by 15% on exports, private consumption will grow by 1,5% in 2009 INTERNAL

  15. Brazil’s private consumption pattern gets closer to developed countries Car Production Personal Care & Toiletries Sales Million Units US$ mn Cell Phones Lines Million of Lines All figures 2008 INTERNAL

  16. % South America LV production – monthly outlook -6,5% 3,8 3,5 2009 2008 Total [mn] Jan Feb Mrz Apr Mai Jun Jul Aug Sep Okt Nov Dez 20082009 INTERNAL

  17. 3,4 LV production per regionchange 2009 vs. 2008 30,2% 18,7% -2,5% -6,5% -8,8% % change -18,3% -20,2% -24,3% -25,1% -33,0% NA SA EU W-EU CEE Asia Japan China Korea India mn units 2009 INTERNAL

  18. For many years Brazilian retail figures showed a steady growth Indexed Retail Sales Figures (2003=100) June08-June09 05/2009 05/2001 Even the crisis at the end of 2008 was not impacting the private consumption significantly INTERNAL

  19. Brazilian consumers are increasingly shopping in supermarkets INTERNAL

  20. Successful social programs increased private consumption impacting the consumer behavior Example: Shift of wealth in Brazil (% of urban households) 2002 2007 INTERNAL

  21. Seven good reasons to be optimistic about Brazil in crisis times Significant increase in purchasing power supports domestic markets Large food exports stabilize Brazil’s international trade Regionally diversified and growth oriented exports dampen volatility More than 220 billion USD of financial reserves to bridge gaps Sophisticated financial system and no credit or real estate bubbles No dependence on imported crude oil due to green energy matrix Stable democratic political system INTERNAL

  22. In general, German companies do have considerable business in Brazil The sales of major German companies in Brazil accounted for US$ 35bn in 2008 INTERNAL

  23. BASF IN SOUTH AMERICA 2008 5.000 employees, 3.500in Brazil Sales in 10 countries 22 production sites There of 8 sites in Brazil • Total Sales: • 2,99 billion euros(including Wintershall) • 1,87 billion euros in Brazil INTERNAL

  24. BASF has a veritable site footprint in South America Ocumare del Tuy Jaboatão Camaçari Callao Guaratinguetá Indaiatuba Lima S. Jose d. Campos Demarchi Multi-divisional sites Mauá Concón Single-divisional sites Vila Prudente Santiago Tortuguitas General Lagos Puerto Montt Burzaco Bellen de Escobar INTERNAL

  25. BASF’s sales portfolio in South America is quite different from the global one South America 2008 EUR 2,9 bn BASF Group 2008 EUR 62,3 bn 5% 29% 10% 16% 22% 18% INTERNAL

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