Doing Business in Brazil

1. Doing Business in Brazil Rio de Janeiro Felipe Hsieh Trade & Receivables Finance, UK October 2012

2. Quick facts about Brazil • Brazil is Latin America’s largest economy ; among the 10 largest in the world (GDP in 2011: $2.5trn) • Brazil is the world’s fifth-largest country by geographical area, 8.5 million km2 and fifth most-populous country, with 190 million inhabitants • Brazil’s ‘investment grade’ economy is diverse and has large and developed agricultural, manufacturing, mining and services sectors Brazil • Population: 190,732,694 (IBGE 2010) • Total area: 8,511,965 sq km • Capital: Brasilia • Major language(s): Portuguese • Time zone: GMT -3 (Brasilia) • Currency: Real (BRL) • Central bank: The Banco Central do Brasil (BCB) • Gross domestic product: 2.5trn (2011) • Inflation rate (consumer prices): 6.5% (2011) North Region Northeast Region Central-west Region Southeast Region South Region Source: Ministerio da Fazenda

3. The great transition • Brazil’s growth story from 1995-2011: from short boom-and-bust cycles in the 1990s to more-sustained growth more recently • The performance of the economy in the last 15 years can be divided into two main periods: Fernando Henrique Cardoso administration (1995 – 2002) and second, the Lula administration (2003 – 2010). Brazil GDP growth (%, annual) Source: IBGE, HSBC

4. Growth, consumption and social mobility A structural shift in Brazil’s demographics • Strong job market • Government income distribution programs • Relatively stable inflation Brazil: Distribution of Economic Classes (millions of people) • Demographics and increasing household income are positive drivers for the next two decades • Middle Class is growing as poverty is reducing • Per capita GDP is expected to more than double by 2030 • Social Mobility impacting around 40m individuals over the next 4 years % Source: Ministry of Finance

5. Retail sales and industrial production - contrasting picture • Consumption has been a compelling story in Brazil in the last few years • The intensive migration of lower income Brazilians to the middle-income segments brought to the market 40 million potential consumers that have access to credit • While retail sales have expanded more or less continuously since 2008, industrial production has been stagnant since 2Q2010 • Demand-led growth; competitiveness still a challenge Household ownership of durable goods Gap between demand and supply (Jul 2008 = 100) % of Household Source: IBGE Source: PNAD

6. Key Challenges • Infrastructure deficiencies • Complex Taxation System • Slow legal framework • Corruption

7. Trade – Facts & Figures Brazilian Foreign Trade Exports are almost three times larger compared to ten years ago EXPORT IMPORT US$ Billions BALANCE Source: MDIC

8. Trade – Facts & Figures EXPORTS (2009) China represents now 13% of Brazilian exports against 2% in 2000 IMPORTS (2009) China represents now 13% of Brazil’s imports against 2.2% in 2000 Source: MDIC

9. Trade – Facts & Figures Exports*: Brazil’s Rank and Market-Share Coffee Orange Juice Sugar Beef 1st 1st 1st 1st 30% 32% 86% 45% Poultry Soy Bean Pork Corn 1st 2nd 4th 2nd 12% 39% 13% 39% * Data from 2009

10. UK – Brazil Trade Trade between Brazil and UK grew by 4 TIMES over the last 10 years Goods and services sold by UK institutions to Brazil grew by same rate Source: MDIC

11. UK – Brazil Trade Source: MDIC

12. Trading with Brazil Since 1990 Brazil has made substantial progress in reducing border trade barriers (tariffs, import licensing, etc.) Moderate tariffs, especially on import taxes Import license required for certain products Free Ports, Zones Common Import Taxes: - Import Duty - Industrialised Product Tax (‘IPI’) - Merchandise and Service Circulation Tax (‘ICMS’)

13. Business etiquette and culture… Most of companies have English-speakers, however using interpreters for 1st meeting can be a good idea…. Establishing personal relationships is essential to conducting business Like South-Europeans Brazilian use a lot of body language and contact DO NOT attempt to do business during CARNIVAL!

14. HSBC in Brazil North Branches: 60 ATMs: 257 Mini-branches: 108 Key Figures Established: 1997 Branches: 897 Employees: 25,000 Customers: 5 million ATMs: 5,285 North Northeast Branches: 47 ATMs: 351 Mini-branches: 124 Northeast Retail Banking Middle West Middle-West Branches: 103 ATMs: 501 Mini-branches: 142 Southeast Trade Finance Southeast Branches: 445 ATMs: 2,654 Mini-branches: 675 South Payments & Cash-Mgmt South Branches: 242 ATMs: 1,522 Mini-branches: 523 Global Markets Corporate Banking

15. Key Contacts l British Embassy, Brasília (Distrito Federal) press.brasilia@fco.gov.uk l British Consulate-General, São Paulo uktibrazil@fco.gov.uk l UK Trade & Investment - Enquiry Service enquiries@ukti.gsi.gov.uk l Export Finance Programme (Programa de Financiamento às Exportações—Proex) http://www.bb.com.br/. l Brazilian Association of Listed Companies (Associação Brasileira das Companhias Abertas— Abrasca http://www.abrasca.org.br (Portuguese only). l Brazilian Export Credit Insurer (Seguradora Brasileira de Crédito à Exportação—SBCE) http://www.sbce.com.br/ us/index.asp l Brazilian Foreign Trade Association (Associação de Comércio Exterior do Brasil—AEB), http://www.aeb.org.br/home.htm (Portuguese only). l Ministry of Development, Industry and Commerce (Ministério do Desenvolvimento Indústria e Comércio Exterior—MDIC) http://www.mdic.gov.br/ (Portuguese only). l São Paulo State Federation of Industry (Federação das Indústrias do Estado de São Paulo—FIESP), http://www.fiesp.com.br

16. Q & A

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