Brazil:New Initiatives for Industrial and

Technological Development

Opportunities for Foreign Investors

June 2004

Luiz Fernando Furlan

Minister of Development, Industry and Foreign Trade

It keeps being successful, but there is still more to know

There is a Brazil that many people know

Soccer Carnival CoffeeAmazon forest

The Brazil that you must know

Innovation, technology, competitiveness and productivity

GDP: US$ 500 billion (2003);

Per capita income: US$ 2,800 (2003);

6,300 Ph.D. graduated every year;

97% of the children aged 7 to 14 are in school.

The Brazil that you must know

The number of current accounts in Brazilian banks increased by 28%, from 56 to 71.5 million (2000-03);

In 2003, from 18.7 millions of income tax declarations, 18.2 were submitted through the internet (97.3%);

Almost 100% of the import/export procedures are performed electronically through Siscomex – an integrated trade system;

In 2003, the volume of bank transactions made through the internet by individuals increased by 27.9%, reaching R$ 1.5 billion.

The Brazil that you must know

430

50

400

330

Brazil India Mexico China

The Brazil that you must knowPhone lines (fixed + mobile) per 1,000 inhabitants

Source: International Telecommunication Union / 2002

75

6

69

19

Brazil India Mexico China

The Brazil that you must know Personal Computers per 1,000 inhabitants

Source: International Telecommunications Union / 2002

The Brazil that you must knowUsers of Internet per 1,000 inhabitants

Source: International Telecommunications Union / 2001

84

16

46 46

Brazil India Mexico China

Source: MDIC, IBGE

Bas

e:

2002

= 1

00The Brazil that you must know

Industrial Production

91

93

95

97

99

101

103

105

jun/00 jun/01 jun/02 jun/03 jun/04

The Brazil that you must knowVehicles Output

Source: Anfavea

(x 1000)

1.586

1.357 1.691

1.817

1.793

1.828

1.990

1998 1999 2000 2001 2002 2003 2004*

The Brazil that you must knowShoes Output

Source: IBGE

543 554 544 516 499

580610

642 650

1995 1996 1997 1998 1999 2000 2001 2002 2003

(millions of pairs)

13524

4443 9895

1422019146

25578

1998 1999 2000 2001 2002 2003

The Brazil that you must knowCell Phones Output

Source: MDIC

(x 1000)

31147

29604

26717

27865

24996

25760

25237

26153

1996 1997 1998 1999 2000 2001 2002 2003

The Brazil that you must knowSteel Output

Source: MDIC

(x 1000 ton)

8064,7

55,3

52

47,350,4

2817,4

3,9

2002 2003 2004

Exports Imports Balance

Source: Secex/MDIC last 12 months ending in May

US$ billion

The Brazil that you must knowTrade Balance

Target for 2006: US$ 100 billion

Competitive and High Added Value Export Sectors:

Exports total in 2003: US$ 73 billion –Break down:

Transport materials: US$ 10.6 billion – [14.5%];

Aircraft: US$ 1.9 billion – [2.6%];

Vehicles and parts: US$ 4.1 billion – [5.6%];

Steel and metallurgical products: US$ 7 billion – [9.6%];

Petrochemical sector: US$ 4.9 billion – [6.7%];

Mobile phones: US$ 1.2 billion (to USA only) – [1.6%].

Source: Central Bank of Brazil (*forecast)

Interest payments/Exports Net external debt/Exports

3,6

1,8

1,0

1,5

2,0

2,5

3,0

3,5

4,0

1998 2000 2002 2004*

20

24

28

32

36

1998 2000 2002 2004*

%

19,9

36,4

16

External ExposureThe Brazil that you must know

Industrial Modernization

Economic growth,Improvements in competitiveness

and efficiency

Innovation and technological development

Targets

Focus of the New Development Initiative

Development and Sustainable Growth

Enhancement of the country’s technological base in areas that show potential for national and international growth;

Creation of a favorable environment for private and public investments;

Coordinated actions with states, metropolitan regions and local governments;

Employment and income generation;

Improvement of the image of Brazil abroad.

Guidelines

Initiatives for Industrial, Technological and Foreign Trade Development

Competitiveness and innovation:

R$ 15 billion (almost US$ 5 billion) of governmental investments;

Creation of the National Council on Industrial Development;

Creation of the Brazilian Agency for Industrial Development;

Horizontal and vertical policies.

Competitiveness and innovation:

Future bearer sectors

(Biotechnology, Nanotechnology, Biomass)

Strategic options

Semiconductors Software

Capital goods Medical and pharmaceuticals products

Initiatives for Industrial, Technological and Foreign Trade Development

BNDES – Programs and credit lines:

PROSOFT (US$ 35 million): US$ 26 million already made available by June;

MODERMAQ (US$ 860 million);

PROFARMA (US$ 172 million);

Customized Capital Goods (US$ 172 million);

Initiatives for Industrial, Technological and Foreign Trade Development

Investment Room

The Brazilian Administration is setting up an investment

room designed to help foreign investors to invest in Brazil;

Its objective is to bring together decision makers from

important related areas in Federal Government and make

them ready and available to get in touch with anyone

willing to invest in Brazil;

Fast track policies to overcome burocracy.

8% 8%

10%

28%

7%7%

31% Others Telecommunications

Finance

VehiclesChemicals Energy Trade

FDI Composition – 2000-2003Major Sectors

Source: Central Bank of Brazil

(US$ 82 billion, FDI inflow)

Announced Investment Plans(US$ millions)

Sector 2003 2004 Share (%) 2003 / 2004 (%)

Mining 6 495 11 401 34,5 140,8

Steel 764 5 720 17,3 648,7

Transports 232 3 334 10,1 1 337

Mechanical/Metallurgy 1 036 3 195 9,7 208,4

Electro/electronic 75 2 275 6,9 2 933,3

Telecommunications 863 2 078 6,3 140,8

Infrastructure 12 941 1 484 4,5 -88,5

Chemical products 457 804 2,4 75,9

Petrochemicals 247 750 2,3 203,6

Others 3 805 1975 6,0 -52

Total 26 915 33 016 100 22,7

Source: BNDES/MDIC

2004 Outlook

FDI: US$ 14,25 billion forecast (Central Bank)

Infrastructure: R$ 298 billion PPA 2003-2007

Investment announcements: 71% growth (2003 / 2002)

Exports: US$ 83 billion Target for 2006: US$ 100 billion

GDP growth: 3.5% (2% due to exports)