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Brazil’s Agenda 2018The companies’ perspectives and strategies for a decisive year full of transformationsDecember 2017

Contents

Brazil’s Agenda 2018 3Key findings 4

Survey sample 5

Performance 7Results expectations 8

Sectors and regions 9

Impacts 10Local 11

International 12

Investments 13Consistent increase 14

Sectors 15

Strategies 16

Government contributions 17

Capitalization 18Sources of funds 19

Reasons 20

Management 21Management priorities 22

Implemented initiatives 23

People and tecnology 24Human capital 25

Contributions 26

Disruptions 27

Section title divider slide

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Brazil’s Agenda 2018

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Brazil’s Agenda 2018

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Key findings

Performance expectations

• Sales, revenue and investments growth

Factors of greater business impact

• Infrastructure investments

• Reforms (tax and social security)

Reasons to invest

• Opportunity related to the company’s business

• Estimate of recovery of the economic activity

Expected investments

• Release of new products or services

• Replacement of machinery, equipments and facilities

Capitalization

• Retail banks and Brazilian Development Bank as main sources of funds

• Continuity of IPOs resumption Human capital

• Increase in the number of employees

• Maintenance of benefits and increased training Technology

• Relatively unaware about digital transformation movements

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Participation per region

Northeast 8%

Southeast 70%

South 18%

Midwest and North 4%

R$1.779 trillionin revenues (represents 26% of the estimated Brazilian GDP for 2017)

750 participating companies

71% of respondents are board members,presidents, vice presidents,superintendents or directors

Survey sample

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Brazil’s Agenda 2018

are foreign controlled

are family-run companies

Have decentralized control

29% 55% 21%

Survey sample

13

12

10

9

64

45

5

6

6

67 7

Technology and telecommunications services Provision of services to companies Agribusiness, food and beverage Health, education, water and sanitation services Financial activities Machinery, equipments and metallurgy Construction and construction services Pharmaceutical and chemical industry Consumer goods Retail / Wholesale Oil, gas, mining and electricity Vehicles and auto parts Transport and logistics services Other manufacturing1

Sector composition (%)

1 Textile and footwear; Pulp and paper; Editorial and graphic design

Performance

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

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Brazil’s Agenda 2018

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Results expectations

Estimated net revenue growth (average of responses)

14.8% Between 2016

and 2017

19% Between 2017

and 2018

13.2% is, on average, the profit margin expected by the organizations interviewed for the 2017 closing

Despite the challenges of the economy, the companies participating in the survey estimate a growth of 14.8% in their net revenue for the 2017 closing.

For 2018, the expectation of increased sales is even higher, reaching 19% – a result that suggests a market optimism about next year.

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Brazil’s Agenda 2018

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Sectors and regions

Estimated net revenue growth per sector (average of responses)

Selected sectorsBetween

2016 and 2017Between

2017 and 2018

Financial activities 17.3% 27%

Business services 9.4% 21%

Construction and construction services 13.0% 20%

Machinery and equipments 4.3% 18%

Agribusiness, food and beverages 13.8% 17%

Regional highlightsCompanies of the Northeast Region estimate an increase of 23% in net revenue in 2018 over the previous year – almost 10 percentage points above the 13.4% expected by these organizations for 2017 in relation to 2016, and well above the average of other regions of Brazil.

Impacts

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

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Brazil’s Agenda 2018

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Agenda 2018

Performance

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Capitalization

Management

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Local

Events with positive impact on business in 2018 (% of respondents; multiple responses)

Increase in infrastructure investments

Tax reform

Social security reform

Presidential election in Brazil

93

84

70

43

The business community estimates that the country’s structural issues, such as investments in infrastructure and reforms, will be more relevant than the political scenario.

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

International

30%of participating companies have debts in foreign currency

Events with negative impact on business in 2018 (% of respondents; multiple responses)

Increase in interest rates in the United States

Slowdown of the Chinese economy

New East Asian conflicts

Exit of the United Kingdom from the EU

Independence of Catalonia

43

33

24

13

6

Investments

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Performance

Impacts

Investments

Capitalization

Management

People and tecnology

14

Brazil’s Agenda 2018

Start

Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Consistent increase

Estimate of increase in investments (average of responses)

11.8% Between

2016 and 2017

15.8% Between

2017 and 2018

Reasons to invest*

74%Opportunities related to the company’s business

Estimate of recovery of the economic activity

Expectations of drop in the basic interest rate

63%

20%

* Among 85% of companies intending to make investments in 2018

In 2018, the resumption of investments is on the radar of organizations: while for the 2017 closing the companies predicted an increase of 11.8% in contributions, for 2018, they project a growth of 15.8% over the previous year.

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Estimate of increase in investments by sector (average of responses)

Selected sectorsBetween

2016 and 2017Between

2017 and 2018

Oil, gas, mining and electricity 21% 32%

Pharmaceutical and chemical industry 1% 15%

Construction and construction services 1% 11%

Sectors

Infrastructure-related segments – such as oil, gas, mining, energy and construction – are among those that can receive more investments in 2018.

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Brazil’s Agenda 2018

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Strategies

Investments foreseen for 2018 (% of respondents; multiple responses)

Release new products/services

Replace machinery, equipment and facilities

Expand the points of sale

Expand the current industrial parks

Acquire another company

Acquire products or trademarks from other companies

Open new industrial units

5645

4040

1917

1614

1413

95

86

Among the respondents of this edition of the survey Among the respondents of the 2016 edition of the survey

The survey identified a bet on the growth of consumption and, consequently, on the continuity of a gradual upturn in the economy. 56% of companies predict releasing new products or services, an increase of 11 percentage points compared with the 45% that indicated this action in the 2016 edition of the survey.

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Brazil’s Agenda 2018

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Government contributions

Highways, which influence the companies’ logistics in terms of product distribution and purchase of inputs, is the sector that most entrepreneurs believe that should receive government investments. Following it, are investments in education, influencing workforce qualification and contributing to improvement of productivity and efficiency.

Sectors that should receive more government investments

Highways Education and technical training

Electric energy Ports Urbanization works

Capitalization

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

19

Brazil’s Agenda 2018

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Sources of funds

How companies will capitalize in 2018

Retailbanks

BrazilianDevelopment

Bank

Contributionfrom the

controlling group

Contributionfrom owners

Contribution from investment funds

10 companies plan to go public on the Stock Exchange in 2018

8 companies, among the participating organizations of the 2016 edition of the study, responded that they intended to go public in 2017

8 IPOs were carried out in 2017, according to Securities and Exchange Commission of Brazil** Includes BR Distribuidora’s IPO, on December 14th

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Reasons

60

Companies plan to capitalize in 2018 with the expectation of...(% of respondents; multiple responses – chose up to 3 priorities)*

Best results for the company

Recovery of the economic activity in Brazil

Lower interest rates

Holding of public concessions

Greater liquidity in the global financial market

Greater liquidity in the Brazilian stock market

51

33

8

6

5

* Among 43% of companies that want to capitalize in 2018

Management

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

22

Brazil’s Agenda 2018

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Management priorities Companies’ priorities for 2018 (% of respondents; multiple responses – chose up to 5 priorities)*

Process management

Financial management

Budget management

Marketing and communication management

Risk and internal control management

Information technology management

Corporate governance structure

Compliance management

Cyber security

Corporate education

Internal audit

External audit

Crisis management

Social responsibility

Environmental management

Transparency mechanisms

Supervisory Board

53

50

41

35

33

32

27

26

17

17

14

12

11

10

9

7

5

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Brazil’s Agenda 2018

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Agenda 2018

Performance

Impacts

Investments

Capitalization

Management

People and tecnology

Implemented initiatives

Level of adoption of practices by companies (% of respondents; multiple responses)

External audit

Financial management

Budget management

Internal audit

Information technology management

Marketing and communication management

Social responsibility

Transparency mechanisms

Environmental management

Process management

Corporate governance structure

Supervisory Board

Compliance management

Cyber security

Risk and internal control management

Corporate education

Crisis management

58 10 5 27

52 40 5 3

45 38 10 7

36 25 11 28

35 48 9 8

29 40 16 15

29 28 15 28

28 30 14 28

27 24 12 37

26 47 18 9

25 30 20 25

25 9 5 61

24 27 19 30

21 31 18 30

20 40 16 24

15 28 18 39

13 23 14 50

Fully implemented Implemented, but requires improvements Under implementation Not implemented

In recent years, organizations were already making adjustments in their structure and processes to deal with the economy’s challenges. The trend is that the constant reinvention of control practices, transparency, financial management, technology and corporate governance continue so that companies can adapt to the new cycle.

People and tecnology

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Performance

Impacts

Investments

Capitalization

Management

People and tecnology

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Brazil’s Agenda 2018

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Agenda 2018

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Investments

Capitalization

Management

People and tecnology

Human capital

41% of the respondents expect to increase the number of employees, a rise of 15 percentage points compared to the 26% of companies that had this expectation for 2017 evaluated in the 2016 edition of the survey

81% will maintain the current employee benefits

47% will maintain the number of employees

45% will increase investments in training for

employees

42% consider

replacement for more qualified professionals

21% consider

replacing staff to reduce costs

12% estimate to reduce the number of employees

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Contributions

3% of revenues is the amount the organizations interviewed, on average, invest in technology

In total, that is more than

R$ 58.9 billion in contributions in this area, among the companies participating in the survey

Sectors that most invest in technology

Businessservices

Technology and telecommunications services

Oil, gas, miningand electricity

Financial services

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Brazil’s Agenda 2018

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Agenda 2018

Performance

Impacts

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Capitalization

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People and tecnology

DisruptionsMore than one-third of the organizations interviewed is unaware about some of the key disruptive technologies. Despite this, many of these new technologies should receive investments from organizations over the next two years.

Knowledge and implementation of new technologies

Blockchain Smart cities

Exponential technologies

Digital health

Industry 4.0

Autonomous platforms Analytics

Augmented virtual reality

Bitcoin Internet of Things

3D Printing

Cyber security

Unaware 35% 35% 35% 32% 31% 30% 24% 23% 19% 18% 14% 11%

Think about investingIn the next two years 10% 7% 13% 9% 17% 12% 16% 11% 5% 19% 7% 17%

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