1. Henrique de Campos Meirelles Brazilian-American Chamber of Commerce October 2010 2010 Brazil Economic Conference

2. 2 Brazil in 2003  60% of total sovereign debt denominated in dollars  IMF debtor country  High public debt to GDP ratio: 60.6%  Policy rate at 25%  Rising inflation  High country risk premiums and sovereign debt rated as speculative grade  Unemployment rate at 12%  Minimum wage at US$ 60

3. 3  Quick disinflation  Jan 03: 30% (annual rate)  Jul 03: 0%  Inflation on target since 2004  Decrease in the public debt  Decrease in sovereign debt exposure on FX  As a result: decrease in country risk premium Changes in Economic Policy 2003: Monetary and fiscal policy stance Austere monetary policy Strong fiscal adjustment

4. 4 Public Sector Net Debt % of GDP Sources: Central Bank of Brazil 60.6 54.9 50.6 48.2 47.0 45.1 42.7 38.4 42.8 40.6 30 35 40 45 50 55 60 Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Aug 08 Dec 08 Dec 09 Dec 10 market consensus

5. 5 Floating Exchange Rate Regime and Build Up of International Reserves Source: Central Bank of Brazil international reserves allow for a safe fluctuation of the exchange rate Oct 6 th 278.7 Aug 08 205.1 0 50 100 150 200 250 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 USD billion

6. 6 Net External Debt and Risk USD billion 1Q03 165.2 4Q04 135.7 -49.5 BBB- BB+ BB BB- B+ BB- Sources: Central Bank of Brazil and S&P

7. 7 reduction of interest rate with more credibility amplified effect lower risk premiums Macroeconomic Responsability Virtuous Circle: macroeconomic stability inflation targets lower inflationary risks decaying net foreign debt floating exchange and intl reserves reduced external risk decline in public debt primary surpluses lower fiscal risk

8. 8 Macroeconomic Policy Framework Macroeconomic fundamentals of inflation targeting, fiscal responsibility, exchange rate flexibility, combined with Adequate prudential policy and solid bank supervision, resulted in  capacity to absorb internal and external shocks  macroeconomic and financial stability  sustainable growth  investment growth  credit and capital market development

9. 9 100 290 480 670 860 1050 1240 1430 1620 1810 2000 90 100 110 120 130 140 150 160 170 1Q 00 1Q 01 1Q 02 1Q 03 1Q 04 1Q 05 1Q 06 1Q 07 1Q 08 1Q 09 3Q 10 investments GFCF (left) country risk - Brasil t-2 (right) 1995 = 100 basis points Investments x Country Risk 2Q 10 Sources: IBGE and JPMorgan

10. 10 Credit – Outstanding Balances 25.7 46.2 5 10 15 20 25 30 35 40 45 50 0 200 400 600 800 1,000 1,200 1,400 1,600 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Aug 10 R$ billion % of GDP consistent growth throughout the period Source: Central Bank of Brazil

11. 11 Source: CVM (Brazilian Securities Comission) *12 months to August Capital market – primary issues 0 20 40 60 80 100 20002001200220032004200520062007200820092010* StocksCommercial papersOthers R$ billion

12. 12 Net Foreign Direct Investment market consensus USD billion 2007-09 35.2 2002-06 15.7 0 10 20 30 40 50 02030405060708091011121314 2010-14 37.8 Source: Central Bank of Brazil (market consensus)

13. 13 020406080100 Spain Peru South Africa Chile Japan Canada Malaysia Australia France Poland Tailand Vietnan Indonesia German United Kingdom Mexico Russia United States Brazil India China 3 rd preferred host economy for FDI for the 2010-12 period Source: UNCTAD

14. 14 as a percentage of the gross external liabilities Brazilian External Liabilities 20012010* FDI 37% Stocks (domestic and foreign) 31.3% Fixed income 18.6% FDI 32.8% Stocks (domestic and foreign) 9.9% Fixed income 30.9% Others 13.2% Others 26.4% Source: Central Bank of Brazil*August

15. 15 50 100 150 200 250 80859095000510 1980-89 25.5 1990-99 42.7 2000-09 111.1 2010-14 229.6 Source: Central Bank of Brazil (market consensus) Exports USD billion 14

16. 16 Exports’ Diversification Source: Central Bank of Brazil* July % 9.9 21.4 23.7 27.8 9 12 15 18 21 24 27 30 20002001200220032004200520062007200820092010* USA Europe Latin America Asia

17. 17 Price Stability and Real Payroll Growth Source: Central Bank of Brazil % change in 12 months Jan 03 = 100 95 100 105 110 115 120 125 130 135 - 2 4 6 8 10 12 14 16 18 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jul 10 IPCA real payroll stability generates increasing well-being

18. 18 Formal Job Creation Source: MTE/CAGED 1804 680 1954 average 96-99 128 average 00-03 741 average 04-07 1312 0 500 1000 1500 2000 969798990001020304050607080910 14 million jobs created since 2003 from January to August thousands

19. 19 Unemployment in Brazil seasonally adjusted Source: IBGE 6.73 7 8 9 10 11 12 13 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Ago 10 %

20. 20 relatively dynamic labor market Source: Bloomberg Unemployment Rate 25.3 20.3 18.3 16.4 13.6 13.3 11.8 11.4 11 10.8 10.7 10.5 10 9.6 9.3 8.9 8.7 8.5 8.42 8.3 8.1 7.9 7.8 7.6 7.4 6.73 South Africa Spain Lithuania Croacia Ireland Colombia Greece Poland Hungary Portugal India Turkey Euro zone United States France Belgium Venezuela Finland Italy Chile Canada Argentina United Kingdom Germany Sweden Brazil

21. 21 0.566 0.56 0.558 0.553 0.545 0.535 0.532 0.528 0.52 0.514 0.509 0.50 0.51 0.52 0.53 0.54 0.55 0.56 0.57 9899010203040506070809 Source: IBGE/PNAD Gini Index Income Inequality Reduction

22. 22  From 2003 to 2009  35.7 million people have entered the middle class  20.5 million have crossed the poverty line upwards  2010-2014 forecast for the current trend  36.0 million more will enter the middle class  14.5 million more will come out of poverty  Family Grant Program (Bolsa Família): reduction of people in extreme poverty from 12% to the 4% level Middle Class Growth and Poverty Reduction Source: FGV-CPS

23. 23 Lower Level of Poverty % of population Source: CPS/FGV 28.1 25.4 22.8 19.3 18.3 16.0 15.3 10 15 20 25 30 2003200420052006200720082009

24. 24 Social Mobility 49 29 16 47 44 40 66 95 113 13 20 31 0 50 100 150 200 200320092014* A/BCDE millions of people +44.1% +19.0% Source: Finance Ministry; * estimated

25. 25 Source: FMI (WEO Oct 2010); * estimated 2007200820092010 GDP real growth % compared to other emerging markets Performance Before and After the Crisis 5.8 3.5 -2.1 (*) 5.6 (*) 6.1 5.1 -0.2 7.5 (*) EME ex. Brazil, India and China Brazil

26. 26 GDP Growth Sources: IBGE and Central Bank of Brazil annual real growth rate -0.2% 7.3% -1 0 1 2 3 4 5 6 7 990001020304050607080910 2.1% (1999-2002) 3.3% (2003-2005) 5.1% (2006-2008)

27. 27 Agenda for the Future  Level of Domestic Saving  Quality of Public Expenditures  Investment Rate and Infra-Structure  Education  Review and Simplification of the Tax System  Legal Environment more favorable to Business  Incentive to Long Term Investment

28. 28 Investment prospects - industry Source: BNDES 2005-20082010-2013% Oil and Gas160340112.9 Mining5352-2.7 Steel265199.5 Petrochemical203470.9 Automobile233237.8 Electric/Electronics152139.0 Pulp and Paper171910.6 Total31454974.8 BRL billionGrowth

29. 29 Investment prospects - infrastructure Source: BNDES 2005-20082010-2013% Electricity679845.2 Telecommunication66672.1 Sanitation223976.5 Railways1956195.3 Highways213673.0 Ports515217.9 Total19931055.6 BRL billionGrowth

30. Henrique de Campos Meirelles October 2010