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2 CHALLENGES AND PROSPECTS FOR THE BRAZILIAN ECONOMY José Augusto Coelho Fernandes Policy and Strategy Director, CNI Brasilia, August 31 th, 2015

1. The Brazilian economy is under an intense process of adjustment and course correction. 2. The fall in oil prices and the developments at Petrobras have severe effects on both the economy and institutions. 3. Adjustments started in the fiscal area. The expectation is that new steps will be taken towards a pro-competitiveness agenda. 4. Politics and economy interact and turn the environment more complex. Where we are 3

A sign of the need for adjustment: Twin deficits 4

5 Economic policy and growth THE CHALLENGE Macroeconomic adjustment Competitiveness agenda

6 The steps of adjustment Phase I Tariff realism Adjustment of public accounts Streamlining of subsidies Adjustment of exchange rate Reform of social benefits Contractionary monetary policy

7 Competitiveness initial actions Phase II

8 The ways out of the crisis: what is feasible? Exports Investment in infrastructure Regulatory reforms Domestic consumption Government expenditure

9 How long will recovery take?

10 The possible recovery dynamics RECOVERYRECOVERY ? Exchange rate devaluation + Real wage fall Exports Inflation reduction Moderate Monetary Policy Increase in families disposable income i

11 Yes Yes, many issues to face but... Institutions Institutions are a source of confidence

12 External control agencies ranking Source: MELO, Marcus. Seminário IBRE — A AGENDA DE CRESCIMENTO DO BRASIL, 2015 Brazil

13 Justice independence in Latin America Source: MELO, Marcus. Seminário IBRE — A AGENDA DE CRESCIMENTO DO BRASIL, 2015 Brazil

14 Public administration quality Source: MELO, Marcus. Seminário IBRE — A AGENDA DE CRESCIMENTO DO BRASIL, 2015

15 Constitutional powers of the presidents Source: MELO, Marcus. Seminário IBRE — A AGENDA DE CRESCIMENTO DO BRASIL, 2015 Brazil

16 And… INDEPENDENT MEDIA ACTIVE CIVIC SOCIETY ACTIVE CIVIC SOCIETY CONGRESS

17 The industry agenda

18 The industry agenda

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