1 Brazil and Norway: A Strengthening Partnership Brazil and Norway: A Strengthening Partnership Ambassador Sergio E. Moreira Lima Seminar on Bioethanol-a green solution for the future at the Brazilian Norwegian Chamber of Commerce (BNCC). Oslo, Nov 4th, 2008

2 Brazil - Norway I - Brazil: sustainable economic growth with reduction of inequalities II – Strains in Global Markets: effects on Brazil III - Brazil-Norway: strengthening relations IV - Towards a strategic partnership

3 The dynamism of Brazil-Norway relations has been influenced not only by the convergence of interests in some important areas, but also by the current vigorous trend of expansion of the Brazilian economy. It would be useful therefore to briefly examine how the strains in global markets are affecting Brazil and the measures being taken by the Government.

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5 Part I Brazil: sustainable economic growth with reduction of inequalities

6 A New Cycle of Sustainable Economic Growth Expansion of the domestic market Increased industrial and agricultural output Growth in foreign trade with diversified markets and increased participation of value-added goods Large inflows of foreign direct investment Better wealth distribution Decrease in poverty Creation of jobs Program of Economic Acceleration (PAC)

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9 INTERNATIONAL RESERVES Source: Central Bank of Brazil mar/06 59,8 Sept 2008 > US$ 207 Bi sep 03 des 03 mar 04 jun 04 sep 04 des 04 mar 05 jun 05 sep 05 des 05 mar 06 jun 06 sep 06 des 06 mar 07 jun 07 Sept. 08 Increase: over 140 billion Liquidation of Foreign Debt to the IMF (US$ billion)

10 From January to September 2008 total FDI reached US$ 28,8 billion

11 Decrease in Poverty Source: FGV/PNAD/IBGE.

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13 Part II Current international financial crisis The most serious crisis since This crisis is deeper than those which occurred in the nineties (billion crisis). The crisis had its epicenter in developed countries (trillion crisis). A systemic crisis– local turmoil in the core of the economic system affects with different intensity all markets.

14 The crisis is affecting mainly developed economies Slower growth. Domestic markets with negligible potential growth. Less solid macroeconomic fundamentals. Financial institutions are too leveraged and have “junk assets”.

15 Less harmful effects in emerging countries Faster growth. Domestic markets with significant potential growth. Solid macroeconomic fundamentals and higher level of international reserves. Financial institutions are less leveraged and have less junk assets.

16 SHORT-TERM IMPACTS ON BRAZIL Credit shortage for the export sector. Liquidity constraints for firms operating in the international market. Domestic credit becomes more expensive. Losses in equity and derivatives. Less certainty about the performance of the economy in 2009.

17 Brazilian Government’s instruments to mitigate liquidity constraints The Government’s short-term loans to the banking system (public offers). Use of international reserves to supply funding to the export sector. Relaxation of reserve requirements for the banking system. Use of BNDES financial resources in exports financing. Early disbursement for the harvest of 2008/09

18 SUSTAINABLE ECONOMIC GROWTH CYCLE Brazil will maintain its current growth cycle despite the international financial crisis: PAC (Growth Acceleration Program) Commitment to the investment priorities Productivity Gains Infrastructure Investments Moderate Reduction of GDP Growth for 2009.

19 The Brazilian Financial Sector: Basel Index (Minimum Capital Requirements)

20 DIVERSIFICATION OF EXPORT MARKETS

21 Fiscal Stability Anchors Since 2003, the Brazilian Public Sector has significantly deleveraged in foreign currency terms through: A) elimination of foreign denominated domestic debt; B) reduction of external debt; C) acquisition of reserves.

22 Last 10 years: Constant Public Sector Primary Surpluses * 2008 refer to 12-month period through August Source: BCB

23 Reduction of Public Debt: FX-Linked Public Debt (Domestic + External) Source: BCB

24 Brazil: Positioned to Withstand Global Turmoil The Brazilian economy is one of the best placed in the region to withstand current global economic headwinds. Strong export growth over the years, and historically high global commodity prices have seen Brazil accumulate massive foreign reserves, measuring some US$205bn in August. Indeed, Brazil is set to have sufficient reserves in 2008 for a full 17 months of import cover, a factor which will go a long way in bolstering banking sector stability at times of tighter liquidity. Business Monitor October 2008

25 Part III Brazil-Norway strengthening relations

: historic years for bilateral relations. Highest level contacts Visit of PM Stoltenberg to Brazil, September, 2008 State Visit of President Lula, September, 2007 First State Visit of a Brazilian President to Norway Follow-up of King Harald’s State Visit to Brazil in 2003

27 AGREEMENT BETWEEN BRAZIL AND NORWAY MOU on Climate Change and Deforestation. Signed in Brasília during PM Stoltenberg’s Visit in September 2008 Cooperation on issues related to: a) Fight against global warming b) Protection of biodiversity and forest preservation c) Enhancement of sustainable development

28 Ministerial exchanges Brazilian side: - Minister of External Relations, Celso Amorim (February and September 2007) – Minister of Development, Industry and Trade, Miguel Jorge (September 2007) – Minister of the Environment, Marina Silva (October 2007)

29 Ministerial exchanges Norwegian side: - State Secretary of Fisheries, Vidar Ulriksen (February 2007) - Minister Development, Cooperation and Environment Erik Solheim (November 2007 and September 2008) - Minister of Higher Education and Research Tora Aasland (April 2008 )

30 High level business contacts – Besides 14 governmental delegations, a number of High-level business contacts – Breakfast of President Lula with Norwegian CEOs and Seminar in Oslo “Meeting of Energy Giants” – CSR Conference in Oslo, participation of Petrobras and CVRD, and Sao Paulo with NHO/FIESP – PM Stoltenberg Seminar in Rio (INTSOK) and Norway’s participation in the Rio Oil and Gas

31 Trade flow reached new records in 2007 and in 2008 and is diversifying its composition.

32 Trade Brazil-Norway Trade flow between Brazil and Norway in Jan-Sep 2008 has surpassed US$ 1 billion, in a new record for the period. Brazilian exports to Norway surpassed US$ 618 million from Jan to Sep 2008, an increase of 33% in relation to the same period last year. Liquefied gases, the traditional “Bacalao”, printing paper are the main import items. Gas compressors are the third main item of export by Brazil to Norway, after alumina and soya.

33 Norway became the main destination for Brazilian exports to Scandinavia in 2006 and 2007

34 Norways tops Scandinavian investment flows in Brazil

35 Part IV Preparing the future Towards a strategic partnership

36 Agreements Signed 2007/2008 Between Governments - MoU on Environmental Issues: global warming, biodiversity, sustainable development - Brazil-Norway cooperation in Africa (Angola and Guinea-Bissau) - KD (Ministry of Knowledge) - MEC (Ministry of Education and Culture) - MCT (Ministry of Science and Technology) Between companies (Petrobras-Statoil) Between business federations (NHO-CNI) Between Research institutions: – NTNU and PUC-Rio – Research Centre of Petrobras (CENPES) and SINTEF

37 Emerging energy giants In the last 20 years, Norway has become one of the largest exporters of oil and gas, but with declining reserves in the North Sea Brazil is becoming the 21 st century frontier of oil and gas exploration and is most successful producer of biofuels Recent offshore discoveries make Brazil a key market for Norwegian oil and gas businesses

38 Key areas for a strategic partnership 1. Energy: – New offshore discoveries – Seismic research, exploration, FPSOs, transportation, pipelines etc – CO2 sequestration and storage

39 Key areas for a strategic partnership 2.Shipping : – Brazil is investing in rebuilding its maritime industry – Norway is increasing its presence in that sector as Petrobras expands its oil & gas production capacity and Transpetro bids for 26 tankers (from a total of 42 - Programa de Modernização e Expansão da Frota)

40 Key areas for a strategic partnership 3.Fertilizers: – Norway - one of the world’s main fertilizer producers – Brazil - an agricultural giant, an expanding market for chemicals and fertilizers – Global need for increase in food production – Yara is already the second largest fertilizer producer in Brazil

41 Key areas for a strategic partnership 4.Environmental sustainable projects: Brazil: Biofuels Combat deforestation Norway: Solar energy CO2 Capture

42 Towards a strategic partnership Convergence of bilateral interests in order to face global challenges is transforming Brazil-Norway relations into a more “strategic partnership” Environment and climate change Energy and Food Security Millennium Development Goals

43 “My visit to Scandinavia has strengthened my conviction that our ambitious partnership can be projected beyond our frontiers. Together we can face truly global challenges, like climate change, the protection of the environment and the fight against hunger and poverty. Only in this way, we will ensure higher levels of wellbeing and prosperity without excluding anyone nor sacrificing future generations. ………….. The world faces the challenge of a growing competition for energy. The successful Brazilian experience with the biofuels shows that it is possible to multiply, moreover in developing countries, the benefits of a renewable source of energy, cleaner and cheaper than the fossil fuels. As Brazil, Norway invests in these renewable sources, showing commitment with the change of global patterns of energy consumption” Luiz Inacio Lula da Silva, speech during the Visit of Prime Minister Stoltenberg to Brazil, Sept 2008

44 Thank you ! Embassy of Brazil Tlf or 36 Fax: (Commercial Section)