1. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce BRAZIL - Country Report March 2005

2. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce It is the largest economy in South America and the 12th largest economy in the world After years with of a protectionist economy Brazil opened the economy for foreign competition in 1990 The government is commitment to privatization and lower import tariffs Brazil has since 1985 a stable democratic government The country has a huge potential growth It is use by foreign companies as a gateway to Mercosur and other South American countries Brazil is one of the largest recipients of FDI in the world The economy and industrial production are growing There is a large and traditional Swedish presence in Brazil There are several compelling reasons for doing business in Brazil.

3. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Brazil basicsBrazil basics Economy Foreign direct investments Swedish presence in Brazil Swedish-Brazilian trade Agenda

4. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Brazilian basic facts 5th largest country in the world in area (19 times larger than Sweden) 174,5 million inhabitants (5th after China, India, USA and Indonesia) 30 million consumers with Swedish purchasing power or stronger 47% of total GDP in South-America FDI investments were US$ 18,2 billion in 2004 Source: Estado de São Paulo (Brazilian newspaper) / IBGE (Brazilian Institute of Geography and Statistics ) Brazil is a huge country in many aspects.

5. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: Swedish-Brazilian Chamber of Commerce / STC Brazil Brazil - 8 500 000 Km 2 Europe - 6 000 000 Km 2 Sweden - 450 000 Km 2 Europe easily fits inside Brazil's boundaries. Rio de Janeiro Porto Alegre Curitiba São Paulo Belo Horizonte Recife Fortaleza Belém Manaus Brasilia Lisbon Madrid Paris Rome Berlin Athens Oslo Stockholm Helsinki

6. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Political system: President: States: Largest cities: Exchange rates: Life expectancy: Urbanization: Brazil is usually divided into five different geographic regions Democracy Luis Inácio Lula da Silva 26 and a federal district Brasília (capital), São Paulo, Rio de Janeiro, Curitiba, Porto Alegre, Belo Horizonte USD 1.00 = R$ 2.70 R$ 1.00 =SEK 2.60 67.6 years 82%

7. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Brazil was discovered in 1500 by Portuguese explorer Pedro Álvares Cabral, and was divided into a series of separate colonies until its independence was declared Brazilian independence day is September 7, 1822, followed by an imperial period, marked by educational promotion, communications improvement and agriculture development. Also in may, 1888, slavery was abolished Brazil was declared republic on November 15, 1889. This period was marked by two long dictatorship periods, totaling 36 years (1930 to 1945 - 1964 to 1985) In march 1985 power was transferred to a civilian president, and a new constitution was approved in 1988. On November 1989 the first presidential elections of the post-military era were held. Source: KPMG Brazil has gone through many changes since it was discovered in 1500. Brazilian history

8. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Brazilian culture Brazil´s inhabitants are a mix of many races Portuguese colonizers mixed with the native Indians and African slaves Dutch and French colonization also took place in the Northeast. In the 19th century, waves of German, Italian, Polish and Japanese immigrants added new elements to the mixture and established settlements mainly in the South Region Portuguese is the national language, but Brazilian Portuguese is very different in accent and intonation compared to the language spoken in Portugal Religion: Roman catholic:88%; Protestant: 6%; Afro-Amer. Spirit: 2%; Spiritist: 2%; Atheist: 1%; Other: 1% Source: STC Brazil Brazilians are perhaps one of the most racially mixed people in the world.

9. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Mercosur is a common market between Brazil, Argentina, Paraguay and Uruguay, and with Chile and Bolivia as associated, not yet full members. It is a market with a population of about 200 million people and a total GDP of approximately 1.000 billion USD The principal Mercosur objectives as stated in the Treaty signed in 1991 are: Key figures about Mercosur Source: KPMG Mercosur is a growing common market in South America –Free transit of goods, capital and services –To follow a common trade and economic policy, adopting a Common External Tariff (TEC) –Co-ordination of macro and sector economic policies –Commitment of members to adjust their legal framework to facilitate integration

10. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Brazil basics EconomyEconomy Foreign direct investments Swedish presence in Brazil Swedish-Brazilian trade Agenda

11. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Current economic outlook 2003-2004: The elected president – Lula – continued economic politics: Maintain fight against inflation Keep primary surplus in budget Continue paying foreign debt Keep privatizations Incentives to exporters After a period of turbulence the economy was stabilized during 2003 and showed a healthy growth in 2004 Speculations and uncertainty related to the presidential elections led to significant economic turbulence during 2002.

12. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Current economic outlook The business climate is positive right now – but the Lula government has a number of important issues to deal with - Total tax pressure is high: 38 % - Interest rates are very high: ~19% - Need for investments in infrastructure - Bureaucracy continues as a problem - Government agencies are less independent - Security is a main concern - Total tax pressure is high: 38 % - Interest rates are very high: ~19% - Need for investments in infrastructure - Bureaucracy continues as a problem - Government agencies are less independent - Security is a main concern + Industry growth is high: 7,6 % + GDP higher than expected: 5.2 % + Currency stable + Inflation controlled: 7,6% + Country risk below 400 + Exports are over USD 100 Bi (+32%) + Industry growth is high: 7,6 % + GDP higher than expected: 5.2 % + Currency stable + Inflation controlled: 7,6% + Country risk below 400 + Exports are over USD 100 Bi (+32%) but The big challenge is now to carry out some important reforms (fiscal area, labor laws, administrative and legal systems, etc.). This will not be easy considering that 1) 2006 is election year 2) PT is divided on many issues and 3) loss of power in congress In a positive scenario - where current economic politics continues and necessary reforms are made - Brazil could enter a phase of sustainable growth

13. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Foreign debt Inflation (average/month) Reserves Exchange rate Imports tariffs Mercosur (trade) Ports Privatization of the state companies Infotech market Foreign capital Patents Electricity sector Telecommunications Gas distribution Oil Mining sector Railways Worrying 26,00% USD 8.7 Billion Fixed Average 42% USD 3.6 Billion Monopoly None Protected Discrimination None Monopoly High but manageable 0,63 % USD 46 Billion Floating Average 38,0% USD 15,3 Billion Privatized Substantial Free Equal rights Patent laws Concessions law Privatized Opening process Privatized Concessions law 20041990 During the last decade major achievements have been achieved in the Brazilian economy Source: Swedish-Brazilian Chamber of Commerce / STC Brazil

14. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Brazil´s economic reform program from 1994 has four key features –Monetary stabilization –Tax reform –Privatization and deregulation –Market liberalization Source: Ministry of Finance/ Brazilian Central Bank The Plano Real is the most successful economic reform program in the history of Brazil.

15. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Monthly inflation, comparison with previous stabilisation plans Source: FIPE The Plano Real is the most successful economic reform program in the history of Brazil (cont…). Based on monthly IPC-FIPE rate from Jan/85 to Dez/04 -10 0 10 20 30 40 50 60 70 80 90 198519861987198819891990199119921993 1994 199519961997199819992000 2001 Cruzado Bresser Verão Collor 1 Collor 2 Real The Plano Real was launched on July 1, 1994 Dec 01 0,25 Mar 90 79,11 Jul 98 -0,77 Jul 95 3,72 % 2002 Dec 02 2,1 2003 Dec 03 0,5 2004 Dec 04 0,6

16. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce 0 5 10 15 19981999200020012002 1,6 8,9 5,9 12,5 % 7,6 Inflation – ( IPCA*) Source: IPEA - Institute of Applied Economic Research 9,3 2003 * IPCA - Consumer Price * *Target – Central Bank Inflation is today relatively stable. 7,6 2004 2005** 5,1

17. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Interest Rate ( SELIC*) The interest rates are high to keep inflation under control. Source: IBGE / Brazilian Central Bank *SELIC is the Central Bank average rate based on banks transactions 0 10 20 30 40 19981999200020012002 31,2 19,0 15,7 19,4 % 19,0 2003 22,9 2004 16,3

18. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce 1 2 3 4 95 9697 98990001 0203 04 05 5 4,2 2,7 3,3 0,1 3,6 4,4 1,3 1,9 0,5 5,2 4,0* Brazil had 2004 the best GDP growth for the last 10 years Germany UK Japan USA Brazil GDP Growth % by country- 2004 1,7 3,2 4,0 4,4 5,2 *Estimate Source: IBGE - Brazilian Institute of Geography and Statistics Source: IBGE, BEA, OCDA, INDEC, Chinese goverment

19. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: Brazilian Central Bank Foreign reserves are increasing essentially the last two years 0 10 20 30 40 50 60 70 199719981999200020012002 45 52 36 45 33 Bi USD 36 Brazilian foreign reserve 46 2003 54 2004

20. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Industry growth was 7,7 % in 2004 Source: IBGE - Brazilian Institute of Geography and Statistics -1,9 1,1 -5,2 0,5 4,5 7,9 7,7 5,7 5,6 5,3 Commerce Construction Other Services Processing Industry Farming 2003 2004 Annual variation GDP subsector in %

21. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Steel was fast-growing sector in terms of profitability in 2004 Pulp and PaperChemistrySiderugy 32,0 23,8 14,4 24,3 20,6 45,1 2003 2004 Source: Brazilian Central Bank Return on the net equity in %

22. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce 2 4 6 8 Finland Denmark Sweden USA Chile South Africa South Korea Brazil Mexico Corruption is still present in Brazil Source: Transparency Internaton Corruptions Index- 2004 China Turkey India Russia Argentina Haiti Score 0-10 Country RANKING-1 to 146 1 3 6 17 20 4447 59647177 8892 107 146 # 10 9,7 9,5 9,2 7,5 7,4 4,6 4,5 3,9 3,6 3,4 3,2 2,8 2,5 1,5

23. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: The Economist Inteligence Unit Brazil GDP is over than 50% of total GDP in South America. Top 5 biggest GDP in 2003 ( US$ million – market exchange rate ) 452 102 94 80 64 0 100 200 300 400 500 Brazil ArgentinaVenezuelaColombiaChile

24. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: UNCTAD Nov 2004 The most attractive location for FDI in Latin America the next three years is Brazil Intended destiny of FDI (%) 0 Uruguay Colombia Peru. Venezuela Chile Argentina Mexico Brazil 2040 60

25. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: BNDES Services is the dominating sector in Brazil. GDP by sector Agriculture Manufacturing 59% 33% 8% Services

26. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: IBGE- Brazilian Institute of Geography and Statistics There are approximately 30 million people in Brazil with Swedish purchasing power or stronger. Family income of different consumer groups in Brazil (USD/month) Classes D/E - Income from 0 to 217 USD Class C From USD 217 to 725 USD Class A/B From 725 USD and more Classes A/B 18% Class C 40% Classes D/E 42%

27. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Brazil basics Economy Foreign direct investmentsForeign direct investments Swedish presence in Brazil Swedish-Brazilian trade Industry sectors Agenda

28. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: BNDES Among the emerging economies, Brazil is the 1st destination of direct investments for many countries. Brazilian foreign direct investors France Germany Italy Netherlands Spain Sweden Swizerland USA

29. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: Federal Government Planning and Budget Ministry of Brazil / SOBEET. Due to less privatisation, FDI in Brazil has decreased but still represents a substantial amount. FDI Brazil (USD bi) 2 6 11 19 29 30 32 19 17 0 5 10 15 20 25 30 35 949596979899000102 * forecast 03* 15

30. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: Annual Report Gazeta Mercantil 2001 / Cense, Nielesen, Bacen and Abras A large share of the biggest Brazilian groups is represented by companies with foreign ownership. 310 biggest Brazilian groups by capital origin - 2000 73% 23% 4% National State Foreign

31. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Brazil basics Economy Foreign direct investments Swedish presence in BrazilSwedish presence in Brazil Swedish-Brazilian trade Industry sectors Agenda

32. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Swedish-Brazilian industrial history Ericsson delivers the first telephone switch to Brazil in 1891 The Johnson line starts regular transportation between Sweden and Brazil in 1908 ASEA supplies electric equipment to the sugar loaf cable car in Rio de Janeiro in 1912 AGA and SKF where the first two companies to get established in Brazil in 1915 Skånska Cement supplied cement to the Corcovado statue construction in 1931 (sometimes called Limhamns-Jesus) Source: Swedish-Brazilian Chamber of Commerce / STC Brazil Sweden has a long industrial history in Brazil

33. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Swedish-Brazilian industry The Swedish business community consists of over 180 companies and 28.000 employees An average of 4-6 new Swedish companies have entered Brazil during the last few years The Swedish-Brazilian companies invested over USD 3.3 billion over the last five years and plan investments for the coming five- year period of more than USD 3 billion Source: SOBEET, Swedish-Brazilian Chamber of Commerce / STC Brazil Today São Paulo is Swedens largest industrial city São Paulo har vuxit fram som en av de absolut viktigaste tillverkningsorterna för bolagen vi är engagerade i. Vi ser dessutom Brasilien som en viktig tillväxtmarknad - Marcus Wallenberg till Veckans Affärer

34. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: Swedish-Brazilian Chamber of Commerce/ STC Brazil The majority of the Swedish companies are situated in four states RJ SP MG PR

35. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Accumulated Swedish investments Source: Brazilian Central Bank Auto industry leads Swedish investments in Brazil Auto industry Metallurgy Electric / electronic industry including Telecom Chemical industry Mechanical industry 36% 20% 14% 12% 5%

36. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Sweden has a strong presence in Brazil, through its multinational companies Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Examples of major multinationals active in Brazil ABB AGA Gases Alfa Laval Astra Zeneca Atlas Copco Autoliv Electrolux Ericsson Interprint Arla Food CompanySector Electrical equipment Industrial gases Mechanical equipment Pharmaceuticals Mechanical equipment Automotive parts Consumer goods Telecommunications Business forms, security printing, Dairy products Pharmacia Upjohn Sandvik Scania SKF Svedala Swedish Match Telia Tetra Pak Trelleborg Veracel (Stora) Volvo CompanySector Pharmaceuticals Cutting tools Automotive industry Ball bearings Mining equipment Consumer products Telecommunications Liquid packaging Rubber products Pulp and paper Automotive industry Source: Swedish-Brazilian Chamber of Commerce/ STC Brazil

37. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Swedish companies established in Brazil 1998-2002 Several Swedish companies have started their activities in Brazil during the last years Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Akers Allgon BT Gambro Hörnell LGP Medi Team Nynas PIAB Scandinavian Steel Segerström Telia Overseas TESS Mölnlycke Heath Care Gateway CompanySector Equipment for rolling mills Antennas for telecom Fork lifts Hemodialysis equipment Safety equipment welding Amplifiers for telecom Caries remover Special petroleum oils Vacuum system Steel trader Mechanical industry Mobile system operator Medical Supplies Entrance Control Source: Swedish-Brazilian Chamber of Commerce / STC Brazil

38. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Swedish exporters in Brazil 2002 There are several examples of successful Swedish exporters represented in Brazil Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Absolut Vodka BT industries Borgstena Kalmar LMV Orrefors Kosta Boda PIAB Perstorp Flooring Tarkett Thule Roxtec CompanySector Beverages Forklift Textiles for vehicles Forklifts Crystals Vacuum equipment Flooring Rack for vehicles Sealings for cables and pipes - In total there are over 1400 companies exporting to Brazil Source: Swedish-Brazilian Chamber of Commerce / STC Brazil

39. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Brazil basics Economy Foreign direct investments Swedish presence in Brazil Swedish-Brazilian tradeSwedish-Brazilian trade Agenda

40. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Source: SECEX Sweden has a large trade surplus with Brazil Swedish-Brazilian Trade (USD FOB - millions) 0 200 400 600 800 1000 1994199519961997199819992000 2001 2002 Exports to Brazil Imports from Brazil 2003 2004 512 819

41. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Sweden exports traditional industrialized products and imports basic goods as well as industrialized products Source: Sveriges Statistiska Centralbyrå Swedish-Brazilian Trade in 2003 - % Machines and instruments17.0% Coffee16.0% Electrical appliances12.0% Motor vehicles and parts 12.0% Animal food - Soy10.0% Meat – frozen and refrigerated 7.0% Iron and steel 4.0% Fresh Fruits 3.0% Machines and instruments 30.0% Electrical appliances 28.0% Motor vehicles and parts 13.0% Iron and steel 4.0% Optical equipment, photo and surgical equip. 3.0% Pharmaceutical products 3.0% Plastics and rubber 2.0% Inorganic chemical products 2.0% Imported from BrazilExported to Brazil

42. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Business climate in Brazil - Conclusions - Big market – huge business potential - Industry and economy performances are good and the forecast is optimistic - Still need for economic reforms – high taxes, bureaucracy, etc. - Do right from the beginning – analyze the market, find right partners and get local support - Big market – huge business potential - Industry and economy performances are good and the forecast is optimistic - Still need for economic reforms – high taxes, bureaucracy, etc. - Do right from the beginning – analyze the market, find right partners and get local support = good business

43. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce Contact information Swedish-Brazilian Chamber / Swedish Trade Council Brazil can support your company to do business in Brazil Johan Fager Phone: +55 11 3066-2550 Fax: +55 11 3064-3042 Email: johan.fager@swedishtrade.se Web site: www.swedcham.com.br Address: Rua Oscar Freire, 379, cj. 121 Zip:01426-001 City: São Paulo Country: Brazil Johan Fager Phone: +55 11 3066-2550 Fax: +55 11 3064-3042 Email: johan.fager@swedishtrade.se Web site: www.swedcham.com.br Address: Rua Oscar Freire, 379, cj. 121 Zip:01426-001 City: São Paulo Country: Brazil Lars Magnusson Phone/Fax: +55 21 2521-9843 Email: lars.magnusson@swedishtrade.se Web site: www.swedcham.com.br Address: Rua da Candelária, 9, sala 1101 Zip: 20091-020 City: Rio de Janeiro Country: Brazil Lars Magnusson Phone/Fax: +55 21 2521-9843 Email: lars.magnusson@swedishtrade.se Web site: www.swedcham.com.br Address: Rua da Candelária, 9, sala 1101 Zip: 20091-020 City: Rio de Janeiro Country: Brazil São Paulo Head Office Rio Branch Office

44. Câmara de Comércio Sueco-Brasileira Swedish-Brazilian Chamber of Commerce