Global Strategy

Global Challenges Executable Solutions

Brazil 2020: What Brazil will Look Like in the Future

Global Corporate Platforms Competit tive or Obsolete for Tomorrows World?

France Houdard g g Director Managing

france.houdard@exolus.com
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Preface: What Does the Worlds 5th Largest Country look Like from Space?
Wh hy?

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Source: NASA (United States National Aeronautics and Space Administration)

INTRODUCTION: Brazil Structural F Framework and Forward Trends . . .

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Framework: Structural Determinants of Brazils Economic Geography

West Largely Uninhabitable 80% Population in East

ACities HighestPopulationandFDI SCities MidHighPopulationandFDI

Manaus

Amazon Forest

Fortaleza

R if Recife

Salvador

Belo Horizonte Rio De Janeiro

Sao Paulo Curitiba

Worlds 5th Largest Country Energy Independent, 45% Green Worlds 3rd Largest Food Exporter
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Highly Advanced Economy

Porto Alegre

Aircraft, Automobiles, Petrochem Agribusiness & Natural Resources

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Economy: Growth in Brazils Economy y

IMF Projected Growth Rate at 6% for Next 5
Brazil GDP (P PPP Adjusted) (USD, trillion)

3.0

Host Olympics (2016) Host the World Cup (2014)

2.5
Global Financial Crisis

USD trillion

2.0

1.5

2x

1.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 f 2011 f 2012 f 2013 f 2014 f 2015 f

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Source: World Bank, IMF 4

Actual

IM MF Forecast

Wealth: Brazil to have 2nd Highest GD DP per Capita among BRIC Countries
Brazil GDP per Capita: USD 5,700 (2009) USD8,800 (2020)
2020 2009

$10,000

Brazil GDP per Capita

$8,000

$6 000 $6,000

$4 000 $4,000

$2 000 $2,000

$0

Brazil
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Russia

China

India
Source: ERSUSDA 5

Income: Brazil Per Capita Disposable Income in Tandem with China

Per Capita Disposable Income Gro owing at Average 6% Per Annum
Brazil

Disposable Inco ome Per Capita (USD per r annum)

80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0
2000 2005 2010 2015 2020 202 25 2030 2035 2040 2045 2050

Russia China India

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Source: GS Global ECS Research

Resources: Rich in Mineral Resources s Iron Ore, Manganese, Gold

Worlds 3rd Largest Iron Producer
IRON

3rd Largest Manganese Reserves

World Iron Production (13% ( share, , 2009) )
China A Australia t li Brazil India Russia Ukraine South Africa Iran Canada United States Kazakhstan Sweden Venezuela Mexico Mauritania Other

Worlds
3rd largest iron producer 4th largest iron reserves

13 %
MANGANESE

World Manganese Reserves (17 % share, ( , 2009) )

Australia B il Brazil China Gabon

Worlds
6th largest manganese producer

17%

India Mexico South Africa Ukraine Other countries

3rd largest manganese reserves

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Source: US Geological Survey 7

Resources: Global Power in Natural Resources, R Energy Production

Worlds Second Fuel Ethanol Produc cer
ETHANOL

4th Largest Timber Producer

USA Brazil EU China Thailand Canada Colombia

World Ethanol Production (33% share, ( , 2009) )

Worlds
2nd fuel ethanol producer First (#1) fuel ethanol exporter

33 %

India Australia Other

TIMBER

Top 10 Timber Producers (7.1% share, ( , 2003) )

United States India China Brazil

Worlds
4th timber producer

Canada Russia Indonesia Ethiopia

7.1%
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Congo C Nigeria

Source: Renewable Fuels Association 8

Resources: A Global Power in Agricult ture Soybeans, Coffee, Beef

Worlds Largest (#1) Green Coffee Producer P
SOYBEANS

2nd Soybeans Producer

United States Brazil Argentina

World Soybeans Production (26% share, ( , 2008) )

Worlds
2nd soybeans producer Largest (#1) soybeans exporter

China India Paraguay Canada Bolivia Uruguay Ukraine Indonesia

26%
COFFEE

Russia Other
Brazil Vietnam Colombia Indonesia

World Green Coffee Production (36% share, 2008)

Worlds 36%
Leading (#1) coffee producer Leading (#1) coffee exporter

Peru Ethiopia Mexico India Guatemala Uganda Honduras Costa Rica Phillipines

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Source: Food and Agriculture Organization, International Coffee Organization 9

The Future 2020: 1 of 5 Countries Highest Combined - GDP, Population, Resources

> USD3 trillion GDP 100+ mi illion people > 3 million sq km

Over 3 million sq km
Indonesia Philippines Canada Australia Bangladesh

Over 100 million People

B il Brazil
US India China Russia

Pakistan Nigeria Ethiopia Mexico Japan

Germany

France

Italy

United King gdom

Over US$3 trillion GDP (PPP)

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10

Corporate Trends: Structural Optimizat tion Markets, Markets Resources Resources, Innovation

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Corporate Burning Platforms: Markets, Resources, Innovation

Market Access/Revenue Growth Global Structural Cost Reduction

Knowledge
R&D Sales

Markets

Engineering

IT

HR

Service

Effi iciency
F&A Distribution Pro oduction /As ssembly Procure Sourcing

Efficiency/ Shared Services Innovation/ / Knowledge Resources/ Cost Reduction Markets / Revenues

CO OST

R ources Reso
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Shareholder Value

DRIVING

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1. Market: Car Sales/Production Prox xy for Directional Market Sizing?

Leading Position for Car Penetration among BRIC
Brazil Russia China India

Car Penetration in BRIC (units per 1,000 people)

250

Car P C Penetration t ti i in Brazil B il (units per 1,000 people)

700

600 200 500 150

400

300

100

200 50 100

0 2010 2020 2030 2040 2050

0 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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Sources: GS Global ECS Research, Other

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h Largest Pharma Market by 2015 1. Market: Projected to be Worlds 5th

USD47 billion Market by b 2015 5th in World

Pharmaceutical Market t Size Country Ranking

(2000 2015f f - USD billion)

2000 Top 8
USA Japan G Germany France UK Italy China Brazil Canada Spain 150 58 17 17 11 11 6.8 6.7 6.3 6.2

2005 Top 8
USA Japan G Germany France UK Italy China Brazil Canada Spain 262 65 24 21 16 15 13 10 10 9.8

2010 Top 8
USA Japan G Germany France China UK Italy Brazil Canada Spain 441 75 48 39 34 32 28 24 22 21

2015F Top 5
USA China J Japan Germany Brazil France UK Italy Russia India 524 103 85 55 47 44 36 31 30 28

Copyright 2011 Exolus. All rights reserved.. Sources: IMS; GSK, Assessment of Opportunit ty for Pharmaceutical Manufacturers in Emerging Markets JMCP; Monitor Analysis; Exolus 14

1. Market: High Spending Growth Resumes after Global Crisis

Sales Growing at 28% CAGR

Retail Sale es Growth

900 800 700 600

US SD Million

500 400 300 200 100

2003

2004

2005

2006

2007

2008

2009

2010

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Source: EIU, Planet Retail 15

2. Revenue/Costs: Where are Pareto-Optimal Market/Resource Envelopes?

Intersection of Natural Resources (We est)
Per Capita Annual Income (USD, ( , PPP-Adjusted) j )

A/S Cities

People (East)

Per Capita p GDP / A/S-City y Overlay y

Roraima Amapa

> 14,500 10,000 14,500 7,500 - 10,000 , -7,500 , 5,500 0 5,500 ACities SCities
Pi i Piaui Acre Rondonia Mato Grosso Goias Mato Grosso do Sul Sao Paulo Parana Tocantins Bahia Amazonas Para Maranhao Ceara Rio Grande do Norte Paraiba P Pernambuco b Alagoas Sergipe

Minas Gerais Espirito Santo Ri De Rio D Janeiro J i

Rio Grande do Sul

Santa Catarina

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Source: Brazilian Institute of Geography and Statistics

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2. Production/Resources: Where are other Key Investment Nodes?

Car Investment Proxy for Investment Destinations?
Brazil Automot tive Production

Manaus

Fortaleza

R if Recife

OEMs

Suppliers OEMs G Goianis Suppliers Sao Paulo OEMs Suppliers Rio De Janeiro OEMs Salvador Belo Horizonte

Curitib ba Suppliers Porto Alegre

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2. Production/Resources: Sao Paulo State S Immense, Larger than the UK

Sao Paulo State (248,209 km sq) larger r than United Kingdom (243,610 km sq)

Sao Paulo (State) ( )

(248,209 km sq)

United Kingdom (Country)

(243,610 km sq)

Sao Paulo City Sao Paulo State

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Sources: Publically Available Information

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2. Production/Resources: Managemen nt Sourced in Sao Paulo, Labor Local

Sao Paulo Brazils Leading Foreign Investment Destination Sao Paulo State
(248 209 km sq) (248,209

Campinas

San Jose dos Campos Osasco So o Paulo

Mau Sao Bernardo do Campo

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Sources: Publically Available Information

19

2. Production/Resources: Rio State Im mmense, as Large as Countries

Rio de Janeiro State (43,696 km sq) s roughly same size Switzerland

Rio de Janeiro (State) ( )

(43,696 km sq)

Switzerland (Country)
(41,285 km sq)

Rio de Janeiro City Ri d Rio de J Janeiro i St State t

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Sources: Publically Available Information

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2. Production/Resources: Managemen nt Sourced in Rio, Labor Local

Rio de Janeiro Region a Leading Investm ment Destination for Oil and Gas Sector Rio de Janeiro State
(43 696 km sq) (43,696

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Sources: Publically Available Information

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3. Innovation: Where are Leading Inn novation Nodes?

Innovation clusters FocusAreas
Electronics Lifesciences
Sao Luis Fortaleza Manaus

Informationtechnology Telecommunication Health Microelectronics

Recife

Nuclearenergy A Aeronautics i Oiltechnology

Salvador Belo Horizonte Vitoria

Agriculture Bioenergy

Santa Rita de e Sapucai

Rio De Janeiro Sao Jose J de Campos San Pa aulo Londrina Campinas Curitiba Sao Leopoldo Florianopolis

Por rto Alegre

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Sources: Kirsten Bound, Brazil th he Natural Knowledge Economy; Isabel Bortagaray, Innovation Clusters in Latin America

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3. Innovation: The Largest Aerospace e Cluster in Southern Hemisphere

Anchor: Embraer Worlds 3rd d Largest Aircraft Manufacturer

Lacit Winnstal UTEC PanMetal Friuli GloboUsinagem AmbraSolutions GeometraBTE Mectron InbraAerospace
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Aerolane Aeroarte Akaer Brascopter Embrasim EQE ESRA Finetornos Gi Giovanni iPassarella P ll GraunaAerospace

Lima&Bonf Avionics LaneDesign FlightSolutions FlightTechnologies GMPMarcatto Gyrofly Lanmar Marcatto Massucato

Solutions&DesignEngineering Tecplas VBJEngenharia VectraTechnology Rastreal TKA MikroStamp PhoenixServiosAeronuticos Winnproject FibraforteEngenharia
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Sources: DECOMI, Brazilian Aerospace Cluster, Believing in Great Ideas

3. Innovation: A Global Leader in Gre een Energy - Biomass, Hydro

Installed Green Energy: Brazil 45% OECD Average 7% World 12%

Primary y En nergy gy Supply* pp y

Green 45% Green n 8% Green 12%

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Geo/Sol/Wind Hydro Biomass Nuclear Gas Oil Coal

Brazil
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OEC CD

World

*For Year 2008

Source: International Energy Agency, Brazil Ministry of Mines and Energy

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Brazils Brazil s Econ nomic Health

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Senior Executives Select Brazil as a To op Global Investment Destination

Brazil Top 5 Investmen nt Destination in World
Top 14 Most Attractive Destinations for Future Investment (2009 2011)
%
60

50

Pe ercent of Responses

40

30

20

10

0 Australia India Indonesia Vietnam U.K. Mexico Poland Unite ed States Germany Canada France China Brazil Russia

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Source: World Investment Prospects 2009 - 2011

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Brazil Economic Outlook: Large Forex Reserves, R Positive Fundamentals

Worlds 7th Largest Forex Reserves Low External Debt Growing Banking System

BrazilHoldsTheWorlds7thLargestForeignExchange E Reserves:USD316billion
In2011theCentralBankhasaccumulatedove erUSD316billioninforeignreserves,upfromUSD50 billionin2004. Theaccumulationoflargeexternalsurplusesmeans m financialsystemenjoysabundantliquidity.

LowExternalDebt/GDPRatioandPositiveCurrentAccountBalance
HealthyexternaldebttoGDPratioat14%ofGDP G in2010. Federalbudgetdeficitat2.3%GDPin2010;pr rojectedtodecreaseto1.7%ofGDPin2011.

BrazilsBankingSystemunderStableandRapi idExpansion
BankingdepositsgrewatCAGRorover29%dur ring2002 2008whichindicatestrongconfidenceof peopletobanksystem.Moreover,thedepositsystemremainedmostlyunaffectedthroughtheglobal creditcrunch. BankingsectorassetsareprojectedtogrowataCAGRof10%from2010to2013.

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Source:CentralBankofBrazil,OECD 27

For a Comparative Perspective with the other BRIC Countries Please Refer to the Follo owing Research Reports

China 2020

India 2020 Found on Slideshare @

Russia 2020

http://www.slideshare.net/contest/world ds-best-presentation-contest-2010/entries http://www.slideshare.net/Exolus/india-2 2020-what-india-will-look-like-in-the-future http://www.slideshare.net/Exolus/russia-2 2020-what-will-russia-look-like-in-the-future

Download Reports @
www.exolus.com/en/kn nowledge/research.html
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Global Expansi p on Strategy gy & Cross-Border Investment Execution

(Greenfield, M&A, Joint Ventures, V Outsourcing)
About Exolus: Exolus is a hybrid management consulting and transaction advisory firm. We work with management teams in the development of their global ex xpansion strategies, across the range of investment formats: Greenfield, M&A, Joint Ventures and Outsourcin ng. As well, we deploy against global strategies by providing p gp program g management g across all p phases of cros ss-border investment p projects, j , from candidate searches and evaluation, through investment structuring and negotiations. The founders of Exolus have spent the past two decades s in the global service space and have direct experience operating in nearly all of the major investment destinations in the world (40+ countries). The team h served has d clients li t of f all ll sizes, i b both th public bli and d private, i t on n projects j t that th t ranged di in i investment t t size i f from USD10 million to greater than USD1 billion. We have served clie ents across all of the following industry segments: Life Sciences, Manufacturing, Automotive, Technology, Retail, Consumer Business, Real Estate, Public Sector.

Follow Exolus at: www.exolus.com w Need Further Informati ion: info@exolus.com Want Copies of our Reports: www.exolus.com/en/knowledge/research.html

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Disclaimer
In writing we benefit from standing on the shoulders of f others and, in the process, we strive to make our own contributions to the market of ideas. As well, we are always tremendously grateful for the many, often selfless, contributions that are availed in the process. The opinions represented herein were prepared for inf formation purposes only, at the time of publication. The information represented herein is believed to be re eliable, at the time of publication, and was obtained by various public sources also believed to be reliable. Th he opinions were considered to be accurate at the point i t of f creation, ti and d further, f th any views, i forecasts, f t or estimates e ti t contained t i d herein h i may b be subject bj t t to change h at anytime without notice. The opinions expressed or implied herein may not be the opinions of the author, also Exolus, or any associated affiliates. This report and the information contained herein collec ctively is not offered as ctively, as, and should not be regarded as, used or relied upon as advice on any matter. It sha all not constitute or be construed as a recommendation or solicitation on behalf of the author, and no legal commitment or obligation shall arise by reason of this document. Thus, the reader shall make an independent assessment of opinions stated herein that shall not be considered a substitute for obta aining advise from the readers readers advisors. advisors The author shall not accept responsibility, express or im mplied, with regards to the accuracy and completeness of the information herein, and the author shall not be liable whatsoever and howsoever arising in connection to this publication publication. The author sh hall not accept accept, and hereby disclaim, disclaim all responsibility and liability to all persons, entities, or organizations for r all consequences arising out of any use or reliance on the whole or any part of this publication. This publication should not be reproduced or distribute ed without the authors consent and is not intended for distribution in any yj jurisdiction in which this would be p pr rohibited.

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