an extensive analysis of the impact of the european union crisis on brazil

1. Impact of European Union crisis on Brazil
Presented By:
Wasim Akram

2. Agenda
• A Brief History of the EU
• Brazil
• Relationship Between European union
and Brazil
• Brazil-Trade
• BRIC
• Global Economic Crisis Effect On EU
• Overall Impact on Brazil
• Recovery plan

3. A BRIEF HISTORY OF THE EU
• 1952:
Treaty of Paris
European Coal and Steel Community
(ECSC)
European industry & improve commerce, post
WWII.
Started with 6 countries expanded over time to
27 countries.
Fore-runner of the EEC, EC, and EU
• Phases of growth
– European Economic Community (EEC)
(1958)
– European Communities (EC) (1967)
– European Union (EU) (after 1992)

4. GROWTH OF THE EU

5. GROWTH OF THE EU
Admission
of
Romania
and
Bulgaria
2007
Croatia and
Macedonia
are new
candidates

6. BRAZIL

7. Named after Brasilwood Tree

8. Geography of Brazil
• Brazil is the worlds
fifth largest country in
both geography, and
population.
*Population Density

9. Geography of Brazil
• It occupies roughly
half of South America.
• Brazil is home to two
of the world’s fifteen
largest cities of Sao
Paulo and Rio de
Janeiro, the Capital
however is Brasilia.
• Brazil covers a total
land area of
3,287,357 sq. mi.

10. Geography of Brazil
• The Amazon River is
located in Brazil
which is the largest
river in Brazil as well
as one of the longest
in the world.
• Amazon Jungle
World’s Largest
Jungle
• Covers upto 50% of
Brazil

11. Brazil-Facts and Figures
Total Population
Local
Currency
194,400,000
(est.)
FLAG
Literacy 86.4%
Real (BRL)
Dilma Rousseff President
GDP
$2.493 trillion

12. They gained their
independence on 7 September,
1822

13. Most of them have mixed backgrounds.
Intermarry and
share culture
Portuguese brought
African slaves.

14. CULTURE
• The core culture of
Brazil came from the
Portuguese culture
because of the strong
ties to the Portuguese
empire.
• The Portuguese
introduced their
language as well as
their Catholic religion
to the Brazilians.

15. Brazil is very crazy for sports,
especially Soccer.
Each big cities of Brazil has a
football (soccer) stadium

16. Well-known for agricultural products
Largest Coffee
producer in the
world

17. World leader in
the production of livestock.

18. Mining are major industries too
Mine lots of minerals
Major producer of steel

19. What is brazil doing to be so dynamic?
• Infrastructure
• Reducing poverty and inequality
• Increased openness to the world
• Institutional reform
What is holding Brazil back ?
• Policy failures
• Failures in the regulatory and legal systems
• Inequality
• External factors

20. Relationship between Brazil and
European union
• Brazil and the European union established their
relation in 1960. Brazil entered in a strategic
partnership with the European Union.
• The relationship is governed by the Framework
Cooperation Agreement(1992),the EUMERCOSUR framework cooperation
Agreement(1995) and the Agreement for
Scientific and technological Cooperation(2004).

21. Summits of EU -Brazil
1st EU-Brazil summit on 4th July 2007 in Lisbon.
They established an energy partnership.
2nd summit on 22nd December 08 in Rio de Janerio.
They discussed global issues, regional situations and
the strengthening of EU-Brazil relations .
3rd summit on 6th October 09 in Stockholm.
Implementation of EU-Brazil joint action Plan adopted
at the 2nd summit.
4th summit on 14 July 2010 in Brasília .
Leaders view point were discussed on implementation
of plan which were positive.

22. 5th summit on 4 October 2011 in Brussels .
Concentrated on strong united nations to tackle
global challenges .
On June 30 2009, the 1st EU-Brazil Civil society
meeting .
They discuss the social consequences of the
Financial crisis as well as energy resources .

23. Trade in goods
• The EU is Brazil’s leading trade partner and represents
23.4% of Brazil’s total trade.
• Brazil's exports to the EU are mainly primary products
(agricultural).
• The EU's exports to Brazil are mainly manufactured
machinery, transport equipment and chemicals.
• At the detailed level, the main EU exports
to Brazil were motor vehicles & parts, medicine and
aircraft & parts, while the main imports were iron ore,
coffee, oilcake, soya beans, wood pulp and crude oil.

25. SOURCE:http://www.wto.org/english/tratop_e/markacc_e/namachairtxt_dec08_e.pdf

26. Growth in EU-Brazil Trade
• The first half of 2011 showed a continued growth
in EU trade with Brazil.
• Exports rose from 14.8 bn in the first six month of
2010 to 16.9 bn in the first half of 2011, and imports
from 14.9 bn to 18.5 bn.
• As a result, the EU27 deficit in trade of goods
with Brazil increased from 0.1 bn in the first half of
2010 to 1.6 bn in the same period of 2011.
• Brazil accounted for just over 2% of the EU's external
trade in goods, and was the EU's ninth most important
trading partner in the first six months of 2011.
Source:http://europa.eu/rapid/pressReleasesAction.do?reference=STAT/11/141&format=HTML&aged=0&language=EN&guiLang
uage=en

27. EU trade with main partners

28. Brazil trade with main partners
SOURCE:http://www.wto.org/english/tratop_e/markacc_e/namachairtxt_dec08_e.pdf

29. GLOBAL ECONOMIC CRISIS
EFFECT ON EU
• Crisis starts in us sep.’08, but spreads to
Europe, where in many countries experienced
similar problems consisting of housing bubble,
excess debt of consumers and Governments.
• Crisis most severe in Greece, Portugal (fiscal
deficits) Ireland, Spain (housing bubbles,
banking system)

30. How did Brazil handle the global
financial Crisis so well?
• Brazil banks were still less exposed to the
U.S. mortgage-backed securities market
where the crisis started.
• Brazil banking sector is benefitted from
having one central regulator-The Central
Bank.
• Low unemployment rate
• Increased trade ties with other developing
and emerging economics

31. BRIC
 BRIC is a grouping acronym that refers to the countries of
Brazil , Russia ,India and China.
 It is typically referred to as “the BRICSs” or “the BRIC
countries “or “the BRIC Economies” or the “Big Four”.
 The countries of Brazil, Russia, India and China are four of
the biggest emerging economies today.
 In 2001, Goldman Sachs had predicted that , these countries
would become bigger than the six most-industrialized
nations in dollar terms by the year 2050.
 Now, things have changed to such an extent, that the
prediction has been moved closer to year 2025.

32. What is so special about “BRIC”?
“BRICS” accounts for:
 40% of the worlds population
 25% of its total geographic area.
 40% of global GDP.

33. The „B‟ in BRIC:
Unlocking Brazils growth potential
• One of the fastest growing economies in the last
•
•
•
•
century
But over-reliance on agricultural commodity
exports resulted in a development marked by boom
and bust
Focus on equitable development has resulted in
significant poverty reduction
Brazilian economy becoming less dependent on
exports
A global leader in renewable fuels.

34. What will happen to emerging economies such as Brazil?
If crisis does not become worse?
Source: IMF World Economic Outlook (June 2011)
Produced by: Ministry of Finance

35. Sound fiscal situation when compared to other countries
Budget balance forecast, in % GDP
* The Economist (September 17th, 2011 edition)
** For Brazil: Ministry of Finance forecast
Source: The Economist
Produced by: Ministry of Finance

36. How does it affect Brazil?
• Stock market volatility.
• Financial institutions exposed to the debt will
write it down, affecting their bottom line.
• Borrowing will get costlier as interest rate will
remain high.
• As a result, spending will be less leading to a
longer recession.
• Weak consumption and spending in Europe
spells trouble for the rest of the world economy,
that is struggling to get out of the downturn.

37. Impact on Brazil
• The Brazilian debate on the future of
Europe is still superficial, but has a
particular concern for the impact the crisis
will have on its growth rate.
• Brazilian companies, already operating in
the continent before the crisis, have been
revaluating whether it would make sense
for them to continue operations.

38. Impact on Brazil
The European crisis has had an impact on Brazil in three
different areas:
• The spill-over effect from Europe s trade reduction
with its current number one trading partner, China,
now Brazil s main trading partner, too;
• The decrease in exports to Europe due to protectionist
measures; and
• An overall impact of the European crisis in worldwide
growth, which has affected the Brazilian GDP,
reducing the expected growth from 3.5 percent to 2.5
percent in 2012.4

39. Impact on Brazil
• According to the World Trade
Organisation (WTO),Brazilian exports
were reduced by almost 17 percent in the
last quarter of 2011 and the first quarter
of 2012, as a result of the European
crisis.

40. Impact on Brazil
• When it comes to investments, there has
been a dual scenario. The expansion
plans of Brazilian companies that were
already operating in Europe before the
crisis have been adjusted.

41. More confidence in Brazil
5-year CDS (Credit Default Swap), in basis points
* Updated on September 21st, 2011.
Source: Moody’s
Produced by: Ministry of Finance

42. What’s being done to avoid the crisis?
• Stronger economies are pushing for stringent
spending control guidelines, where a country’s
spending will be directly proportional to its
economic strength.
• Several options are being discussed, such as,
issuance of Euro Bonds, backed by the entire EU.
• Restructuring of debt, with strict austerity
measures placed on countries at risk of default.
• Troubled eurozone countries are pledging to cut
back government spending to show they can be
trusted.

43. Recovery Plan
• Brazilian government clearly signals its firm
belief that oil should serve as a tool to
increase its international weight and
strengthen ties with key partners,
particularly China, USA and Europe.
• The Brazilian experience has proven that
crisis have invariably had a short-term
negative impact with positive long run
results.

44. Recovery Plan
• The current crisis should be a new
moment for Brazil to rethink its positioning
strategy in the global scene.
• A common agenda for Brazil and Europe
for the near future should be developed
including
1. Education and immigration
2. Trade
3. Collective security

45. Recovery Plan
• For every $2 invested in Brazil from
Europe, there is $1.5 invested back by
Brazil.
• The European crisis has represented a
unique opportunity for brazilian capitalism
to be more competitive internationally.
• The new Brazil Is entirely dependent on
Brazil for growth

46. Conclusion
• Crisis come and go, so do Governments.
Policies and institutions should be,
however, long lasting. Their strength is
essential for longevity. Brazil should look
to Europe as a vital partner in building the
new world order, with increasing influence
over emerging countries, who should take
over responsibilities in the international
arena.

47. Group suggestions for Brazil
 FISCAL CONSOLIDATION
• Achieve high PRIMARY RESULTS in 2011, 2012 and
afterwards
• Control new CURRENT EXPENDITURES
• Create fiscal space to continue expanding INVESTMENTS
and TAX EXEMPTIONS
• Create conditions to reduce INTEREST RATES
• NEW MIX OF FISCAL-MONETARY POLICIES
 TRADE DEFENSE: Federal Revenue and MDIC measures
 CURRENCY WAR:
• Reserves
• Taxation
• Derivatives
• Incentives to innovation and local content

48. THANK YOU!!!