THOMAZ ZANOTTOHead Director

DEREXDepartment of Trade and Foreign Affairs

Brazil and the global value chains

The Industry System

Accounts for 131 sector business associations which stands for about 150,000 regional and national firms

• 3rd largest economy in Latin America, after

Brazil and Mexico;

• 70% of Brazilian manufacturing GDP;

• 33% of Brazilian total GDP;

• 48% of domestic production of vehicles;

• 3rd largest aircraft producer in the world;

Source: Investe SP, IBGE, MDIC

The state of São Paulo

DEREX | Department of Trade and Foreign Affairs

Bilateral trade and investment relations...

Source: Aliceweb; Central Bank of Brazil

• 5th largest single direct investor in

2013 (US$ 2.5 bn);

• 6th largest single holder of assets

in the country (US$ 31.3 bn in2012)

• 5th main destination of Brazilian

exports in 2013 (US$ 7.9 bn);

• 7th main source of Brazilian

imports in 2013 (US$ 7.1 bn);

DEREX | Department of Trade and Foreign Affairs

Recently announced japanese investments in Brazil...

• US$ 500 mn in a

new automotive plantat Itirapina, state ofSão Paulo;

• US$ 50 mn in an

eolic energy park atthe state of RioGrande do Sul;

• US$ 500 mn in a

new motor plant atthe state of Goiás;

• US$ 10 mn in a

new plant for medicalinstruments at thestate of São Paulo;

Source: Valor Econômico, 15/08/2014

+ investments in insurance and banking services

DEREX | Department of Trade and Foreign Affairs

Current Brazilian economic portrait

• 1970’s: industry development driven

by imports-substitution;

• Resulted in a diversified industrial

base, from steel to textiles;

• Difficulties in integrating logistics

within the country and the region;

• Custo Brasil: outdated tax system,

bureaucracy compliance, cost of

capital, labour legislation, etc;

Brazilian insertion in the global

value chains is a work in progress...

DEREX | Department of Trade and Foreign Affairs

Relevant cases of Brazilian productive chains...

• Value added: each US$ 1.00Embraer exports, around US$0.70 were imported;

• Main upstream activities(project and development)done in Brazil;

• Globalized supply chain withhigh skilled services content;

• Government procurement in theE&P value chain;

• Opportunities for foreigninvestment in services ofengineering and management ofproduction (derivatives);

• Distribution synergy (e.g: gasoducts crossing industrial clusters);

Oil and Gas:

DEREX | Department of Trade and Foreign AffairsDEREX | Department of Trade and Foreign Affairs

Regional opportunities for insertion in the value chains...

Brazilian automotivesector:

Trade with Argentina and Mexico goes either way in the

automotive value chain, accounting for:

• 15% of Brazilian imports of autoparts (US$ 1.9 bi);

• 72% of Brazilian exports of autovehicles (US$ 4.9 bi);

• 6 international agreementsrelated to the sector enhanced the productivechains with partners in theregion;

Source: ANFAVEA and Sindipecas

DEREX | Department of Trade and Foreign Affairs

Proposals of integration

Deeper physical integration among the countries of

MERCOSUR and ALADI;

Technological cooperation with high developed

economies, like European Union, United States and

Japan;

Trade and investment agreements with strategic

partners to boost upgrading along the value chains;

Enforcement of trade facilitation initiatives among

Latin and African countries;Position paper of FIESP, launchedthis June;

Thank you!

Thomaz ZanottoHead Director

55 (11) 3549 4532cderex@fiesp.org.br

DEREX | Department of Trade and Foreign Affairs