Investments Opportunities in Bahia

Predictability, good regulation and respect for contracts.

Basics facts and Economic Infrastructure

BAHIA INFRASTRUCTURE PROJECTS

World Economic Outlook

World Economic Outlook

Asia Leading the Global Recovery

“While the rich world puts its house in order, developing countries are becoming a new engine of global growth and a pulling force for advanced economies.”

World Bank.

China leadership role in the world economy

• Asia Leading the Way.

• The recent crisis has underlined the emergence of Asia as a global economic powerhouse.

• China and India are leading the way, but the phenomenon is by nomeans limited to these two countries. Asia’s economic importance is unmistakable.

• Within five years Asia’s economy will be about 50 percent largerthan it is today, account for more than a third of global output, and be comparable in size to the economies of the United States and Europe.

• By 2030, Asian gross domestic product (GDP) will exceed that of the Group of Seven major industrial economies (G-7).

���������� ������������ � ���

� ���������������������� �� � �

Bahia Challenges & Opportunities

������������� �������������� �� �������

Bahia is a new growth engine

�� ��� ������� ����� � ����

Bahia Infrastructure sector offers profitable opportunities for trade partners. Many projects are available and our mission is offers the opportunity to get involved.

Global Development 2010: Shifting Wealth

Perspectives on Global Development 2010The dynamics of the global economy over the last 20 years, and the economic rise of China and Brazil, highlights the increasing interactions between our countries through trade and foreign direct investment.

As of 2008, developing countries were holding USD 4.2 trillion in foreign currency reserves, more than one and a half times the amount held by rich countries.

These are just a few examples of a 20-year structural transformation of the global economy in which the world’s economic centre of gravity has moved from OECD members to emerging economies, a phenomenonal “shifting wealth”.

Although the process has been ongoing for 20 years, the opportunities for our countries are only starting to be understood.

• Global recovery has advanced: activity in emerging economies has been sustained by strong domestic demand and the recovery of global trade.

• Major economies in Asia — China, India— remain in the lead, followed by Brazil in Latin America.

• China’s rapid economic growth since 1978 has resulted in a doubling of the country’s GDP every 7–8 years.

• This rapid growth bring a significant expansion in China’s external trade. The large economy has grown fast and has become increasingly and quickly integrated with the world economy.

Potential gains from China-Brasil trade

Developing countries now account for around 37% of global trade, with South-South flows making up about half of that total.

Last month Sinopec invest $7.1 billion to develop offshore fields like those that led to the $70 billion Petrobras I.P.O.Sinopec also make $10 billion aprocurement contract e a 1.000 Km gasene.

Trade could be one of the main engines of growth over the coming decade. The direct channels of interaction between China and Brazil – such as trade and foreign direct investment (FDI) – have been intensifying.

A win-win situation?• Improvements in the range and quality of exports, greater

technological dynamism, better prospects for doing business, a larger consumption base – all these factors can create substantial welfare benefits for the whole world.

• That is not to deny the challenges. Environmental sustainability, growing levels of inequality within countries and increased competition are three significant issues raised by shifting wealth. The birth pains of this new economic world order have also been accompanied by enormous global imbalances. These challenges havebeen building over the last two decades.

• Despite these challenges, the overall picture is a positive one for development.

Economic policies should be:

• Develop strategies to cacth the opportunities of shifting world.

• promote foreign direct investment, learning the lessons from successful clusters and using investment links to achieve technological innovation systems;

• Using sovereign wealth funds to promote growth and investment in the economy;

• respond to the growing demand for agricultural exports to improve agricultural productivity, through greater support to R&D and extension services, and technological transfer.

Doing Business

Chinese visitors are still a rare sight on the streets of Brazilian cities - but not for much longer. And when they come, they’ll know where to get their cash: Brazil’s biggest bank: Itaú signed yesterday a cooperation agreement with CHINA UNIONPAY (CUP).

By this contract, CUP clients with their 2.2 billion credit and debit cards will be able to withdraw at over 30,000 Itaú ATMs 24 hours a day.

��������� ��������� ���

The World Bank predicts that Brazil will move from being the tenth largest economy in the world today to the five biggest economies by 2025

Brazil is one of the fast-growing Bric economies –Brazil, Russia, India and China – that are reshaping the international order.

The $67bn share offering by Petrobras, the state oil company, is the world’s largest ever and just the expression of Brazil’s emerging financial clout.

International Trade Flows

Brazil - Merchandise Exports by Region

In 2009 China became the leading trade partner of Brazil.

Brazil is one of the most attractive markets for infrastructure in the World today thanks to favourable macroeconomics, a competitive infrastructure sector developing fast.

Macro-economics: 4% stable projected GDP growth, an increasing population (close to 200 millions people), being one of the main recipient of forign direct investment worldwide and a rapidly increasing motorization rate, shape a bright future.

In Brazil northeast, the Bahia state is moving forward, with a lot of projects in railways, roads and ports. There are local and international players and a stable legal framework allowing an increasing number of projects being tendered.

The government Accelerated Growth prgram (PAC) is making progresses. With investments of more than US$500 billons planned in the period 2011-14. Opportunities for investment in infrastructure in Brazil exist mainly in roads, railways, aiports, stadiums and energy. The fact that Brazil will host the two premier world sports events, FIFA World Cup 2014 and Olympic Games 2016 is pushing all this infrastructure development.

Brazil is a relevant market for any global player in infrastructure.

Strategic Logistic and Transport Plan

BAHIA INFRASTRUCTURE PROJECTS

Commodities lead the way

�������� � �� �����������

��� ������ ��!�"

��������# � �� ��$ ��� ���� �� ���� �� ���% � ����� ���� �������&���''�( �$ ) �$

������� � ������� ������

Iron Ore Reserves: the importance of China to Bahia

Trade could be one of the main engines of growth over the coming decade.

Bahia East-west RailroadBahia Port to Central Brazil

Extension: 975 km

Total Value: R$ 4,8 billions

Term: 2011

China is the largest developing country outward investor with an investment stock estimated at more than USD 1 trillion.

FDI in Bahia has also increased.

Railway, Port and Airport Railway, Port and Airport

Intermodal Transport System

SISTEMA PONTE SALVADOR-ITAPARICA / BR-116 / BR-101 / BR-242

Intermodal Transport SystemPort - Airport - Railway - Roads

•Market and supplier access are the main factors affecting investments entry. Also the access to customers and suppliers of inputs are key determinants of FDI inflows.

•Our Governments spend large sums of money to entice foreign direct investment (FDI), offering generous tax incentives. We believe that foreign firms will generate positive externalities on domestic firms.

•The State fiscal Programs: Desenvolve and Probahia support with tax isention the atraction of foreign direct investment (FDI).

Incentives for direct investment (FDI)

*�� ��% � �

World Cup 2014The Brazilian Strategy

The sense of urgency created by the advent of the World Cup in 2014 and the Olympics in 2016 can be very positive for Brazil as this stirs the public and private sectors to carry out badly needed infrastructure investments.

INVESTMENT OPPORTUNITIES FOR FIFA 2014 WORLD CUP IN THE CITY OF SALVADOR, STATE OF BAHIA.

New Stadiun Fonte Nova

The sense of urgency created by the World Cup in 2014 and the Olympics in 2016 can be very positive for Brazil as this stirs the public and private sectors to carry out badly needed infrastructure investments.

• This project now is under progress as Private Public Partnership(PPP) to build and operate a new World Cup 2014 stadium.

• The stadium will feature seating for 50,000.

• Transportation, energy, sanitation, and other infrastructures ofthe project will be developed to meet international standards.

• Hosting of the World Football Cup in 2014 and the Olympic games in 2016 will stimulate much response, the construction of roads, airports, and stadiums.

World Cup 2014 Stadium

Logistic Multimodal Transport PlataformInfrastructure sector offers profitable opportunities for trade partners. Many projects are available and our mission is offers the opportunity to discover how to get involved.

Opportunities in agribusiness and renewable energies: wind, solar and biofuels.

Juazeiro Logistic Plataform• Juazeiro has a privileged geographical location in the center

of brazilian northeast, and the radial connection around Juazeiro in addition to its network, facilitate the transport ofmerchandise and favors the intermodal infrastructure.

• Nearby Petrolina has a good intermodal infrastructure and facilities that connect with those of Juazeiro. Together, the two interact synergistically to create a logistic platform.

• Platforma Logística do São Francisco is a PPPI project to convert Juazeiro into the largest logistic platform in the Brazilian Northeast.

The choice of industrial leaders:

• Ford Motors Automotive Complex: U$ 1,9 Billion investment. Production capacity for 250.000 vehicles / year.

• Paper and Pulp Industry: Investments of more than U$1,5 billion over the last 5 years

• Oil and Gas Industry: New oil discoveries raising Brazilian reserves from 14th place to 4th place in the world.

Why Invest in Bahia?

Oil Industry Investments

•Brazil has 12 billion barrels of proven oil reserves, the second-largest in South America after Venezuela.

•Petrobras has the world’s largest capital expenditure programme, worth $220 billion over the next five years.

•The discoveries of oil made by Petrobrás have made it ease to forget that Brazil is already the world´s largest exporter of coffe, sugar, chickens, beef and orange juice. It also exports vast amount of soya and iron ore, as well as other ores and metals.

Romeu TemporalEconomic Adviser

Governo do Estado da Bahia

Secretaria de Planejamento

This presentation summarizes Bahia's economic prospects.

The state's future looks bright; but it will require lots of hard work and leadership to bring the less fortunate people out of poverty.

How has China Handled the Global Crisis?

• China was hit hard by the global financial crisis. However, the authorities policy response mitigate the impact on the economy and ensured that China has led the global recovery.

• Public infrastructure spending was quickly increased, taxes were lowered, the government put in place incentives to boost purchases of consumer durables, and pensions, social transfers, healthcare and education spending were all raised.

• China’s recovery had positive spillovers to the region and the global economy, initially through increased demand for commodities—contributing to an upswing in global commodity prices—and later through higher imports of capital goods.

The Great Trade Collapse To what extent has trade recovered from the recent global recession?

•Have the speed and extent of the recovery differed among economies,particularly between those that suffered a banking crisis and those that did not?

•Has the recovery varied across different product groups?

•How has trade behaved in the wake of previous banking and debt crises?

•What factors are associated with sharp declines in trade following a crisis?

•What are the implications for the recovery of trade from the recent crisis?

The Recovery in Trade

Has Trade Recovered?

Trade gravity model

• The gravity model is widely used to explain the level of bilateral trade flows on the basis of individual characteristics of each partner (size and level of economic development) as well as the characteristics of the country pair (distance between them and whether they share a common border, language, or currency).

•Chinese inflation has been modest.

Supply factors, including those captured through upstream foreign commodity prices, have been important drivers to curb inflation.

Domestic demand and monetary conditions seem less important, reflecting a large domestic output gap generated by many years of high investment.