AGRIBUSINESS: Driving force of the Brazilian Economy Quebec, 29th September, 2006
Summary Banco do Brasil Rural Credit/Agribusiness funding in Brazil Agribusiness importance for Brazil Banco do Brasil and Agribusiness Actions in Progress Agribusiness Trends
Banco do Brasil 23.7 million customers (market leader in Brazil). Individuals: 22.2 million Companies: 1.5 million 41.7 thousand ATMs (largest network in Latin America) 8.1 million internet banking users (market leader in Brazil) 14.9 thousand domestic points of services (largest network) Operates in 23 countries with 17 branches, 8 sub-branches, 10 Representative Offices and 5 subsidiaries Source: 1 st Half 06 Results
Banco do Brasil Net Income: US$ 1.8 billion (1 st Half 06); Total Assets: US$ 126 billion (leader in Brazil); ROE - Annualized: 47.8%; Loan Portfolio: US$ 52 billion (leader in Brazil); Exports domestic market share: 36.8% (leader); Credit Cards: 9.9 million (leader in Brazil); Assets Under Management: US$ 79 billion (leader in Brazil); New customers: 1.7 million in the last 12 months; Source: 1 st Half 06 Results
Summary Banco do Brasil Rural Credit/Agribusiness funding in Brazil Agribusiness importance for Brazil Banco do Brasil and Agribusiness Actions in Progress Agribusiness Trends
Rural Credit Structure MTb MDA MAPA Treasury Ministry CMN MIN MMA S.N.C.R. Central Bank Financial Agents Technical Assistance Entities Banks Cooperatives
Rural Credit Concepts Rural Credit: The financial resources supply, by institutions of National Rural Credit System, for agribusiness sector. Goals: Finance the costs of producing and marketing agricultural products efficiently; Stimulate the rural investments; Encourage the introduction of rational methods into the production system; Strengthen the agribusiness sector.
Rural Credit Objectives Costs: Provide support for productive cycle expenses. Investment: Provide support for goods and services expenses generating benefits for more than a production cycle. Marketing: Provide support for postproduction expenses.
Agribusiness Financing in Brazil Until 1994: Extreme dependence on official resources; A great government interference in the sales via minimum price ; Financial system retreat due to the elevated risk of the activity; Disestablishment of indexed financing costs, compared to the farming products prices. Results: Producers and cooperatives with high debts; Official resources exhaustion; High level of default; Conflict among producers, banks and government.
Agribusiness Financing in Brazil What the government did: Stabilized the Brazilian economy (Plano Real); Established prefixes rates for the rural credit; Developed special programs for debt restructuring: Securitização, Pesa and Recoop; Adopted the extension of credit assistance systematically for each crop; Criated new Credit investment Portfolio for the sector.
Agribusiness Financing in Brazil At present: Low default rates; Use of modern mechanisms as anticipated selling and future markets. Varied financing instruments: Rural credit; Own resources; Anticipated sellings; Exchange of resources; Supplier s credit; General credit.
Summary Banco do Brasil Rural Credit/Agribusiness funding in Brazil Agribusiness importance for Brazil Banco do Brasil and Agribusiness Actions in Progress Agribusiness Trends
Agribusiness importance for Brazil GDP 33.0% Brazilian Exports 37.0% Employment 37.0% Source: MAPA
Agribusiness importance for Brazil Brazilian Agribusiness Commodities Production and Exports Production Exports Coffee 1 st 1 st Orange Juice 1 st 1 st Sugar 1 st 1 st Soy 2 st 1 st Bovine Meat 2 st 1 st Poultry 2 st 1 st Tobacco 2 st 1 st Fruit 3 st - Source: Mapa/2005
Agribusiness importance for Brazil Sustainable Production Territorial distribution estimated = 851 million hc Permanent cultures 2% Cities, lakes and routes 2% Amazonas rain forest 41% Planted forest 1% other uses 4% Annual cultures 6% No explored areas 12% Protected areas 6% Ranching 26% Fonte: Embrapa
Agribusiness importance for Brazil Brazilian crop Production and area 123.2 119.4 Production (Million tons) 100.3 119.1 113.9 106% 68.4 57.9 68.3 37.9 38.5 35.6 76.0 81.1 73.6 78.4 76.6 82.4 AREA (Million hc) 83.0 96.7 39.1 38.5 37.0 36.6 35.0 36.9 37.8 37.8 40.2 43.9 47.4 49.8 47.2 24% 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 Source: CONAB / MAPA
Agribusiness importance for Brazil Production (1.000 t o n s ) 5.200 5.400 4.050 6.045 4.052 Brazilian meat production 7.517 6.900 6.650 6.270 7.300 5.820 6.736 6.040 5.977 5.526 4.875 4.461 8.494 7.843 8.350 7.700 8.950 8.750 162% 68% 106% 3.411 1.330 1.470 1.560 1.540 1.699 1.834 2.556 2.730 2.872 2.698 2.679 2.735 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Bovine Poultry Pork Source: CNA, ABEF e ABIECS
Agribusiness importance for Brazil Brazilian Trade Balance 44.7 40 30 Agribusiness 38.4 U S $ b i l lion 20 10 0 Brazil 6.3-10 -20-30 Other 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 Fonte: MAPA
Agribusiness importance for Brazil Cotton 3.5% Leather and its Products 7.2% Brazilian Exports - Main Products Jul/05 a Jun/06 Sugar and Alcohol 11.5% Wood products 8.3% Cellulose/Paper 8.3% Coffee 5.9% Tobacco 4.0% Meat 18.4% Fruit Juice 3.0% Soy Complex 20.9% Others 9.0% Fonte: MAPA
Agribusiness importance for Brazil Brazilian Exports - Major Markets Jul/05 a Jun/06 China 8.1% United States 14.0% Middle East 7.2% Europa (others) 10.0% Asia (excluding Middle East and China) 12.2% Africa 6.5% Mercosul 3.0% E U 31.5% Ocean 0.4% America (other) 7.1% Fonte: MAPA
Agribusiness importance for Brazil Soybean: Areas used Source: IBGE - 2002
Agribusiness importance for Brazil Sugarcane: Areas used Source: IBGE - 2002
Agribusiness importance for Brazil Coffee: Areas used Source: IBGE - 2002
Agribusiness importance for Brazil Cotton: Areas used Source: IBGE - 2002
Agribusiness importance for Brazil Reasons for Agribusiness success in Brazil Soil, climate, luminosity, topography, water etc; Expertise and management capacity of producers; Improvement in logistics and infrastructure; Technological and genetic development; Use of modern production techniques; Attribution of credit risk to the financial system; Modernization of trade policies, with decreasing governmental interference.
Summary Banco do Brasil Rural Credit/Agribusiness funding in Brazil Agribusiness importance for Brazil Banco do Brasil and Agribusiness Actions in Progress Agribusiness Trends
Banco do Brasil and the Agribusiness 1.5 million agribusiness producers in client portfolio; 3 thousand agribusiness companies in client portfolio; 56.5% of the agribusiness credit (spent) in the Country; Agribusiness share is 35% of BB s credit portfolio; US$ 14,4 billion spent in the 2005/2006; www.agronegocios-e.com.br: US$ 1 billion in 2005.
Banco do Brasil and Agribusiness US$ million Share at the Domestic National Financial System (%) 40.000 56.5 54.3 55.2 55.1 53.6 54.8 36.000 53.3 50.4 56.5 32.000 28.000 24.000 20.000 16.000 12.000 8.000 4.000 - jun/04 set/04 dez/04 mar/05 jun/05 set/05 dez/05 mar/06 jun/06 National Finance System - NFS BB Participation (%) Fonte: BACEN
Banco do Brasil and Agribusiness Credit portfolio profile (US$ 52 billion) Retail 17% Wholesale 14% Agribusiness 35% Small Business 13% Other 3% Foreign Trade 9% Abroad 9% Source: 1 st Half 06
Banco do Brasil and Agribusiness Agribusiness Details MARKETING 12% OTHERS 3% CPR 6% INPUT/WORKING CAPTIAL 39% INVESTIMENT 40% Source: 1 st Half 06 Results
Banco do Brasil and Agribusiness Credit portfolio by geographic region and main products 3% Financed items % Livestock/cattle/poultry/pork 18 Soy 13 Corn 8 Rice 3 Coffee 3 Cotton 2 26% 24% 7% Source: 1 st Half 06 Results 40%
Banco do Brasil and Agribusiness Ways of Performing in the Agribusiness Production: Rural Credit CPR Future Markets and Options Agronegocios-e.com.br. Ouro Agrícola Insurance Farming Industry: Industrial Farming Credit General Credit Exports: Industrial Farming Credit. Advancements on exchange agreements (ACC) and advancements on delivered exchange agreements (ACE). Government: Electronic auction Regulator stocks PROAGRO - Insurance CPR Food
Banco do Brasil and Agribusiness Small Holder Agriculture Participation in Brazilian Production Cassava Beans Milk Corn Poultry and Eggs Swine/Pork 2.4 84% 67% 52% 49% 40% Loans (US$ Billion) 1.6 58% 1.9 1.0 0.4 0.4 0.5 0.6 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 Fonte: MDA
Banco do Brasil and Agribusiness Supporting Regional Development Goals: Promote social inclusion; Democratize credit access; Stimulate associations and cooperative societies; Improve Quality of Life Indexes. Family Assistence (thousands) 113 70 17 2004 2005 Mar/06
Banco do Brasil and Agribusiness Developed activities Local total credit disbursed Storage structure Transport structure Rural operations experience Non performing crops over the last 5 years Producer s age Qualitative Risk Analysis Machinery and implements External sources punctuality Punctuality in operations Producer s farm Personal History Farmer s crop experience Type of property
Banco do Brasil and Agribusiness Farming Technical Risk System Soil Climate Road Warehouse Productivity Cost Price Technology Distance Market
Banco do Brasil and Agribusiness Producer s average productivity in the last 3 regular crops; Regional production system s minimum productivity; Regional production system s maximum productivity; Producer s number of non-performing crops over the last 5 years; Risk of the activity. Technical Risk Analysis
Summary Banco do Brasil Rural Credit/Agribusiness funding in Brazil Agribusiness importance for Brazil Banco do Brasil and Agribusiness Actions in Progress Agribusiness Trends
Actions in Progress Futures and Options Markets; Rural Insurance Programs; Integration Systems Support Programs; Enhancement of Reforestation Programs; Localized Rural Wharehouse Development; Biofuel Production Program; Simplication of the Rural Credit Methodology; Improve the service for Small Holder Farmers.
Summary Banco do Brasil Rural Credit/Agribusiness funding in Brazil Agribusiness importance for Brazil Banco do Brasil and Agribusiness Actions in Progress Agribusiness Trends
Agribusiness Trends Intensification of hedge use by rural producers; Intensification of grain selling via Internet and logistics services as well; Maintenance of the concentration in few farming commodities buyers; Concentration of logistics in big tradings; Raise of the private banks interest in the farming market; The importance of the farming sector in the economic growth process as well as in the result of the country s external accounts.
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