Brazil Market Update and Opportunities in Infrastructure , 2014 FIFA World Cup, & 2016 Rio Olympic Games

Greg Wallis

Consul-General & Trade Commissioner

Australian Trade Commission

São Paulo, Brazil

28 March 2011

Brazil Overview & Update

Australia Unlimited

Images

Australia Unlimited

Source: Invest Brasil

Brazil has a combined geographic size, population and economy shared by only the USA and other BRICs

Reality

Australia Unlimited

Why Brazil?

• 29 million new consumers in past 8 years; 2/3 Brazilians now middle/upper classes

• World’s 7th biggest economy (recently overtaken Italy; soon to overtake UK and France)

• Stable and growing: 7.5% growth in 2011; 4.6% predicted for 2011

• No. 1 global exporter and/or producer of sugar, coffee, orange juice, ethanol, iron ore,

soya beans, chicken, beef

• World’s largest unused arable land

• Rated 3rd most attractive investment destination by UNCTAD

• 2 major factors that define Brazil today vs. yesterday:

• Consistent long-term decline in interest rates, which has stabilized businesses and

established a long-term business culture

• Consistent decline in income inequality

• Consumers have an increasing capacity to purchase imported goods coupled with an (until

recently) unprecedented access to credit. Auto financing, home mortgages, credit and

debit cards are penetrating previously "unbanked" sectors of society

Australia Unlimited

Main Growth Drivers

• Changing demographic – rising middle class • Global demand for commodities, especially China • Growth Acceleration Programme (PAC) – launched in 2007 (R$ 500billion). PAC

2 calls for an even larger combined public and private investment of almost R$1.6 trillion to 2020. Massive investments in energy, transportation

• FIFA World Cup 2014 and 2016 Olympic Games

Australia Unlimited

Current Australian Exports/Investments in Brazil

• Currently some 430 Australian merchandisers export to Brazil

• 55 Australian companies established in Brazil

– Pacific Hydro’s $160 million wind power investments in NE Brazil

– BHP Billiton, Mirabela, Troy Resources, and 11 other juniors have investments in gold, iron ore, bauxite, oil and gas

– Nufarm has a $350 million investment in crop protection products

– Wellard and Sanger have both invested in Brazil to produce meat for global markets

– QBE provides micro insurance

– Populous involved in the master plan design of Natal Soccer Stadium for 2014WC

– MI Associates has contracts with Rio 2016 Organizing Committee for Organizational Consultancy, Games Foundation Plan and National Olympic Training Centre

Australia Unlimited

Political Update

• New Dilma administration is generally agreed to have made a promising start, with a business focus and reining in of spending (restricted minimum wage rise)

• Foreign policy move towards closer relations with USA

• Recognized importance of delivery of successful World Cup & Olympics

• Efficient administrator, not charismatic leader

• Challenges:

– can she manage her coalition?

– can she effect political and taxation reforms

– can she make public services more efficient, cost-effective and responsive to the needs of the population?

– can she manage an overheated economy?

• Overriding message - continuity

Infrastructure

Australia Unlimited

Brazil’s Infrastructure Challenges

• Road, Rail and Metro transportation

• Airports

• Ports

• Sewage systems

• Water management

• Solid waste management

• Power

• Information and Communication Systems

Australia Unlimited

Plan of Accelerated Growth 1 (PAC1)

• Recognition that infrastructure in Brazil is inadequate and that needs

extend beyond what is required for the World Cup & Olympics

• A federal government program with planned investment of around R$

500 billion between 2007 and 2010.

• The priorities were sanitation, housing, transportation, energy, power

and water resources, among others.

• The final assessment of the PAC1’s performance, made by the federal

government, indicates that 88% was carried out at a cost of R$ 444

billion.

• R$115 billion was spent in the Oil & Gas sector

Australia Unlimited

PAC2

• Introduced in 2010, investments of $R959 billion between 2011 and 2014 and

$R1.59 trillion in total

• Sectors

Improving our Cities R$57.1 billion

Citizen Community R$23 billion

My Home, My Life R$278.2 billion

Water and Electricity for All R$30.6 billion

Transportation R$104.5 billion

Power R$465.5 billion

TOTAL R$958.9 billion

Australia Unlimited

Australia Unlimited

Rio-São Paulo High Speed Train

Olympics & World Cup

Australia Unlimited

The 21014 FIFA World Cup and 2016 Rio Olympics is an opportunity for Australia and Brazil to build relationships at a number of levels because of the perceived expertise of Australia in both the preparation and management of the games, and as an Olympic sporting power.

Australian Sports Events Expertise

Khalifa Stadium, Doha “Watercube”, Beijing Olympics Etihad Stadium, Melbourne

Australia Unlimited

Upcoming Sports Events in Brazil

2011 2013 2014 2015 2016

Military Games Confederations Cup World Cup Copa America Olympic Games

Australia Unlimited

2014 FIFA World Cup Brazil

• The 2014 World Cup will be conducted in 12 Brazilian cities in the five geographic regions.

• Public works projects of some US$59 billion are planned in order to develop the necessary infrastructure (stadiums construction, transport system, roads & highways, airports, electric power network expansion, telecommunication networks, water & waste) in addition to contracts for the staging of the event.

• Biggest challenge: Airports

Australia Unlimited

Host Cities – Infrastructure Investment

US$ 1.7 bi

US$ 3.2 bi

US$ 2.9 bi

US$ 2.4 bi

US$ 4.7 bi

US$ 5.6 bi

US$ 8.8 bi

US$ 3.9 bi

US$ 3.4 bi

US$ 0.9 bi

US$ 2.6 bi

US$ 19.3 bi

Australia Unlimited

Investments by type

Sector US$ Million Responsibility

Urban Mobility 35,042 States &

Municipalities

Airports 3,938 Federal

Ports 425 Federal & Private

Sector

Electric Energy 1,530 Federal

Basic Sanitation 7,139 Federal

Hotels 7,256 Private Sector

Hospital 674 Federal

Security 720 Federal

Stadium/Arenas 3,111

States &

Municipalities /

Private Sector

Total 59,839 Source: ABDIB – Brazilian Association of Infrastructure and Basic Industries

Australia Unlimited

Sustainability in the World Cup 2014

FIFA and the Local Organising Committee (COL) of the Brazilian Football Confederation (CBF) have decided that the World Cup 2014 should be the “Green Cup”

Consequently, all stadium projects (new and remodelled) are being designed in accordance to sustainability guidelines, including:

• Recycling and use of demolition materials;

• Permeable flooring and roofing throughout the complex;

• Green roofing;

• Use of solar panels for harnessing energy;

• Use of efficient lamps and energy-efficient equipment;

• Rainwater collection; storage and re-use;

• Material specifications taking into account sustainability criteria;

• Waste management during construction and throughout the arena’s life cycle.

Australia Unlimited

2014 World Cup Stadiums Overview

Investments needed in all of the 12 selected cities. The bids related to the public arenas are structured in two different models:

• 5 Public-Private Partnerships (PPP)

- Mineirão Complex – Minas Gerais

- Fonte Nova – Bahia

- Castelão Stadium – Ceará

- Arena Recife – Recife

- Dunas Arena – Rio Grande do Norte

• 4 Public Arenas to be operated by public authorities

- Amazonas Arena – Amazonas

- Pantanal Arena – Mato Grosso

- Maracanã – Rio de Janeiro

- Mané Garrincha – Brasília

• 3 Private Arenas

- Corinthians Arena – São Paulo

- Beira Rio – Rio Grande do Sul

- Baixada Arena – Paraná

Australia Unlimited

Decision Making

2014 FIFA World Cup Organising Committee

• The overarching structure that is liaising with the 12 host city organizing committees.

• It reports to FIFA headquarters and it is responsible for delivering the World Cup.

Host City Work Groups (Local Organizing Committees)

• State and Municipality authorities that will be responsible for procurement and to deliver the event in each city.

Australia Unlimited

• First South American host in the history of the Games has generated great popular support and enthusiasm

• Three levels of Government working together

• Games staged in four clusters around the city (Barra, Deodoro, Maracana and Copacabana). 11 permanent and 4 temporary sport installations will be constructed plus modernization of existing ones

• A BRT (Bus Rapid Transport) system will be implemented in the city to connect the planned clusters as well as modernization and extension of metro lines

• Main driver/concern: Urban Legacy

Rio 2016 Olympic Games

Australia Unlimited

Rio 2016 – Olympic Clusters & Sports Venues

Existing 54%

Temporary 20%

Additional (New) 26%

Barra

Deodoro

Copacabana

Maracanã

Australia Unlimited

Investments by type

Source: ABDIB – Brazilian Association of Infrastructure and Basic Industries

Sector US$ Million

Airport & Port 1,001

Highways & Railways 4,451

Accommodations 56

Sports Facilities (Competition & Training) 490

Olympic Village 427

Barra Media Village 812

Electricity Infrastructure 770

Environmental Management Systems 1,205

Health 10

Security 813

IBC/MPC 203

Urban Legacy 820

Total 11,059

Australia Unlimited

Olympic Games Organizational Structure

Rio 2016 - Local Organising Committee

• Equivalent to 2000 SOCOG; responsible for games organization and operations

Olympic Public Authority (APO)

• Equivalent and inspired in the London ODA – just created and to be headed by Henrique Meirelles (ex President of Central Bank). Peak organization for delivery of the Olympic Games

Brazil 2016

• Procurement body and operational arm of the APO, for contract co-ordination & procurement

Australia Unlimited

• APO interacts with all government institutions (3 levels: Federal, State and City)

• Procurement of non-Olympics specific infrastructure also done at 3 levels of government

IOC / IPC

Rio 2016 APO

GOV

Brazil 2016

Games Organizational Structure

Australia Unlimited

Opportunities for both events • Master planning and project management

• Urban infrastructure improvements - legacy planning

• Design, development and construction of venues and related games infrastructure

• Overlay – temporary venues, modifications to existing venues and temporary requirements for operations

• Games services, accessibility, catering, cleaning and waste

• Games management, planning and coordination, training staff and volunteers

• ICT – technology operations and telecommunication

• Transport (air, road, rail, metro), accommodation and service infrastructure

• Major event security and risk management

Australia Unlimited

Opportunities for both events

• Arena Management

• Branding, communication & marketing

• Environmental consultancy

• Security consulting (crowd control and risk management)

• Delegations’ accommodation planning

• Opening and Closing Ceremonies

Australia Unlimited

Other Infrastructure Projects

• In addition to funding allocated under the PACs and projects planned for the World Cup & the Olympics, states in Brazil have their own infrastructure investment programs

• In Sao Paulo alone, there are currently R$22bn worth of PPP infrastructure projects underway or planned in the next few years

Australia Unlimited

• Brazil is undergoing an unprecedented period of investment in infrastructure

• Much of this is related to the World Cup and Olympics, but there is also the PAC2 and states’ programs

• Project opportunities range from PPP engagement level down to the “nuts and bolts” of specific technologies for a wide range of sectors including construction and transportation

• Key contacts may be engineering companies, Rio 2016, Brazil 2016 or host city authorities – we can help identify

• Most World Cup stadium design and refurbishment contracts already let but many opportunities remain

Key Messages

Australia Unlimited

• Oversized and convoluted tax system

• Distorted labour market

• Poor educational system

• Slow judicial system and bureaucracy

• Weak infrastructure

• Low “Ease of Doing Business” ranking

…but the market is huge, growing, and becoming more accessible every year, and foreign companies are welcome and successful

Brazil Challenges Still Remain

Australia Unlimited

Planned Activities: 2011/2012

Austrade and ally government and industry bodies are planning several activities (including trade missions; networking events; seminars) to engage Australian companies and Brazilian public and private entities: • SportAccord International Convention (London 3-8 April 2011) • Rio’s Mayor Visit to Australia (TBD)

• Business Club Australia (London 2012 Olympic Games)

• Visit of Minas Gerais State Government 2011

Australia Unlimited

For latest news and updates on the procurement processes please access: www.brazil2014-rio2016.com

To register your interest please access: www.brazilgames.icn.org.au

Register your interest!

Austrade is working closely with allies (including ICN, AISES, ALABC and ABCC) in developing contacts with a wide range of Brazilian companies and organisations with a connection to the World Cup and the Olympics. We are keen to promote specific Australian capability, and would be interested to receive profiles from relevant Australian suppliers since our aim is to present portfolios of specialist capability to clusters of related contacts.

Australia Unlimited

Austrade – Contact Details in Brazil

Greg Wallis Fabio Nave Consul General & Trade Commissioner Business Development Manager Tel: +55 11 2112 6222 Tel: +55 11 2112 6212 E-mail: greg.wallis@austrade.gov.au E-mail: fabio.nave@austrade.gov.au www.austrade.gov.au/2014-Brazil-FIFA-World-Cup-and-2016-Rio-Olympic-Games/default.aspx

For more information please access:

Thank you!

Greg Wallis

Consul-General & Trade Commissioner

Australian Trade Commission

São Paulo, Brazil

greg.wallis@austrade.gov.au