2. A SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
Table of contents
Introduction 3
A look ahead on the highway
to the year 2030 4
The paper product used in this publication originates
from forests under socially correct management acting
Under the banner of sustainability 10 in an environmentally correct and economically feasible
way. This is one of the ways that we contribute and
demonstrate our commitment to the sustainable
development of the planet and to the future of the
Map of consumption opportunities 20 communities where we operate.
3. Introduction
This is the second in a series of five to estimate, for example, the configuration
publications that analyze the horizons of the of income brackets and their consumption
Brazilian economy for the next decades, with needs over time – basic planning
a special focus on its most strategic sectors, information for companies that operate or
examined both from the perspective of their intend to operate in the country.
importance to domestic revenue generation
and the business opportunities that they This work, a joint effort between
represent over time. The approach to the Ernst & Young and the Getúlio Vargas
issues takes into account Brazil’s potential Foundation, also seeks to qualify Brazil’s
for interaction with the world market, with development concepts over the next few
scenarios being outlined up to the year 2030. decades. More important than wondering
The issues addressed are the following: whether the country will grow a lot or a
little, is the question of whether it will
Housing market potential; grow well, i.e. take full advantage of its
Economic growth and consumption possibilities, in a sustainable manner, in
potential; terms of market and business expansion.
Energy market challenges;
Prospects for Brazilian agribusiness; Growing well does not only mean breaking
Horizons for industrial competitiveness. with past cycles of ups and downs,
but also making significant progress
In this study, we present the main results in the areas of human development
of the scenario model developed by, the and the energy-environmental equation.
Getúlio Vargas Foundation (FGV-Fundação The intensity with which such progress
Getúlio Vargas), one of the foremost and will occur obviously involves a degree
renowned academic institutions in Brazil, in of uncertainty that is inherent in future
order to allow for a discussion based on an projections, and, therefore, analyses of
outlook for the world economy. The survey factors that may favor or delay progress
covers a total of 100 countries, analyzed are presented.
not only from the standpoint of their
economic aspects, but also in regard to their The statistical modeling developed for
demographic dynamics, quality of life and this study reveals a fortunate discovery.
human and natural resources. Brazil has already made progress on the
narrow path of balanced growth, and it is
An enhanced view of the behavior of the not unrealistic to foresee its progressively
main determining factors for the global qualified participation in the global
scenario is based on the requirement for context. More than just a desire, this is
valid projections for Brazilian growth. the consequence of achievements realized
This model is a tool that can supply since the 1990s. The optimism with regard
information that goes far beyond general to Brazil, therefore, transcends the limits
economic data, such as population growth of the art of rhetoric and is based on
and the GDP. With the model, it is possible solid fundamentals.
4. 4 SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
A lookahead on the
highway to the year 2030
What to expect to an end and, in the near future,
there would simply be no wars or
from a scenario even any major disputes. What
pessimist, seeing things through
When presenting a global scenario grey-colored glasses, would have
for the next two decades, it is dared forecast that the 21st
necessary to clarify the analytical century would start under a heavy
perspective and the purpose cloud of global terrorism?
it serves. Economic forecasts
are known for their fragility, This leads to one fundamental
particularly on a time horizon question. For a period of time in
subject to a series of unforeseeable which so many transformations can
factors, not only in the strictly occur, what is the use of building a
economic field, but also in regard scenario or – in a study comprised
to behavior, technology, politics, of several premises and hypotheses
geopolitics, etc. – a series of scenarios?
Just 20 years ago, the concept of The first consideration to be
the internet sounded almost like made is precisely that building
science fiction – but who could such a scenario provides us with
imagine living without it nowadays? elements to outline the future
What entrepreneur, at that time, regardless of those factors that
had a clear view of the great we cannot foresee. Thus, based
business opportunities that would on reasonable premises, it can
arise from the union of computers be said with a certain degree
and entertainment? And what of certainty that things will be
about the widespread use of mobile a certain way in a certain year.
telephones in Brazil? Who would That reliability is provided by
have predicted that? the explanatory capacity of the
statistical model adopted and by
At the end of the 1980s, the idea the validity of its presumptions.
of “the end of history” created
a fair amount of discussion. In other words, based on a
According to the defenders of historical series of interdependent
that theory, history “would end” variables and compilation of
because the dynamics of conflicts premises, we can foresee how
between the various competing important elements of reality
players in world society had come will behave “if” no great and
5. A
Sustainable development presumes, by
definition, the rational use of resources, to
the detriment of less costly yet more polluting
production forms and technologies.
unexpected change occurs. than its historical average unless advancement opportunities.
Statistical modeling is designed as there is a very good reason to do More recently, the non-predatory
a projection factory. Additionally, so. Additionally, the observation use of natural resources has been
it considers critical factors that of other countries’ histories, of included in the set of factors that
interfere with such projections relevant facts that marked the characterize development. Then the
and, therefore, provides an evolution of their economies, concept of sustainability arose.
implicit understanding of risks allows us to establish premises
and potentials. that guide the outlining of a future It is an ambiguous term.
scenario for a given country or for Sustainable development presumes,
For example: GDP growth is a set of countries. per definition, the rational use
dependent upon demographic of resources, to the detriment
tendencies, investment behavior A fundamental aspect of this issue of less costly yet more polluting
premises, economic performance is that the model outlines the route forms of production and
records and prospects for enhanced that a given country will take over technologies. In this respect,
productivity. At the same time, a longer time span. In this respect, a country’s growth potential is
any rise in income is restricted more important than saying what restricted. China, for example,
by what society understands as the GDP of the country will be in could not enjoy the industrial
the acceptable use of natural 2030, is to understand why the production figures it has achieved
resources – an idea illustrated economy will take one direction if it had a restrictive gas emissions
by the refusal to allow unselective and not another. Scenarios policy. At the same time, the
deforestation for expansion of constitute a valuable planning tool concept expresses growth that
agricultural and livestock frontiers. precisely due to their capacity for sustains itself over time, i.e.
The scenario model simulates indicating tendencies. a smooth highway, able to
how the interaction of these guarantee a certain steady pace
factors will determine the
development of wages, profits,
Double of increasing well-being over
the years, in the context of a
investment, consumption and Sustainability balanced society that manages
income distribution. to be moderate in its consumption
The differentiation between growth of natural resources.
In this work, the records of 100 and development is a generally
countries over the last 57 years accepted reference to qualify the The reference scenario presumes
have been considered. Even if the economic production of a society. a world in which there will always
past performance of an economy Decades ago, development was be more pressure for sustainable
does not necessarily reflect its seen as growth that is reflected in policies within the ambiguity
future performance, its statistical proportional progress regarding described above. For Brazil, this
track record, for instance, does the quality of life of a population, sustainability context requires
not allow us to project income which implies a good level of that no policies be adopted
growth much higher or lower income distribution and social that could provide more growth,
6. 6 SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
but cause economic imbalance and inflation to take off. Exceeding 2030. This would consider a 4.3%
regressions in the environmental the speed limit would result in average per year for the next ten
area. disturbing sustainable growth in years and 3.8% from 2017 on.
Brazil for years, and, in the end, Thus, in that period, Brazilian GDP
Thus, it is not realistic to think there would be much greater losses will grow from US$ 963 billion to
that Brazil will once again achieve than gains. US$ 2.4 trillion, an increase of
the figures verified during the more than 150%.
era of the “economic miracle”. The above example attempts to
In the beginning of the 1970s, the show an extreme situation. However, The conditions for such a result
additional productivity earnings in general, measures that ignore are feasible:
were significantly higher and, the fundamentals of efficient and
at the same time, industrial and balanced economic administration an average investment rate of
agricultural frontiers expanded are laden with the consequences 22.7%;
without restrictions. Today, in of deviations on the highway to
order for the economy to grow 7% development. The reference scenario an expansion of the work force
per year, as occurred during the adopted here presumes that Brazil at 0.95% per year, equivalent to
“miracle”, 38% of the GDP would has reached a certain level of the world standard, but higher
have to be re-invested – and the maturity and will not have serious than the rate of developed
current level is 21%. problems in this regard. countries, i.e. 0.1% per year;
As the Brazilian pension structure better education of the work
does not place a priority on the
Without excesses, force, rising from 7.8 years of
creation of long-term savings, GDP will grow 150% formal schooling in 2007 to 11.3
such marked additional investment years in 2030;
would only be possible by The sustainability scenario for
increasing government spending the Brazilian economy shows the average productivity increases of
to unprecedented levels or through tendency to obtain significant 0.93% per year – a figure close to
an unlikely volume of foreign long-term results, regardless of the increases in developed
investment. It should be stressed structural reforms that could countries (1.05% per year), but
that such an increase in public increase its growth exponentially. lower than China’s pace (1.37%
expenses would lead to a very Improving the tax system and per year), for example.
unbalanced treasury, which would undertaking pension reform,
cause, in addition to inflationary
pressures, a high degree of
for example, would increase
income generation capacity,
A promising
economic uncertainty. but even without such factors market
Brazil displays a high potential
Economic growth of 7% per year for improving its position in the The reference scenario for the
would lead to a corresponding global context, due both to its Brazilian economy projects a
increase in electricity consumption, income level and the expansion significant increase in consumption,
but there would not be sufficient of its consumer market. a consequence of important
capacity to meet such demand. improvements in the following
In the job market, the demand The performance and improvement indicators:
for labor would bring about of economic fundamentals over
real salary increases of 6% per recent years show that it is possible per capita income increase of
year, a much higher rate than to achieve an average growth rate 3.1% per year, higher than the
the rise in productivity, causing of 4% per year between 2007 and rate over the last 17 years (1.3%
7. 7
per year), but close to the average highest salaries; today, the The income distribution and growth
rates of recent years; nation ranks 11th; over the projection period will allow
for the gradual social advancement
payroll growth of 3.5% per consumption growth of 3.8% of low-income families. It should
year, which would put Brazil in per year, making Brazil the fifth be noted that upward mobility is a
eighth place in 2030 among biggest consumer market in consequence of universal education,
the economies paying the the world; new employment opportunities,
The 20 biggest consumer markets
2030
2007
in US$
billion*
in US$
billion*
1 United States 9,125.00 1 United States 15,585.52
2 China 3,862.19 2 China 12,755.94
3 India 2,530.19 3 India 5,265.46
4 Japan 2,357.55 4 Japan 2,818.44
5 Germany 1,489.64 5 Brazil 2,507.00
6 Great Britain 1,365.09 6 Great Britain 1,924.66
7 France 1,098.04 7 Mexico 1,854.33
8 Brazil 1,066.55 8 Germany 1,813.34
9 Italy 1,019.76 9 France 1,528.25
10 Russia 823.28 10 Italy 1,340.84
11 Mexico 820.21 11 Indonesia 1,141.27
12 Spain 723.65 12 Russia 1,136.22
13 Canada 626.76 13 South Korea 1,072.47
14 South Korea 618.77 14 Spain 1,047.66
15 Indonesia 602.14 15 Canada 989.68
16 Turkey 458.89 16 Turkey 974.73
17 Australia 400.60 17 Philippines 966.16
18 Argentina 373.76 18 Pakistan 734.93
19 Philippines 373.15 19 South Africa 729.95
20 Thailand 353.94 20 Australia 721.12
Source: Getulio Vargas Foundation
(*) 2005 US$ adjusted for Purchase Power Parity
8. 8 SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
Income distribution
2007
Monthly income brackets
2030
Total income Families
1.3% AAA 4.7% 0.0% AAA 0.3%
more than more than
R$ 32,000 R$ 32,000
5.0% AA 10.6% 0.4% AA 1.4%
from R$ 16,000 from R$ 16,000
to R$ 32,000 to R$ 32,000
11.7% A 17.6% 1.7% A 4.5%
from R$ 8,000 from R$ 8,000
to R$ 16,000 to R$ 16,000
18.2% B 22.7% 5.2% B 11.6%
from R$ 4,000 from R$ 4,000
to R$ 8,000 to R$ 8,000
22.8% C 23.0% 12.9% C 22.9%
from R$ 2,000 from R$ 2,000
to R$ 4,000 to R$ 4,000
22.1% D 15.0% 24.5% D 28.9%
from R$ 1,000 from R$ 1,000
to R$ 2,000 to R$ 2,000
18.8% E 6.5% 55.3% E 30.5%
up to R$ 1,000 up to R$ 1,000
Consumer market per line of product 2007
in R$ billion 2030
942.5
Total 2007 1,410.6
Total 2030 3,304.3
676.0 Variation per year 3.8%
379.2 378.7 376.8 397.8
296.7 283.4
249.1
195.5 163.7
140.2 116.2 119.1
Non-durable Durable Other
Health,
Housing Services Food consumer consumer products
education goods goods and services
(%) per year
4.0% 3.6% 2.9% 4.4% 3.4% 3.8% 3.9%
Source: Getulio Vargas Foundation
9. 9
increases in workforce productivity growth of the middle class will
and maturation of age-bracket and cause a corresponding expansion
family structures. in services.
The base of the income pyramid Over the next 22 years, there
will slim down considerably. Families will also be a strong increase
with monthly incomes of up to in housing expenses involving
R$ 1,000, which represented 55.3% construction, renovation and
of the population in 2007, will be additional property expenses.
30.5% in 2030 – a good part of them This market, with a turnover
will have migrated to the income of R$ 379.2 billion a year today,
range between R$ 1,000 and will reach R$ 942.5 billion
R$ 2,000. But the range that will in 2030, mainly due to the
grow most in number of families is increased demand of the middle
the immediately higher one, between and upper classes.
R$ 2,000 and R$ 4,000. In 2007,
12.9% of Brazilian households had Lower income brackets, for their
monthly incomes in that range and part, are going to cause a large
in 2030 this percentage will rise part of the 2.9% growth in the
to 22.9%. food market. The same social
segment will also pace growth
There will also be a higher in non-durable goods, which will
proportion of families in higher double by 2030.
income brackets, which means a
widening at the top of the pyramid. The reference scenario allows
During that process, there will be a for a detailed mapping of demand
major increase in the total volume per income class in several
in the income brackets above R$ activity lines, as will be shown
4,000 – from 36.2% in 2007 to in greater detail on the Map
55.6% in 2030. This movement will of Consumption Opportunities
consolidate over the next 22 years (starting on page 18). In the
and will lead relatively quickly to next chapter of this overview, we
an increase in Brazilian families’ present the general conditions for
sophistication in terms of demand. sustainable development for the
world and Brazil.
Opportunities
in sight
The process of consumer market
qualification brings about a new
range of opportunities in business
segments. The areas of education
and health, for example, will have
an annual growth rate of 4.4% up
to the year 2030. In general, the
10. 10 SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
Under the banner
of sustainability
Globalization and premise was adopted with
regard to globalization, making
global interdependence are rare,
and it would be comfortable to
Uncertainties it a determining element in the assume a continuous deepening
analysis of economic relations both of interrelations at the global
For the preparation of the globally and locally. Nowadays, level. However, it was deemed
reference scenario, a conservative markets that have no kind of preferable to adopt a line of
analysis that does not necessarily
forecast accentuated expansion,
but rather consolidation at a high
level of interdependence. Such
a perspective is guided by the
understanding that it is a process
Worldwide merchandise, service and capital flows subject to flip-flops.
From a strictly economic point
1990 of view, globalization is nothing
in US$ billion* 2005 more than a movement toward
specialization that divides work
8,602.4 beyond national borders. There
is something very positive in this
outlook, to the benefit of both
productivity and comparative
advantages. The economic history
4,102.8 of the world after World War
3,459.3 II, especially since the 1990s,
shows that trade flow movements
have grown at a significantly
higher rate than the world’s GDP
683.7
increase – 6.3% per year against
Merchandise Capital 2.8% per year, respectively.
and services (DFI and portfolio) Such a difference is even more
accentuated when considering
Expansion
6.3% 12.7% capital flows expanding at a much
higher speed (12.7% per year).
Source: Getulio Vargas Foundation Cross-border progression of
(*) 2000 prices - DFI: Direct Foreign Investment, acquisitions of equity stakes in companies
financial markets has increased
amounting to more than 10% of capital stock. Portfolio: Investment in shares amounting to less than
10% of capital stock. the allocable efficiency of world
11. A
Globalization tends to favor countries in which
a significant portion of economic power is
dependent upon foreign trade, as is the case
with Brazil and its most important partners.
savings accounts, which have event that it does not intensify, it
been freed up to look for better will at least remain the way it is.
opportunities in the market
– consequently, free fund traffic has Such considerations facing the
increased the productivity of capital world economy are important for
on a worldwide level. the reference scenario because:
Although globalization is still going trade expansion and free fund
strong, there are factors that may traffic are key factors
be able to restrain it and even determining economic growth on
cause retrogression. It is important a worldwide level;
to consider that:
economic interdependence
at the same time it rewards causes permeability of values,
efficiency, globalization causes i.e. commercial and service
concentration of income and traffic has an implicit cultural
deeply affects local markets, dimension that provides
causing resistance and a consensus regarding what
permanent tensions, as procedures are internationally
exemplified by problems in correct;
negotiating global trade treaties;
globalization tends to favor
conflicts, even on a regional countries in which a significant
level, can substantially affect portion of economic power is
important trade and capital dependent upon foreign trade, as
flows; is the case with Brazil and its
most important partners, such as
the effects of a deep worldwide the United States and China.
financial crisis cannot be
assessed with any degree of
certainty in the context of highly
Sources of Progress
interconnected markets. and Conflict
That said, it does not appear to be The geopolitical and demographic
an exaggeration to suppose that dimensions are essential to qualify
the current stage of globalization the globalization process and
is relatively stable and, even in the prospects for both sustainability
12. 12 SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
and growth. Within the limits of against 3.5%) will not be enough
this analysis, some important to achieve improvements in the
tendencies should be emphasized: quality of life indices in that region;
Asia and Oceania, largely strong economic growth in
leveraged through the economic developing countries with a
performance of China, will heavy population density – such
markedly increase their as Brazil, Mexico and India – will
worldwide importance, yielding be an important element in
average income growth of 4.8% diminishing migratory flows to
per year, higher than that verified more developed areas;
in South America (3.5%), in the
United States (2.7%) and, above of the 100 economies analyzed,
all, in Europe (1.7%). Growth in the number of countries with
the Asian population will be less high Human Development Indices
than the world average; (HDI) will reach 59 in 2030,
against 37 in 2005. Improvement
the United States, even with a in this key indicator reflects
comparatively lower GDP growth, the rise in per capita income,
will continue to be the biggest higher educational levels and also
and one of the most propelling improved life expectancy at a
economies of the world, with high global level.
rates of productivity and capital
remuneration;
Qualified
the Middle East will preserve its Development
characteristics as a strategic
region and deserves special Global growth over the next 23
attention due to its oil reserves years will be strongly influenced
and high potential for conflicts by the performance of the United
between countries and religious States and developing countries,
or ethnic groups; primarily China, India and Brazil.
Due to this fact, world GDP should
South America will gain relative undergo a stronger expansion
importance due to its economic during the period from 2007-2017,
growth at rates above the world at a rate of 3.9% per year. In the
average, especially in Brazil, later period, this growth will slow
and the valuation of its energy down because China will loose its
reserves (oil, gas, biofuels impetus, falling from an average
and ethanol); of 7.9% in the first period to 5.5%
between 2017 and 2030. By the
Subsaharan Africa will have the same token, India’s pace will slow
highest population growth rate down proportionally, from 4.4% to
on the planet (2.1%). In this 2.6%. The economy of the United
context, even economic growth States, on the other hand, will
above the world average (3.8% accelerate from 2.5% to 2.8%.
13. 13
Europe will post lower growth rates, justified by broader customer and
of 2.1% and 1.4%, respectively. partner relationship policies.
The best performers will be Great
Britain (1.9% and 1.5%) and Implementation of more efficient
Spain (2.2% and 1.5%). Russia and sustainable technologies,
will suffer a slump in its pace of pursuant to historical capitalistic
development (from 3.2% to 0.7%) development, will initially be
as a consequence of gradually carried out in developed countries
decreasing productivity and the that invest heavily in research
significant reduction of its work and development and are subject
force, caused by the ongoing to more intense pressures for
process of population decline advances in this area. This process
observed since the 1990s. will only be repeated in developing
countries, especially China, after a
The general factors that affect considerable delay.
growth are the same as those
established by economic theory: Over the next two decades,
increased pressure is foreseeable
respect for property rights and for environmentally correct
an environment of trust for procedures in a world that is
doing business; witnessing a growing scarcity of
water and arable lands. Standards
market competition and global of energy consumption will play a
economic integration; central role among the elements
that will foster sustainability
quality of institutions linked to projects, as they strongly affect
the functioning of the economy; both the intensity of economic
growth and the interaction of
application of efficient and society with the environment.
stabilizing economic policies.
One new element that has been
added to these general principles is
the environmental question that is
expressed by a growing demand for
productive systems that consider
sustainability even if this causes
losses in terms of efficiency. In this
context, the use of proportionally
more expensive supplies – recycled
paper, for example – is justified as it
means that a company is adopting
an environmentally responsible
stance. The additional expenses
that cause an immediate loss in
efficiency by increasing costs are
14. A SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
WORLD GROWTH MAP
NAFTA
The 20 largest economies 53,840
in the world in 2030 2.7%
Central
0.6%
America and
GDP Population
Caribbean
(billions**) (in millions of 5,438
inhabitants) 2.9%
1 United States 23,896.02 366.46 1.7%
2 China 11,994.18 1,461.42
3 Japan 5,662.94 118.48
4 Germany 3,627.78 79.56
5 Great Britain 3,416.00 66.21 Country
United States 65,208 2.7% 0,5%
6 France 3,209.14 66.71
Mexico 23,295 4.0% 1.0%
7 Italy 2,531.08 57.63
8 Brazil 2,398.35 233.56
9 Mexico 2,068.97 128.09
10 India 2,004.30 1,507.09 Brazil
11
12
Canada
Spain
1,916.46
1,813.15
39.15
46.89 Country
20,214
13 South Korea 1,600.74 48.51 Argentina 24,601 2.8% 0.9% 4.0%
14 Australia 1,497.22 25.31 Chile
Venezuela
23,368
11,510
3.5%
3.1%
0.6%
1.4%
0.9%
15 Russia 1,271.19 124.42 South
16 Turkey 922.43 92.56 America
Netherlands 872.01 17.17
17
18 South Africa 612.83 53.33
16,764
19 Indonesia 605.27 280.00
3.5%
20 Sweden 570.93 10.02 1.1%
World* 82,291.49 7,338.50
Source: Getulio Vargas Foundation
(*) “World” figures refer to the sum of the GDPs of
the 100 economies considered in this study.
(**) In 2005 US$.
15. A
World
18,892 Per capita GDP in 2030*
3.5% Economic growth between 2007 and 2003
0.9% Increase of the work force between 2007 and 2030
Country
Great Britain 46,968 1.7% 0.1%
France 41,844 1.6% 0.0%
Portugal 26,353 1.1% -0.3%
Spain 40,542 1.8% -0.1%
Germany 39,642 1.0% -0.6%
Russia 20,766 1.8% -0.9%
Europe
34,847
1.7%
-0.2%
Asia and Oceania
17,314
4.8%
0.8%
Middle East and Country
Northern Africa Japan 42,113 0.8% -0.8%
8,895 China
Korea
32,379
44,572
6.5%
2.7%
0.1%
-0.4%
2.4% India 6,213 3.4% 1.5%
1.4% Australia 52,188 2.9% 0.5%
Aging of the world’s
population
Life expectancy
Sub-Saharan 80
in years Average age
Africa
2,984 68 73.6
3.8%
2.6% 56
44 47.9
32 35.1
26.9
20
1950 1970 1990 2010 2030
Source: United Nations
Source: Getulio Vargas Foundation
(*) 2005 US$, adjusted for Purchasing Power Parity.
16. 16 SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
A new energy mix sources - and an open scenario
with a more aggressive position
of energy demand will be related to
the makeup of supply that meets
The reference scenario presumes towards international competition, safety criteria, gradually reduces
that the international supply of one that even accepts sophisticated emissions and introduces energy
energy will undergo substantial alternatives with environmental efficiency measures.
medium- and long-term commitment.
transformations. The continuing
rise in the price of oil will make it In the reference scenario, the
Brazil’s projection
feasible to open up new production proportions of available energy as a player
areas, extract liquid fuels from sources on both a global and Brazilian
non-conventional oil sources and level will be reordered, considering World economic projections
implement alternative energy sustainability of choices in terms indicate a significant increase
sources. Developing countries will of economic competitiveness, in the importance of Brazil, the
increase their share of world energy physical resource availability and fruit of a record of constant
consumption, and the supply of environmental impacts. The evolution growth and stability. Brazil will
energy should include major inputs
from biofuels and nuclear energy.
However, a broad spectrum of factors
should be taken into account as they
create uncertainties with regard to Return on capital of the 20 biggest economies in 2030
the behavior of the energy market
up to the year 2030. The scenario is
based on two critical factors for the
energy market: a) the proportion
of international energy flows and Capital Stock*** Return on Capital
Country*
b) the competitive introduction 1 United States 49,873.5 28.1%
of alternative sources. Future 2 China 39,159.5 19.9%
supply and demand will result from 3 Japan 20,224.0 16.0%
hypotheses regarding the evolution 4 Germany 10,871.4 19.1%
and interconnection of such factors. 5 Great Britain 6,839.9 29.1%
6 France 7,545.6 24.4%
7 Italy 6,943.9 20.7%
It should be considered that obtaining 8 Brazil 6,280.6 24.2%
a competitive mix of energy sources 9 Mexico 5,357.2 23.6%
allows for greater safety in terms of 10 India 6,215.0 22.5%
supply availability and contributes to 11 Canada 4,466.1 24.7%
sustainability of choices. At the same 12 Spain 5,404.0 19.2%
time, the extent of commercial flows
13 South Korea 6,482.4 14.1%
14 Australia 4,499.5 18.6%
and worldwide competition lead to a 15 Russia 5,432.3 14.3%
reduction in the cost of energy and 16 Turkey 2,557.0 22.2%
more pressure to reduce greenhouse 17 Netherlands 2,194.2 22.5%
gases and introduce new technologies 18 South Africa 1,522.0 24.8%
for generating energy. 19 Indonesia 1,956.0 20.9%
20 Sweden 1,221.6 26.4%
World** 221,834.46 22.2%
A sustainable energy scenario is
one that achieves a balance between
a restrictive scenario - tightly closed
Source: Getulio Vargas Foundation
to international exchange and limited (*) Ordered by GDP in 2030. (**) “World” amounts refer to the sum of the GDPs of the 100
in access to diversity in energy economies considered in this study. (***) 2005 US$ billion.
17. 17
post growth of 4% per year The evolution of education in Brazil
between 2007 and 2030, which
will make it jump from 10th to 8th
place in the ranking of the world’s 11.3
biggest economies. Years of formal education
Economically active population 10.4
In regard to the evolution of Total population
9.6
developing countries, it needs
8.9
to be emphasized that China will
8.2
already have become the second 7.5
biggest economy in 2017 and 7.5
that, over the next two decades, 6.8
Mexico and India will overtake 6.2
Spain and Canada and be ranked 5.6
5.1
right below Brazil.
4.6
The 3% per capita income growth of
2005 2010 2015 2020 2025 2030
Brazil between 2007 and 2030 will
be well above the world average of
Source: Getulio Vargas Foundation
1.7%, which will make this indicator
double in 23 years. Payroll volume
will reach US$ 880.3 billion in
2030, due to its growth at a rate of
3.5% per year, making it the eighth
largest economy in the world.
Payroll growth similar to that of
Brazil’s will be verified in Mexico, at 12.5 years. Educational levels Nowadays, the countries of the
and it is likely that such a pace will will tend to converge globally, European Union and the United
only be exceeded by the impetus of although even while considering States hold 60% of the total capital
China, growing as it does without a this aspect Brazilian development invested in the world, understood as
commitment to sustainability. will be noteworthy for its machines, equipment and buildings in
tremendous progress. general, including residential buildings.
The advantages of Brazil, Mexico This percentage will be reduced to 49%
and China are directly related to Changes in social and economic in 2030, due to the quickening pace of
the productivity level of their work patterns will occur in the context capital accumulation in the developing
forces. They are part of the small of a decline in average world countries. Brazil, for example, today
group of countries that will keep investment rates, arising from a holds 2% of the world’s net assets,
up with the improved productivity high aging ratio of the population but by 2030 that share will reach
in the developed countries. In this – this factor leads to a decline in approximately 3%.
respect, the increased educational the general savings level due to
levels of Brazilian labor is relevant, increasing pension and medical One bit of promising information
given that by 2030 it will reach the assistance expenses. This will for Brazil is that its return on capital
current educational level of workers occur in a more accentuated investment will remain high compared
in developed countries, with an manner in Europe and in the NAFTA to other developing countries. High
average of more than 11 years of countries, which will significantly levels of investment in China and India
studies completed. This indicator change the distribution of the will narrow the business opportunity
is similar to that of present-day capital stock invested in the world, horizon in those countries by 2030,
South Korea but lower than that with an increase in the share of while Brazil and Mexico will offer better
of the US, which currently stands developing countries. return possibilities.
18. 18 SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
Premises for a education, governments will
surely need more funds. Even
depends in turn on the
gradual reduction of interest
better country so, tax collection should be rates, improvements in financing
increased at a slower pace, mechanisms and reduction in
The achievements of the economic below that of total revenues, credit risks.
policies since the 1990s have in such a manner that the tax
established the basis that will make burden gradually decreases, Deregulation and simplification:
it possible to achieve relatively as opposed to what is presently a swifter system of justice and
high sustained growth for the being done. In this context, elimination of red tape in all
next 22 years. However, there is a a more simplified tax structure three branches of government
potential for even higher economic would make the environment would generally work in favor of
growth, an achievement which will more appropriate for business, economic growth by establishing
be dependent upon the adoption which is a determinant for a more favorable and safer
of specific – and feasible – policies investments. environment for business.
in the years ahead. They will have
a strong influence on investment, Infrastructure: investing in Education: once universal
productivity and consequent infrastructure once again in Brazil education is established at the
economic growth. In general, the can come about through the basic level, Brazil will be able to
factors that can improve Brazil’s advancement of regulation over progress gradually in its
performance are: this sector and re-intensification attempt to meet bolder goals for
of public investment. The modus intermediate high school
Labor and pension: two aspects operandi known as the Public- education and overall educational
that deserve attention. Firstly, Private Partnerships (PPPs) quality. This would increase
tax relief for company payrolls, opened a doorway for funds to the efficiency level of the
which besides reducing labor enter the infrastructure sector Brazilian economy and boost
costs, with effects on and the more recent Growth social mobility.
productivity, will have a Acceleration Program (locally
direct impact on the reduction PAC) indicates that higher Technology: another factor that
of informal labor. Secondly, the volumes of funding will be restricts the growth of Brazil is
adequate treatment of pension available for infrastructure the low productivity that
matters, since at present Brazil areas through to the next major is directly associated with
spends approximately 13% of election year (2010). However, technological policies. R&D
its GDP on retirement and several regulatory aspects expenses are still at a beginner’s
pension expenses, which is – such as environmental concerns level in Brazil, and an increase
equivalent to the percentage – and the difficulty of mobilizing in the public budget for basic
of countries such as France and public funds, tend to delay these and applied research would
Austria. Growth in pension investments. be a natural route to take.
expenses in the years ahead will A complementary strategy
restrict the creation of savings Housing: investment in housing consists of the creation of
and, therefore, investment. still represents a small portion incentives for in-bound
of the GDP compared to the technology transfers by means
Tax burden and reform: in situation in other countries, of foreign investments.
general, this is not a case in spite of recent progress in this
of decreasing tax collection in sector. Brazil lacks a housing Progress in the areas listed above
absolute terms, in view of policy, most of all for its lower would make an even more promising
the fact that, in order to invest income population. Stronger horizon for sustainable growth
once again in infrastructure and recovery of real estate credit possible for Brazil in the next 22
19. 19
years. It is estimated that a realistic the average schooling projected significant effects on the evolution
set of changes would considerably for the work force from 11.3 to of per capita income, which would
increase investment in the areas of 12.5 years in 2030, would have grow at 3.8% per year, higher than
energy, transportation, sanitation direct effects on the efficiency that projected for the South Korean
and housing, with effects on the of the Brazilian economy, and Chilean economies. In this
entire economy. The average diminishing the gap that exists scenario, Brazil would overtake
investment rate would reach 24% today with regard to global Uruguay in terms of human
of the GDP leading up to 2030, 1.3 technological borders. development and would get closer
percentage point above the rate to the levels that will be reached
considered in the reference scenario More accentuated investment by Chile, Argentina, and Mexico.
and 3 percentage point above the and productivity increases The consumption growth rate would
investment rate in 2007. would raise growth projections. increase to 4% per year, bringing
The average GDP growth rate Brazil closer to Japan (the fourth
In addition, a more accentuated between 2007 and 2030 would largest consumption market in
advance in education, increasing be hiked from 4.0% to 4.6% with 2030) quicker.
Brazil in two scenarios
2007 to 2030
Reference Scenario
Indicators 1990-2007 scenario with advances
Investment (as % of GDP) 19.0% 22.7% 24.0%
Productivity increase 0.1% 0.9% 1.1%
Economic growth (%) per year 2.8% 4.0% 4.6%
Expansion of the consumer market (%) per year 2.5% 3.8% 4.0%
2030
Reference Scenario
Indicators 2007 scenario with advances
GDP in US$ billion* 962.9 2,398.4 2,718.2
GDP per capita in US$* 5,092 10,269 11,638
Source: Getulio Vargas Foundation
(*) Amounts in 2005 terms.
20. 20 SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
Map of consumption
opportunities
The reference scenario, as has been in 2007 to R$ 3.30 trillion in 2030 – i.e. changes in the consumption profile.
shown throughout this study, is halfway it will more than double in the next 22 The portion of family expenses for
between optimism and pessimism and year period. non-durable consumer goods, such
always seeks to accept the most likely as food, tobacco and beverages, fuel
proposition as valid, chosen largely Due to economic growth and social and transportation in general, will
according to the historical record of mobility, consumption growth rates are decrease. In contrast, expenses with
each variable. This model indicates a higher in income brackets with more living, health and education will grow
deep change in the profile of Brazilian purchasing power, in particular the ones by leaps and bounds.
society as it undergoes a straightening with the strongest projected growth
of its social pyramid, with the growth of over the next 22 years. The share Taking families with incomes between
middle income brackets. of consumption expenses of families R$ 4,000 and R$ 8,000 as a reference,
with monthly incomes of more than it can be noted that the evolution
This means that companies that R$ 8,000 in total consumption will of the total income of this bracket
operate or intend to operate in the increase from 22.4% in 2007 to 37.2% will have a stronger effect on the
Brazilian market have to adjust to a in 2030. The share of families with consumption of personal hygiene and
transforming business environment. monthly incomes of up to R$ 2,000 in cleaning products and health services
This dynamism is expressed by a 3.8% the total volume will diminish by 15% in than on the demand for clothing and
average growth rate for the consumer the coming years due to migration to beverage products.
market up to 2030. higher income brackets.
Visualizing changes in the consumption
In absolute figures, this market will The maturation of the Brazilian profile is easier when comparing the
leap from total sales of R$ 1.41 trillion consumer market will cause significant current configuration with the projections
Consumption per income bracket
2007 2030
Family income brackets R$ billion* % R$ billion* % % per year
Up to R$ 1,000 200.4 14.2% 193.1 5.8% -0.2%
From R$ 1,000 to R$ 2,000 286.7 20.3% 440.0 13.3% 1.9%
From R$ 2,000 to R$ 4,000 326.6 23.2% 693.4 21.0% 3.3%
From R$ 4,000 to R$ 8,000 281.3 19.9% 749.7 22.7% 4.4%
From R$ 8,000 to R$ 16,000 192.5 13.6% 620.9 18.8% 5.2%
From R$ 16,000 to R$ 32,000 101.1 7.2% 451.9 13.7% 6.7%
More than R$ 32,000 21.9 1.6% 155.2 4.7% 8.9%
Total 1,410.5 100.0% 3,304.2 100.0% 3.8%
Source: Getulio Vargas Foundation
(*) 2007 prices.
21. A
Changes in the profile of Brazilian society will
be deep. The country will undergo a narrowing
of its social pyramid, with growth of middle
income brackets.
Consumption per product line
2007 2030
Product line R$ billion* % R$ billion* % % per year
Natural foods 28.5 2.0% 50.5 1.5% 2.5%
Processed foods 134.4 9.5% 269.9 8.2% 3.1%
Beverages 16.8 1.2% 30.3 0.9% 2.6%
Tobacco 15.8 1.1% 28.0 0.8% 2.5%
Clothing 69.9 5.0% 138.0 4.2% 3.0%
Construction materials 55.9 4.0% 113.4 3.4% 3.1%
Energy, gas, sanitation and garbage 163.8 11.7% 397.8 12.0% 3.9%
Fuels 30.2 2.1% 63.5 1.9% 3.3%
Housing 323.4 22.9% 829.2 25.2% 4.2%
Household utilities 61.3 4.3% 143.1 4.3% 3.8%
Vehicles 57.7 4.1% 140.3 4.2% 3.9%
Personal hygiene and cleaning 16.0 1.1% 47.6 1.4% 4.8%
Health 81.7 5.8% 221.3 6.7% 4.4%
Education and culture 58.5 4.1% 155.5 4.7% 4.3%
Lodging and restaurants 80.1 5.7% 180.1 5.5% 3.6%
Communications 3.2 0.2% 6.5 0.2% 3.1%
Transport 90.5 6.4% 186.0 5.6% 3.2%
Financial services 48.8 3.5% 131.3 4.0% 4.4%
General services 9.8 0.7% 24.8 0.8% 4.1%
Associational and domestic services 64.2 4.6% 147.1 4.5% 3.7%
Total 1,410.5 100.0% 3,304.2 100.0% 3.8%
Source: Getulio Vargas Foundation
(*) at 2007 prices.
for 2030, according to the “Map families with incomes between industrialized (processed) foods
of Opportunities” (page 18). The R$ 4,000 and R$ 16,000 will and food consumed outside
differences in the two consumption account for 47.5% of this additional homes;
periods, in each product line and slice, or R$ 896.8 billion more
social class, map the possibilities consumed; the market share for natural
for new business in the Brazilian foods will be a very small
economy. In general, the following 26.7% of the consumption increase part of the growth of the
points need to be emphasized: comes from increases in housing consumer market;
expenses and 12.4% from public
a new portion of the consumer utility services; the car and fuel markets will
market, in the amount of R$ 1.893 contribute 6.1% to consumption
trillion, will arise by 2030. This increased incomes and social growth, a smaller share than the
amount will be added to the mobility in Brazil will redefine the one verified over the last ten
current R$ 1.41 trillion; food market, with high shares for years, 8.5%.
22. A SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
Map of opportunities:
expansion of the market until 2030
$ R$* Family income brackets
% Contribution** Up to R$ 1,000 R$ 1,000 - R$ 2,000 –
R$ 2,000 R$ 4,000
The market
share for
natural foods Product line $ % $ % $ %
will be a very -0.27 4.06 6.86
Natural foods -1.2% 18.5% 31.2%
small part of the
growth of the Processed foods -1.29 -1.0% 20.09 14.8% 37.21 27.5%
consumption
market. Beverages -0.13 -0.9% 2.16 16.0% 3.97 29.3%
Tobacco -0.13 -1.0% 2.45 20.1% 3.78 31.0%
Clothing -0.37 -0.5% 8.44 12.4% 18.58 27.3%
Construction materials -0.26 -0.4% 6.18 10.8% 14.72 25.6%
26,7% Energy, gas, sanitation, garbage -0.75 -0.3% 17.98 7.7% 35.56 15.2%
of the Fuels -0.33 -1.0% 4.92 14.8% 9.04 27.1%
consumption
increase will Housing -1.63 -0.3% 33.27 6.6% 81.65 16.1%
come from Domestic utilities -0.41 -0.5% 8.03 9.8% 18.95 23.2%
increases in
housing Vehicles -0.22 -0.3% 4.17 5.1% 15.48 18.7%
expenses and
Personal hygiene and cleaning -0.16 -0.5% 3.05 9.7% 7.17 22.7%
12,4%, Health -0.45 -0.3% 9.57 6.9% 26.14 18.7%
from public
utility services Education and culture -0.09 -0.1% 3.29 3.4% 15.32 15.8%
Lodging and restaurants -0.30 -0.3% 7.80 7.8% 20.11 20.1%
Communications -0.03 -0.9% 0.51 15.4% 0.99 29.9%
Transportation -0.29 -0.3% 9.36 9.8% 23.63 24.7%
Financial services -0.12 -0.1% 3.10 3.8% 11.71 14.2%
General services -0.04 -0.3% 1.13 7.6% 2.80 18.7%
Associational and domestic services -0.05 -0.1% 3.71 4.5% 13.14 15.8%
Total -7.32 -0.4% 153.27 8.1% 366.81 19.4%
Source: Getulio Vargas Foundation
(*) in R$billion at 2007 prices; (**) Contribution to the growth of each product line;
(***) Contribution of each product line to the growth of total consumption.
23. 23
A new portion of the consumer
market, in the amount of
R$ 1.893 trillion,
will arise by 2030. This amount will be
added to the current R$ 1.41 trillion
families in income brackets
between R$ 4,000 and R$ 16,000
will account for 47,5% of this
additional slice, or R$ 896.8 billion
more consumed
R$ 4,000 - R$ 8,000 – R$ 16,000 – More than Total
R$ 8,000 R$ 16,000 R$ 32,000 R$ 32,000
Increased
incomes and
$ % $ % $ % $ % $ % *** social mobility in
Brazil will redefine
5.64 25.7% 3.63 16.5% 1.91 8.7% 0.15 0.7% 22.0 1.2%
the food market,
34.36 25.4% 25.11 18.5% 16.27 12.0% 3.76 2.8% 135.5 7.2% with higher
contributions
3.51 25.9% 2.42 17.9% 1.31 9.6% 0.31 2.3% 13.6 0.7% from processed
foods and food
3.39 27.8% 1.90 15.6% 0.75 6.2% 0.04 0.3% 12.2 0.6% outside homes
18.58 27.3% 13.31 19.6% 7.84 11.5% 1.68 2.5% 68.1 3.6%
15.18 26.4% 14.57 25.4% 6.50 11.3% 0.58 1.0% 57.5 3.0%
47.92 20.5% 44.96 19.2% 56.91 24.3% 31.41 13.4% 234.0 12.4%
The vehicle and
8.41 25.3% 6.15 18.5% 4.08 12.2% 1.04 3.1% 33.3 1.8% fuel market
together will
105.20 20.8% 121.51 24.0% 110.06 21.8% 55.73 11.0% 505.8 26.7% contribute
21.49 26.3% 15.80 19.3% 12.42 15.2% 5.45 6.7% 81.7 4.3%
6.1%
24.54 29.7% 20.61 24.9% 13.93 16.9% 4.08 4.9% 82.6 4.4% of the
consumption
8.43 26.7% 6.70 21.2% 4.62 14.6% 1.78 5.6% 31.6 1.7% increase, a
smaller share
36.00 25.8% 31.06 22.2% 32.02 22.9% 5.30 3.8% 139.6 7.4%
than the one
30.83 31.8% 24.96 25.7% 17.04 17.6% 5.61 5.8% 97.0 5.1% verified in
the last ten
26.98 27.0% 24.44 24.4% 16.81 16.8% 4.14 4.1% 100.0 5.3% years, 8.5%
0.76 23.1% 0.45 13.8% 0.58 17.7% 0.03 1.0% 3.3 0.2%
28.49 29.8% 22.18 23.2% 9.67 10.1% 2.44 2.6% 95.5 5.0%
19.88 24.1% 23.60 28.6% 18.82 22.8% 5.56 6.7% 82.5 4.4%
3.93 26.2% 3.36 22.4% 2.84 18.9% 0.98 6.5% 15.0 0.8%
24.88 30.0% 21.70 26.1% 16.40 19.7% 3.27 3.9% 83.1 4.4%
468.40 24.7% 428.42 22.6% 350.78 18.5% 133.34 7.0% 1,893.9 100.0%
24. 24 SUSTAINABLE BRAZIL ECONOMIC GROWTH AND CONSUMPTION POTENTIAL
The evolution of income distribution which today represent 16.4% It can be said that the expected
and the demographic dynamics and 53.3% of the national income and consumption growth
over the next 22 years will also consumption respectively, will in the less developed regions
bring about changes in the regional grow slower than the national on a global level up to the year
consumer market composition. average. As a consequence, 2030 should also apply to the
Consumption expenses for the there will be an increase in the Brazilian scenario, regionally
South and Southeast regions, shares of the other regions. speaking.
Consumption per region
2007 2030
Regions R$ billion* % R$ billion* % % per year
North 81.7 5.8% 216.0 6.5% 4.3%
Northeast 231.5 16.4% 576.8 17.5% 4.0%
Southeast 751.5 53.3 % 1,733.8 52.5% 3.7%
South 231.7 16.4% 507.4 15.4% 3.5%
Central-West 114.3 8.1% 270.3 8.2% 3.8%
Brazil 1,410.7 100.0% 3,304.3 100.0% 3.8%
Source: Getulio Vargas Foundation
(*) At 2007 prices.
25. Our offices
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Project and editing management: Getulio Vargas Foundation Team Technical staff:
Mitizy Olive Kupermann Edney Cielici Dias (editorial, research and editorial
Technical coordination and consulting), Ana Maria Castelo (real estate sector
Editorial coordination: content development: research), Otávio Mielnik (energy sector research),
Rejane Rodrigues FGV Projetos Robson Ribeiro Gonçalves (agribusiness research),
(MTB 22.837) Jorge de Oliveira Pires (industrial competitiveness
Project director: research), Ana Lélia Magnabosco (research of
Printing and design: César Cunha Campos indicators)
Milena Tavares Teves
Supervisor:
Infographs: Ricardo Simonsen
Infografe
Coordinator: This is a publication of the Communication
Revision: Fernando Garcia and Brand Management Department of
Beatriz Marchesini (in charge of scenario model) Ernst & Young Brazil.