 Good afternoon, ladies and gentlemen. My name is Oliver Call. I'm an Associate Director with the Media Team, the World Economic Forum. Thank you for joining us this afternoon for our second press conference of the day. Thank you also to our audience who are watching this live webcast on our website. My guest here for this press conference is the Minister of Finance of Brazil, Mr. Guido Mantega. The format of this press conference is Minister Mantega will make a few opening remarks and then we'll have some time for questions and answers. I'd like to invite the Minister to say a few remarks. Okay. Thank you. I think it's difficult for us to talk about the end of the BRICs or the middle-aged crisis, as it was put. There is no middle-aged crisis because the BRICs haven't even arrived yet. We are still in the youth, so what we have is the reflection of the advanced countries' crisis, which meant that most emerging countries had to reduce their growth rates. However, China will continue to be the economy that grows the most in the world. Therefore, by creating dynamism for the global economy, India should also grow, not only those rates that we all grew in 2006, 2007, but with lower rates, however, greater than the advanced economies. Therefore, we will continue to be a group of countries that will continue to lead the growth of the global economy. Of course, for this to happen, we all have to face our challenges, and each country has its own specific challenges. In the case of China, China will hardly grow 10%, 12%, 14% as it grew in the past, but if it grows 7.5%, 7% in the coming years or in the coming decades, it will be giving an important contribution to the global economy. India is also growing 6%, 7%, and so on. Brazil also has conditions to grow the largest rates in the coming years. To do this, we need to make adjustments to these economies. In the case of China, the adjustment is to stimulate the internal demand, because China will hardly be able to continue to have a great expansion of the international economy. I am saying that the recovery of the international economy will not be translated again into the same pre-crisis that we had in the growing of the international economy. Therefore, Asian countries that depend a lot on advanced markets will have to change their growth strategy to stimulate the internal market. Therefore, less investment, when I say less investment, means that instead of the investment growing in China at 48%, it will be able to grow 40%, 38%, in the case of India, something similar. In the case of Brazil, it is the opposite. In the case of Brazil, in the last years, we have established a great medium class market that continues to expand in the country, as the country is working closely with the employment market. The consumer market, the real mass market, continues to expand. Therefore, we have a good market. It is not only growing more lately, because we have a credit restriction, so it could grow more, but now we have to privilege the expansion of the investment, the investment, fundamentally, in infrastructure, in order to eliminate the gaps, in order to reduce the inefficiency points that we have in our productive structure. In the last 30 to 40 years, Brazil has invested little. We have to recover this lost time, and in the last 10 years, the investment has been growing, around 6% in the middle. In the last year, 2013, the investment has grown well, 6.5%. And now the government has launched a great program of concessions where the private sector in partnership with the government will have to implement hundreds of billions of dollars of investment in the country. This is already happening, there will be a continuity in the coming years. They are practically all important sectors, oil and gas, electric energy, railways, railways, airports, they will all be mobilized, they will therefore accelerate the brutal formation of fixed capital. We have to spend 20% of the GDP, moving towards 24% of the GDP, and at the same time reduce costs of transportation, import export, which are high in the country. Therefore, the growth path of Brazil is given, so to speak, to grow with strong investment means depending on our own conditions, because we already have a demand for these sectors, for the air sector, for the roads, for oil and so on. Therefore, these are lucrative businesses that will attract foreign capital, national capital, and will have the support of the government to get funding and to be implemented. Therefore, I think the BRICS will continue leading the growth of the global economy, although there are more modest growth rates, however, higher rates than the growth rates of advanced economies. And if the advanced economies in fact recover, they will give a strong stimulus so that the growth of the BRICS happens. Can you hear me okay? We are starting this with the Economic Forum and the positive age of a growing or positive growth economic scenario. We have had five years of crisis, and we see now that after those five years of crisis, the advanced economies are beginning to recover and to increase the recovery rates. Of course, the problems are not over yet, but we do have our path to follow and our challenges to face in recovering dynamism for the global economy. On the emerging countries, a lot of the growth of the emerging countries is somehow tied to the advanced economies of the world. The crisis in the advanced economies caused that the growth rates from the emerging economies were lower than before. That's why I believe it is hard to talk about a midlife crisis for the BRICS as has been mentioned before, because the BRICS have not reached their midlife yet. The BRICS are still in their very youth. I believe that what is happening now is, like I said, the reduction of the crisis from the advanced economies is causing the growth rates of the emerging countries to go down. China, for instance, will continue to be the top economy in the world in terms of growth rates, which will bring more dynamism to the global economy as it has been before. India will also continue growing, and even though those countries will not probably be growing at their previous 2006 or 2007 levels, they will still be growing at higher rates than the previous economies from before, which means that the BRICS countries will continue to lead growth rates in the global economy. We do have our challenges for absolutely. China is probably not likely to reach the previous 12%, 14% growth rates that they had reached before, but it is still quite likely that they may reach 7% to 7.5% growth rates over the next decades, which will continue to be important for the economy. We probably grow at 6% or 7% as well, and Brazil is also going to continue to grow its economy. However, some adjustments are needed in these economies, which is true. China is pressed to work further on growing internal demand because it will be more difficult for it to continue growing based on external demand as had been before. The dynamism of these growth rates for these economies will be different, and they need to adapt. Asian countries are particularly dependent on advanced economies for their growth rates, which means that they need to work harder on growing their internal market, which leads to investment. We are seeing these BRICS countries reducing investments, but it is important to highlight that investments reducing does not mean that they will become non-existent. China may reduce its investment rates from 48% to 40% or 38%, but these are still significant investment rates that are important for the global economy. The same thing happens with India, which will be reducing its investment rates and looking for more growth in the internal market. Brazil on that particular front is going on a different path. It is actually increasing spending, even though it has built a very large new middle class that is expanding, even though we have virtual full employment in the country, even though real income is growing in the internal market, and it is internal spending is growing, which hasn't grown more because of credit restrictions. We are investing more than we did before, because we need to eliminate bottlenecks on the infrastructure and because of other issues as well. Brazil has had a dearth of investment for 30 to 40 years before, and is now becoming beginning to recover the last time. Over the last 10 or years or so, we have increased our investment at very strong rates, usually at averages of 6% a year, and have increased our investment in 2013 by 6.5%. We have implemented a large concession program wherein the private sector is working together with the government, and you will see hundreds of millions of dollars being invested in infrastructure under the large concession program as well. Okay, sorry. We are... The program covers a number of sectors, including oil and gas, electricity, roads, railroads, ports and airports, all being subject to concessions in the country. And of course, this will also help leading to further increases in our girls' fixed capital formation. We are moving past the 20% mark in girls' fixed capital formation and are going towards our target, which is bringing it above 24% of GDP. We will reduce transportation bottlenecks, reduce import bottlenecks and export bottlenecks and costs to make sure that Brazil's growth recovery is continuing to rise. It is a bit different from other countries because we depend on our own conditions. The demand for these sectors that I mentioned, oil and gas, ports, railroads and roads, is already high internally, and it is a very lucrative business with very attractive capital destinations in which we'll be working with... the government will be working with the companies who have granted these concessions to provide support and ensure that these programs are successful. Like I said, the BRICS will continue to lead the global growth of the economies. And like I said, we do have a road ahead of the advantages, a road of challenges ahead. And if we may see, like the signs are showing, that the advanced economies will get better growth rates than in the past, then the growth of the advanced economies may compound to the BRICS growth rates and bring further positive effects into the economy. Thank you. And of course, having a worldwide audience, your interpretation is very much appreciated by our viewers in the media centre here in Davos, but also around the world because this is live stream. So if I could perhaps ask... you're more than welcome to ask questions in Portuguese, but if we could have an interpretation as well so our audience can follow the debate. Can I have the first question, please? Deborah and Francisco, you were first. You were giving me signals five minutes ago, at least. So we'll do you two first, and then we'll come to you two. Thank you. Good afternoon, Minister. Today, the Coupon Act indicates that it is hard to control inflation in Brazil. An increase and a trend for an increase. How do you react to that? I didn't see the Coupon Act, but I saw it... I'm sorry, could we just... The Coupon, the Brazilian Monetary Policy committee. How many foreign journalists do we have here? How many foreign journalists do we have here? He sits there and makes the translation next to the journalists. Well, if we could just perhaps have the question translated so our audience could follow online, that would be great. What's the link? I'm sorry? The link is on our website. www.weforum.org. The Monetary Policy Committee has recently met and concluded that it was probably hard to control inflation in Brazil with an increased basic interest rate and a tendency to increase for the next meeting of the committee. How do you see those increases? I didn't see the Coupon Act, but I saw the IPCA-15 that came below the market expectations. Therefore, Brazil has controlled inflation in the last 10 years. We have been below the maximum limit of the inflation target regime, and we will continue like this in the next years. Therefore, inflation will continue to be a priority of the government. The control of inflation will be a priority of the government always. Next. I haven't seen the minutes of the meeting of the Monetary Policy Committee, but I have seen the IPCA-15 index numbers and they are below the expectations of the market in terms of inflation rates. We have been controlling inflation for 10 years, and we have kept our inflation rate growth below the maximum targets, and we'll continue to do so. Inflation control will continue to be a priority of the Brazilian government as it has always been. Next question. I don't know why I didn't come with her on the plane, so I don't know exactly what she's going to say if she's going to make an announcement or not. Can I ask you a question? Do you think it is necessary to change, to increase the fiscal limit in Brazil? I think it is necessary that we always keep a solid fiscal policy, and we will continue doing that. We made a great effort in which we had to make an anti-cycle policy and at that time the primary super-life was smaller, a little smaller, even so, I would like to remember that the primary super-life of Brazil is bigger than the BRICS, for example. Of all the BRICS, Brazil continues to make the biggest primary super-life. So we will continue to make the primary super-life necessary to continue reducing the liquid debt of the public sector. This will also be done in 2014. We still don't have a definition for 2014. We only have the one that came out in the budget proposal that we presented in August or in the Congress. And now, at the beginning of February, we will have to present the final format of the 2014 budget proposal when we make the budget execution decree. Because then we will say of the budget approved how much it will be contingent. And therefore, we will be saying with more precision what will be the primary super-life that will be done in 2014. So, we will be talking about the impact of change in Brazil's fiscal targets. Are there increases of primary surplus predicted? And do you believe those are necessary to increase the primary surplus targets? The minister responded that he cannot anticipate the answer to what the president will announce. He did not come with her on the plane. He cannot predict what she will say. The journalist then changed the question to the minister. It is necessary the minister responded to maintain a solid fiscal policy. We have undertaken major efforts in the past to engage into anti-cyclical policies with one of the results decreased primary surplus. But it is still the largest primary surplus between the BRICS countries that is something important to highlight. And we will continue to pursue primary surplus increases to reduce the net debt of the public sector. Something that we will continue to do in 2014. We haven't had a definition for 2013 yet on the targets because there's only been a budget proposal sent to the Brazilian Congress. In February this year, we present what is called the final format of our budget performance which is based on the budget performance act. That is where it is decided all that has been planned for the budget is actually appropriated. After those budget contingencies are decided then we have what we call the primary surplus. In the end of 2013, if we observe from September September, October, November, December we had an elevation of the reduction which reflects a greater growth of 2013 compared to 2012 greater profitability of the companies therefore paying more in income and everything else. And this performance should continue in 2014 facilitating a necessary fiscal result. Stopping to give new Not exactly removing tax exemptions but gradually facing them out with the recovery starting September 2013 and continuing through October to December with collection rates increasing for all of those months the profitability of Brazilian companies has also increased which leads to companies consequently paying more taxes. A tendency or trend that should be developed in 2013 facilitating the achievement of the targets. Next question. We have just over 10 minutes so gentlemen at the back first and gentlemen at the front row if we have time we'll try to do you as well so we do these three. So keep it to one question please. I would like to ask if Brazil would be willing to negotiate with the European Union a free trade agreement but in Argentina? Brazil is willing and is negotiating a free trade agreement with the European Union. We started doing this at the beginning of last year when a mission came from the European Union to Brazil and we established this agreement. We didn't think about excluding Argentina. On the contrary, we want to bring Argentina to this agreement and it seems that the reactions are positive from Argentina. Therefore it is viable to build a commercial agreement with the European Union. The question was would Brazil be willing to start negotiations with the EU to build a free trade agreement with Argentina? The answer was Brazil is willing and is already negotiating a possible free trade agreement with the EU. The work began early last year when Brazil was visited by a mission from the European Union and at that time it was decided that a group should start working on building that free trade agreement. It was not however discussed under the premise of excluding Argentina. Actually Argentina is included in the discussions and has shown positive reactions to this free trade agreement and I believe that it is a viable trade agreement to happen. Next question. Okay, gentlemen and friends. The second question do you think it is logical to wait for an increase in the price of Petrobrasch before the elections? I believe that there is a stronger recovery of the United States in relation to other advanced countries, although the United States still has to consolidate this recovery, it is taking the first steps in consolidating. I think that the agreement with the congress on the issue of the American debt is positive. With this, the United States will be able to grow 3% this year as is being predicted by the monetary fund. In the first place this brings some problems for emerging countries because of the reduction of the monetary stimulus. So, provisorily we will still have some changes, some capital flow. However, in the middle of the period, the greater growth of the United States is positive for Brazil and other countries. Brazil has a trade relationship with the United States and if the United States grows more it will import more Brazilian products and we will have more energy. Therefore, I think this will be positive. As I said this will be fundamentally pulled by investments by the concessions by the businesses in this area. So, it is good to remember that the direct external investment in Brazil continued very high even in the last year which was a difficult year. In 2012, also a difficult year we had 65 billion dollars of direct external investment. We do not have the value of December, but we have already reached the next 60 billion until November. So, there is interest in Brazil there is a capital flow that comes in Brazil, the possibility to have greater profits than the profits that the Treasury will allow with the increase of the legal taxes. That is why I think it is a passenger, because today they are going in search after this reallocation of these assets investors will look for more profitable investments than these offered in the United States. Therefore, emerging countries will continue to be more profitable and will continue to attract foreign capital here. Therefore, the growth of our country will be greater. Petrobras, you have to ask for the Directorate of Petrobras even though it is the President of the Council, but the increase in prices is from the Directorate. This is in the Petrobras Statute. So, you can ask the President of Petrobras, who is here she is not here in this room only if she is hidden but she is here in the event, you can ask her. The question was is that a lot of expectation has been created in the event of the U.S. and its recovery. What are your expectations on the recovery of the U.S.? And would that recovery help Brazil? And can Brazil be also a surprise in terms of generating positive expectations throughout the middle in the end of the year? He also asked about the prices of Petrobras and how it affects things. The strong recovery of the U.S., which has been shown better recovery rates than the other advanced economies are consolidating. The recovery of the American economy is still in its first steps. The agreement reached with the American Congress on the debt scene was important in achieving those goals. They now have 3% growth rates according to estimates by the IMF which are good growth rates. That would create for emerging economies an immediate negative impact on the very short term because of the reduction of the monetary stimulus in the American government. However, on the midterm that trend is positive for countries like Brazil and other similar countries who have important trade relations from the U.S. because those trade relationships will increase. America will import more from Brazil from those other countries. So on the middle term, I would say that this would be a positive outlook on the growth of Brazil we have mostly been said before, but in our growth on investment and concessions and it is something worth highlighting here is that Brazil's foreign direct investment levels remained high despite the difficult years we may have had over the last few years. In 2012, which was a hard year, we still had 65 billion in foreign direct investment inflows and the estimates for 2013 as far as November, we do not have December number yet are already at 60 billion. So there is an obvious interest in investing in a Brazilian economy and even though the Treasury may increase interest rates for investments in the American Treasury, those are still 3% per annum rates. So after reallocating assets depending on the changes to be made many investors will see that they still need or they still want to find more attractive investments and the emerging economies are more profitable investments than those. So I believe we continue to attract foreign capital. On the question about Petrobras, you have to ask the Petrobras directorate. It was highlighted that the minister is the chairman of the board of Petrobras, but he informed that the statute or the bylaws of the company clearly state that the board has no direction on prices, that this is this rule of the directorate who is here at the event and can be found to answer questions Okay, and we're running very short of time but Maria Cristina I'd like to invite you to ask one quick question please. There's a microphone here. But I saw the price research that says that 44% of the investors who were interviewed are optimistic about the global economy, which is much better than in January last year, I don't remember how much it was, but it was much less than that. How much? No. 44% now and last year how much was it? 18%. 44%. So, optimism is very important which means that they are available to make investments. In addition, 12% of these investors are the ones who intend to invest in Brazil. So, Brazil was in fourth place as an address for investment. China, the United States, entered Germany, last year Brazil was third, this year it was fourth place. What is similar to our classification in terms of direct investment? Last year we were the third country that attracted this position more than last year. Regarding the degeneration no, the idea is that some degeneration will stay, for example the degeneration of the payment sheet. To stay will be an important for the productive sector. IPI, etc. about investment will stay. Now, other degeneration will be able to be relocated about consumption and everything else. By the way, the IPI on automobiles is increasing, the IPI on the white line is increasing, the IPI on the mobile is increasing. So, it is a trajectory so, no, the payment sheet no, the payment sheet came to stay because it is structural, it is a structural reduction of the cost of the work for the Brazilian companies to be more competitive. So, at this moment we do not need to re-edit new degeneration, on the contrary we are recomposing some degeneration. There is a chronogram on the white line on the mobile that is to return to the initial patterns there is no defined time. When we finish the time that we defined the first time we go up we examine and verify the demand and then we decide so, there is no predefined calendar for this return of this. The second question was there are actually two questions one was if the minister had already felt the water with regard or felt the temperature when talking to investors and the second was on the tax exemptions and the tax exemption reductions to happen will they stop, have the benefits been measured. I haven't met with investors yet but I did see a survey by Price which stated that 44% of CEOs surveyed a much better percentage than the one surveyed last year which was about 18%. This optimism is important because it shows willingness to invest and to invest more. Also 12% of investors said that they are willing to invest in Brazil which puts us in fourth place as the most attractive investment country. We have China, the US, Germany which is a new entrant last year Brazil was third and now Brazil is fourth. Brazil which also matches surveys on most favorite FDI destinations or foreign direct investment destinations Brazil is ranking fourth in those as well. On the exemptions some will continue and some will remain. Payroll tax exemptions will remain and they are here to stay they are considered a structural reduction of taxes because they reduce the cost of labor. Now on the tax on industrialized products some will change and some won't and the investment exemptions are going to remain. For the IPI the Brazilian tax on industrialized products there are particular rates that are changing for furniture for home appliances and for cars which are gradually being increased to recompose the collection of the government. The payroll tax exemption however will continue. It is a competitiveness measure that will reduce the cost of labor and make Brazil's economy more dynamic and competitive. It will continue. There was a follow up question on whether there was a schedule for the reduction of tax exemptions and when they will happen and how they will happen. The reduction follows a sort of process like he mentioned before there is a schedule for the exemptions to expire on furniture, home appliances and cars. So there is a schedule for the reduction of exemptions for furniture, appliances and cars for the industrialized tax on industrialized products and they will gradually return to the initial levels. Usually we will climb a step in reducing the exemptions and then check what happens to the demand and then plan the next step. It is a gradual process. Thank you very much. We have come to the end of our half hour allocated time for this press conference. Thank you very much Mr. Minister. Thank you to our audience watching us from the media centre.