Presentation - Brazil-US Business Council

US- Brazil Bilateral Cooperation Perspectives
1

Telecommunication
Incumbents
Land lines lines access
Business Groups
The main groups are organized as follows:
Cell phones, Pay TV and
broadband
Public service with obligation to
provide services for all
customers
Competitive market

Telecommunication
Business Groups
Net Revenue 2010 of Six Major Groups in Brazil
(R$ billion)
Source: Teleco

Telecommunication
Business Groups
Market Leaders by Market Segment
(percentage of penetration in each market)
América Móvil
Source: Teleco

Telecommunication
Business Groups
Market Leaders by Total All-Service Access
(million subscribers)
Source: Teleco

Telecommunication
Telecom Infrastructure
Brazil is the 6th largest mobile market in the world.
The growth of subscribers 1997-2011
Source: Teleco

Telecommunication
Telecom Infrastructure
Though with high density of cell phones (107 lines/ 100 habitants)
the subscriber base is still growing at a constant rate.
Cell Phones Net Additions per Quarter
Source: Teleco

Telecommunication
Telecom Infrastructure
Though the base is growing, one of the biggest challenges
from the mobile market is low revenue per user (ARPU) but
has been overcome with the increase in service data revenues.
Data Service Revenue from Total Revenue
Source: Teleco

Telecommunication
Business Opportunities for New Competitors:
Mobile Virtual Network Operator
Based on these numbers, Anatel (Brazil telecom regulator) published
in November 2010, a new regulation allowing the entry of new
competitors in mobile market: “Mobile Virtual Network Operator”.
Allows the operation of companies, not holding the mobile telephone network,
the provision of services to specific markets and customers through sharing of
infrastructure with the carriers.
The Porto Seguro (insurance company ) in association with the operator TIM
(Telecom Italia) is the first to request the license in Brazil.

Telecommunication
Business Opportunities for New Competitors:
There are approximately 85 million worldwide phone subscribers
through a mobile virtual operator (MVNO).
The largest companies by number of subscribers operating in the U.S. market:
• Tracfone with 15 million subscribers (the America Móvil group);
• Virgin Mobile with 5 million worldwide subscribers (acquired by Sprint in 2009)
According to the consultancy E-Consulting Corp., the MVNOs will reach 6.5% of
penetration in Brazilian market.
Mobile Virtual Network Operator

Telecommunication
Broadband Infrastrucuture
The infrastructure of fixed broadband reached 94% of the population
(backbone + backhaul) but as seen in the graph, the number of
access is still low due to the high cost of service, a problem that is
expected to be resolved with the Federal Government Broadband National
Plan (PNBL).
Source: Anatel e Teleco

Telecommunication
Digital Television Broadcasting
The highlights of system adopted in Brazil for the digitalization of TV:
• free service, including broadcasts for cell phones;
• the National Technology Middleware (GINGA) that will provide interactivity
for the user in future for shopping and online games.
After three years of operation, The Brazilian Digital Television System (SBTVD-T),
based on Japanese standard (ISDB-T), is already present in 425 cities, covering
89.5 million people.
Source: Teleco

Telecommunication
Digital Television Broadcasting
For the purpose of promoting regional integration, all Latin American
countries, except Colombia, have adopted the Japan-Brazil Digital TV
standard.
Adopted the ISDB-T standard (Japan-Brazil standard)
Adopted the DVB-T standard (European standard)
Adopted the ATSC (American standard)
No standard yet
Source: Teleco

Transport
Transport Modal Mix
Present and Future
2005 2025
13%
3,6% 0,4%
29%
5%
1%
25%
35%
58%
100%
100%
30%
Road Rail Waterway Pipeline Air
Source: PNLT

Transport
National Logistics and Transportation Plan -
1. Geo-referenced database
PNLT
In 2006, the Brazilian Federal Government launched the National
Logistics and Transportation Plan (PNLT) based on:
2. Economic optimazation of the transport fuel
3. Integration of the regional plan
4. Logistical aspects taken into account (cost & time)
5. Inventory / Warehousing / Distribution / Multimodality
6. Participation of all interested civil sectors.
Investiments of R$ 290 billion (2006-2025).

Transport
Highways
Highways:
1.7 million km
Highway
concessions:
15 thousand km
(administrated by 52
companies)

Transport
Highways - Investiments
Federal Highways:
PNLT Planned
Investiments:
R$ 70 billion
Period R$ (billion)
2008-2011 47.0
2012-2015 10.5
After 2015 12.5
Total 70.0
Main Highway Development in the
State of São Paulo: “Ring Road”
(Northern stretch – 42.8 km - R$ 4.85
billion).

Transport
Railroads
Railroads – 29,817 km
12 concessions: operated by 5 private groups and 1 state company (VALEC).
PNLT Planned Investments:
R$ 150 billion
2,700 km construction
1,500 km planned
5,300 km modelling
2,500 km in analisis
Period R$ (billion)
2008-2011 34
2012-2015 53
After 2015 63
Total 150

Transport
Railroad Expansion
Prolongamento Norte da Ferrovia Norte–Sul
Barcarena/PA – Açailândia/TO - 450 km
Barcarena
Conexão Transnordestina/Norte–Sul
Eliseu Martins/PI–Estreito/MA – 400 km
Pecém
Ferrovia Norte–Sul – Trecho Norte
Aguiarnópolis/TO – Palmas/TO – 720 km
Ferrovia de Integração Centro–Oeste
Uruaçu/GO–Vilhena/RO – 1.600 km
Vilhena
Ferrovia Norte–Sul – Trecho Sul
Palmas/TO –Estrela do Oeste/SP – 1.535 km
Sorriso
Açailândia
Aguiarnópolis
Palmas
Figueirópolis
Uruaçu
Eliseu Martins
Luís Eduardo
Ibotirama
Brumado
Missão Velha
Salgueiro
Ilhéus
Ferrovia Nova Transnordestina
Missão Velha/CE – Salgueiro/PE – 1.728 km
Recife
Suape
Salvador
Reconstrução Ferroviária
Recife/PE–Propriá/AL – 550 km
Ferronorte Alto Araguaia – Rondonópolis – 260 km
Anápolis
Ferrovia da Integração Oeste–Leste
Ilhéus/BA–Figueirópolis/TO – 1.444 km
Prolongamento Sul da Ferrovia Norte–Sul
Estrela d’Oeste — Panorama–Porto Murtinho – 900 km
Ferroeste - Cascavel/PR–Maracajú/MS – 600 km
Antofagasta – Chile
Corredor Ferroviário Bioceânico
Santos/SP – Antofagasta/Chile – 2.930 km
Porto Murtinho
Maracajú
Estrela D’oeste
Cascavel
Chapecó
Resistência – Argentina
Panorama
Imbituba
Ferrovia Frango/SC
Itajaí/SC–Chapecó/SC – 549 km
São Paulo
Santos
Paranaguá
Araquari
Itajaí
Belo Horizonte
Itaguaí
Ferrovia Litorânea/SC
Imbituba/SC–Araquari/SC – 235 km
Variante Ferroviária Oeste do Paraná - 130 km
RailRoad Gauge
Wide (1,6 m)
Construction
Project
Narrow (1,0 m)
Construction
Project

Transport
Highspeed Train - “TAV Brasil”
Linking the city of –
Campinas - São Paulo -
Rio de Janeiro
Lenght: 511 Km
Planned Investiment: R$
33.1 billion
Estimated conclusion:
2016
Auction: 04/29/11

Transport
Urban Mobility Projects: Metro and Trams
Collective Transport System and Metro
expansion to 11 municipalities.
• Current Metro length: 215.7 km
• Planned Expansion: 133 km by 2022
• Planned Investment: R$ 105 billion

Transport
Inland Waterways
Lenght: 28.000 km
• Currently in operation:
13,000 km
• New Operation
potential >15,000 km,
totaling 43,000 km.
• Main ports: 15

Transport
Inland Waterways
PNLT Planned Investiments: R$
16.0 bilion
Structuring the current main
waterway corridors: (dredging,
demolishing, sinalization and cargo
terminals)
Period R$ (billion)
2008-2011 4.0
2012-2015 7.0
After 2015 5.0
Total 16.0
Total Waterway Terminals for
passangers (Current & Planned): 34

Transport
Ports
• 34 main marine ports
• Plans in port infrastructure
• Dredging
• Passanger terminals
• Logistic Intelligence
• Planned Investment by 2014:
• Public R$ 5.1 billion
• Private: R$ 6.0 billion
Period
R$ (billion)
2008-2011 18.0
2012-2015 8.0
After 2015 13.0
Total 39.0
The Federal Government is
developing a National Port Logistic
Plan, to be released in December
2011

Transport
Airports
• 67 main airports; 34 international
• Annual Passenger Movement:
• 2003: 71 million
• 2010: 155 million
• 2014: 190 million
• 10.3% Annual Passenger Growth
Source: Infraero

Transport
Airports
• Infraero Planned Investiments
• by 2014: R$ 5.6 billion (World Cup).
• between 2014 -2016: R$ 3.1 billion (Rio
Olympic Games)
Period R$ (billion)
2008-2011 5.0
2012-2015 4.0
After 2015 3.7
Total 12.7
• Planned PNLT Investiments: R$ 12,7
bilhões
• Federal Government announced the
restructurization of the sector, with the
creation of the Secretary of Airports.
Source: Infraero

World Cup
Expectation from the Fifa World Cup:
Unite the Country
Promote the Country
in the World
Build World Class
Multi-use Stadiums
Service upgrades
Infrastructure
Modernization

World Cup
World Cup - 2014
12 sites:
• Belo Horizonte,
• Brasília,
• Cuiabá,
• Curitiba,
• Fortaleza,
• Manaus,
• Natal,
• Porto Alegre,
• Recife,
• Rio de Janeiro,
• Salvador,
• São Paulo.

World Cup
World Cup - 2014
Direct Investments:R$ 47 billion
Infrastructure •Construction: R$ 23 billion
•Service: R$ 10 billion
Tourism
•600 thousand Int’ tourists(R$ 3.9 billion)
•3 million domestic tourists (R$ 5.5 billion)
Jobs
Generation
•Permanent: 332 thousand (2009-2014)
•Temporary: 381 thousand (2014)
Consumption • Growth: R$ 5.0 billion (2009-2014)
Revenues
•Total: R$ 16.8 billion

World Cup
EstimationAdded: ~ R$ 183 billion to the Brazilian GDP until 2019 (or +0.4%
per year)
135,7 183,2
R$ Billion
47,5
Indirect
TotaI Impact
Direct
•Infrastructure Investments
•Cash flow
•Tourism Spending
•Increase in domestic
consumption
•Increase of Tourism and
the use of Stadiums
after the World Cup
+0,4%
in GDP
2010-2019

World Cup
Planned Investments up to now: R$ 24.8 billion
•Stadiums= R$
5,075 million
•Local= R$ 783
million
(São Paulo
stadium not
included)
5.9
3,0
2,9
11.6
7,7 11,5
3,9
1,0
0,7
5,6 24,8
5,2
0,4
5,9
7,3
Local resources
Federal Finance
Ofederal Budgetl
Estádios e
entorno
Mobilidade
Urbana
Hotelaria Portos Aeroportos Total
# Projetos 11 51 n.d
7 13
83
+ Projects in:
• Security
• Telecom/IT
• Energy
• Health
• Tourism Infrastructure
• Professional Qualification

World Cup
Stadiums
Site Invest. Current Situation Site Invest. Current Situation
Manaus
533
Plus local
Construction
started
533
Fortaleza
projects financed by BNDES
452
Construction
started
Cuiabá
597
Plus local
Construction
started
Natal
*
413
Bidding
Brasília
*
São
Paulo
702
-
Construction
started
TBD
Recife
Salvador
678
Plus Local
630
com entorno
Waiting for the
Bidding
Construction
started
Curitiba
*
Porto
Alegre
*
185
Plus local
154
Plus local
Construction
started
Construction
started
Belo
Horizonte
*
Rio de
Janeiro
684
Plus
Local
828
Plus
Local
Construction
started
Construction
started

Energy Overview
Energy Mix
Primary Energy Demand by Fuel Type
12,271
(MTOE)
16,725
(MTOE)
World
Non-
Renewable
87%
Renewable
13%
Hydro 2%
Biofuels 0,4%
Other
Renewables 1%
Biomass
10%
Non-Renewable
84%
Renewables
16%
Hydro 3%
Biofuels 1%
Other
Renewables 3%
Biomass
10%
2008 2030
245
(MTOE)
572
(MTOE)
Brazil
Non-
Renewable
55%
Renewable
45%
Hydro 2%
Biofuels 5%
Non-
Renewable
54%
Renewable
46%
Hydro 13%
Biofuels 10%
Other
Renewables 2%
Biomass
27%
Biomass
21%
Source: IBP

Energy Overview
Energy Mix
World
Brazil
2.2%
10.5%
1.5%
6%
13.8%
26.5%
5.9%
20.9%
36.7%
31.5%
34.0%
10.3%
Hydro Biomass Natural Gas Oil and derivatives Nuclear Coal
Source: Key World Energy Statistics 2009 - IEA

Energy Overview
Power Generation
World
2.6%
15.6%
Brazil
4.8% Wind;
2.8% 1.6% 0.1%
3.0%
6.0%
41.5%
20.9%
81.7%
13.8%
5.6%
Hydro
Oil and derivatives
Coal
Natural Gas
Nuclear
Other
Hydro
Natural Gas
Oil and derivatives Nuclear
Coal
Biomass
Wind
Source: Key World Energy Statistics 2009 - IEA

Power Generation
Energy Generation Institutional Framework
• Planning: Ten Year Energy Plan – “PDE 2019” and National Energy
Plan – “PNE 2030”.
• Guarantee of Supply: transmission and generation auctions,
lowest tariff with long term contracts (15 or 30 years PPA).
• Optimized Tariff: lowest tariff auctions and distribution and
transmission reviews.
• Universal Access: “Light for Everyone” Program and “Social Tariff.

Power Generation
Institutional Management
• Policy and Planning:
National Council of Energy Policy – CNPE
Ministry of Minning and Energy – MME
Energy Research Center – EPE
• Regulation:
National Electrical Power Agency – ANEEL
• Operator:
National System Operator – ONS
• Commercialization:
Electrical Power Commercialization Chamber - CCEE

Power Generation
Expansion Summary
2009 2019
Ten-year
Incremental
%
Installed Capacity (GW) 103.6 167.0 63.4 61%
Hydro 81.5 116.7 35.2 43%
Nuclear 2.0 3.4 1.4 70%
Thermal 13.3 25.4 12.1 91%
Alternative Sources 6.8 21.5 14.7 116%
Transmission
Transmission Lines (Km) 95,582 132,379 36,797 38%
Sub-stations (MVA) 206,212 282,351 76,139 37%
Fonte: EPE (PDE 2019)

Power Generation
Investiment Estimates
R$ Billion
(2010-2019)
Total Electrical 214 22.5%
Generation 175 18.4%
Transmission 39 4.1%
Total Oil and Natural Gas 672 70.6%
Exploration and Production 506 53.1%
Oil Derivative Supply 151 15.9%
Natural Gas Supply 15 1.6%
Total Liquid Biofuels 66 6.9%
Ethanol – Production Plants 58 6.1%
Ethanol – Pipelines 7 0.8%
Biodiesel – Production Plants 0.5 0.1%
Total 952 100%
%
Source: EPE (PDE 2019)

Power Generation
Hydropower Expansion
9000
Installed Capacity Growth (MW)
8000
7000
6000
5000
4000
3000
2000
1000
0
1716
2314
812
2205
110
1071
3086
1890
2401
3419
5656
2003
1231
2444 2444 2444
Planned
Contracted
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: EPE (PDE 2019)

Power Generation
Alternative Energy Expansion
Installed Capacity Growth of 14.6 GW (2010-2019) from the following
sources:
Contracted & Planned Expansion
Wind
36%
Small
Hydro
27%
Biomass
37%
Small
Hydro
Wind
6.8GW expansion contracted (2010-
2012)
7.85GW planned (2013-2019)
116% Growth
Biomass
3.9 GW 5.3 GW 5.4 GW
Source: EPE (PDE 2019)

Power Generation
Alternative Energy Expansion
Installed Capacity Growth (MW)
3985
776
Contracted
2044
1150
1350
1250
Planned
850 800
1100
1350
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: EPE (PDE 2019)

Power Generation
Nuclear Expansion
• Angra III comissioning in 2015, adding 1.4GW to the total
installed capacity.
• Studies in progress for nuclear development in the South, South-
East and North-East Regions.
Installed Capicity Growth (MW)
1500
1250
1000
750
500
250
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Angra III
Source: EPE (PDE 2019)

Oil
Total Oil and Gas Production
Total Petrobras production will increase 1,255 thousand boepd by 2013, an
annual average increase of 8.8%.
Oil Production - Brazil
Gas Production - Brazil
Oil & Gas Production - World
Source: Petrobras

Oil
Oil Expansion
• Major investments in oil prospecting and exploration .
• National Production Growth from 2.0 to 5.1 Mb/day
Estimated Oil
Production Growth by
2019 is 155%
2019
Source: EPE (PDE 2019)

Oil
Number of Concessions
Concessions
(Jan – 2010)
Petrobras
Other Companies
(2009)
Total
Brazil
Exploration 143 182 325
Plans 38 0 38
Production 286 38 324
Total 467 220 687

Oil
Number of Concessions

Oil
Industries : Other Statistic Data
Refining Capacity: 2.0 mbpd
Expansion to meet demand: 2.3 mbpd by 2013
Expansion to meet export: + 0.9 mmbpd by 2015 (Premium refinement)
Natural Gas:
Reserves: 423 million cubic meters( excluding Pre-salt)
Domestic Production: 53 million cubic meters per day (high growth rate)
Consumo doméstico: 60 million cubic meters per day (135 in 2013)
Pipelines: 22,500 KM (GAS: 9,840 km )
US$ 8 billion investment to construct 7,400 km by 2013
Pipeline distribution: 18,000 km
Natural Gas Vehicle (NGV)
3rd largest Light Vehicles Fleet in the world: 1.6 million vehicles
1,700 Service stations
Fonte: IBP , Gas Energy

Oil
Investiment
2010-2014
Exploration & Production (E&P)
Oil & Natural Gas (O&G)
Other
20%
Other
17%
Petrobras
80%
Petrobras
83%
Total US$ 135 billion
Petrobras Other
US$ 108 billion US$ 27 billion
Total US$ 250 billion
Petrobras Other
US$ 208 billion US$ 42 billion
Source: IBP e Petrobras

Oil
Challenges World Oil Supply
• Worldwide Production in 2008: 86 mbpd;
• Worldwide Production in 2030: 31 mbpd (excluding new discoveries);
• Global demand in 2030: 106 mbpd;
• Deficit– 75 mbpd supplied by:
• New discoveries;
• Alternative energy;
• Increase in energy efficiency.
In all world economic growth scenarios,
new major oil discoveries will be
necessary to meet expected demand

Oil
Pre-Salt Region

Oil
São paulo – oil & gas exploration/ production
UGN
RPBC
UTGCA
PMXL-1
170 Km
URG
PMLZ-1
TEFRAN
SS-11
Área do
TUPI
Fonte: Petrobras

Oil
Petrobras HQ Project in SANTOS/SP
Fonte: Petrobras

Oil
Offshore Production Evolution
124m
189m
293m
383m
492m
781m
1027m
Platform
1709m
1863m
1877m
1886m
2200m
2500m
Source: IBP & Petrobras

Oil
Petrobras – Exploration & Production Oil Technology
6,000m below surface
Source: Petrobras

Oil
Pre-Salt
The pre-salt layer is a strip located up to 300 km (180 miles)
offshore, along 800 km (500 miles) of coastline in the southeast of
Brazil. The oil lies at depths that exceed 7,000 meters underneath a
thick layer of salt that conserves the quality of the oil. This is the
first large reserve of light oil found in Brazil.
Source: UBS Pactual e Folha de São Paulo

Oil
Pre-Salt – Santos Basin
Total Area: 149,000 km²
Granted Area: 41,772 km² (28%)
Granted area with Petrobras: 35,739 km² (24%)
Area without Concession: 107,228 km² (72%)
Currently, proved reserves (post-salt): 19 billion barrels.
Guaranteed 19 years of production
FIESP estimates that Pre-Salt reserves could reach
100 billion BOE
source: Petrobras

Oil
Pre-Salt
World’s Largest Oil Producers
Optimistic Realistic Present Forecast Day: ~ 14.9 billion 100 billion 150 boe (17 (2 (5 nd th )
Source: Crédit Suisse (adapted)

Oil
Exploration modeling
How it
works?
Concession Regime
- Concessionaries pay through
exploration, assuming the risks &
own the production
Sharing Regime
- The State is the owner of the oil
and gas production
Who
explores?
- Winner of the auction: who pays
the highest bid
- Winner of the auction: who
grants the biggest share to the
State
Who
operates?
- Any participant of the winning
consortium
- Petrobras will the only operator

Ethanol
Overview
► 456 facilities producing ethanol from sugarcane and
generating electricity from bagasse in 2008.
► 100% of Brazil’s sugar and ethanol factories are selfsufficient
in electricity.
► 5.31% of Brazil’s energy mix, corresponding to an
installed capacity of 6,254 MW, are from bioelectricity from
sugarcane bagasse.
► Brazil has world-class expertise in the technology and
construction of ethanol plants that generate electricity by
burning sugarcane bagasse.
Source: UNICA, ANEEL

Ethanol
Sugarcane Products
• Sugar (food )
• Ethanol (fuel and other uses)
• Biodiesel (transesterification process)
• Diesel ( lower GHG emissions up to 80%)
(different from biodiesel – Amyris technology)
• Biorefineries (Green Plastics: ethylene, bio-polyethylene, bio-PVC, bio-PET)
• Cogeneration Power (burning sugarcane and straw in the plants)
• Ethanol Turbine (Power generation - VSE)
• Biogas (Power Generation)

Ethanol
The success of Brazil’s ethanol program has been driven by two key factors:
► R&D on genetic improvement of sugarcane
► Technological innovation in the automotive industry
Brazil is the world’s sixth-largest producer and fifth-largest market of automotive vehicles.
It produced more than 3 million in 2007. The number of vehicles in circulation exceeds 26
million. Today ethanol accounts for over 50% of the fuel use, including E25 gasoline
mixture.
Source: ANP

Ethanol
Car & Light Commercial Vehicles:
Consumption
2% 3%
World
Brazil
1%
4%
39%
56%
48%
47%
Diesel Gasoline Ethanol Other
Source: ANP 2009, FIESP 2009

Ethanol
Flex-Fuel
• The flex-fuel engine is a highly creative invention. It enables consumers to use
gasoline, ethanol or any blend of the two.
• Ethanol costs approximately 40% less than gasoline at the fuel pump in Brazil.
This generates competitiveness for the entire economy because it helps keep
down the price of gasoline. Also, greenhouse gas emissions are significantly
reduced, making ethanol a “green fuel”.
• The Brazilian automotive industry developed the first ethanol-powered car in
1976. But the real breakthrough came with the development of flex-fuel
technology in 2003.
Source: Anfavea

Ethanol
Flex-Fuel
Here are the automotive manufacturers that produce flex-fuel vehicles in Brazil:
Ask Your Local Dealer When Flex-Fuel Technology
Will Be Available In Your Country.

Ethanol
Ethanol and Climate Change
• February 2010: the U.S. Environmental Protection Agency
confirmed that ethanol from sugarcane is a low carbon renewable
fuel.
• The American Agency has designated sugarcane ethanol as an
advanced biofuel that lowers greenhouse gas emissions up to
61%.
By Adding 10% of sugarcane ethanol to gasoline;
greenhouse gases emissions are reduced by 6.1%

Ethanol
Sugarcane Productive Areas VS Amazon Rain Forest
Source: Unica

Biodiesel
Feedstock for Biodiesel
Source:: Biodiesel Atlas - Biodiesel BR

Biodiesel
Main Biodiesel Uses
• Diesel Engine
Can be added up to 10% with no engine modification.
• Trains
B5 with no engine modification and B20 & B100 with
modified engines.
• Planes
biokerosene for aviation (TAM – A320 trial flight
in 11/22/2010).

Carlos A. Cavalcanti
Energy Head Director
Infrastructure Department
+55 11 3549-4401
www.fiesp.org.br
80