► Latin America/South America (SASA) projection ► Brazil and the immigration scenario ► SASA’s global mobility issues

1. 2012 Human Capital Conference
23–26 October
Strategic growth markets:
SASA
Human Capital developments and specificities
for the South America Sub Area
Sub-Area

2. Circular 230 disclaimer
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used, and cannot be used, for the purpose of avoiding penalties that may
be imposed under the Internal Revenue Code or applicable state or local
tax law provisions.
Page 2 Human Capital on SASA

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Page 3 Human Capital on SASA

4. Presenter
► Carlos Henrique Martins Tonnus
q
► Ernst & Young Terco
► carlos.martins@br.ey.com
Page 4 Human Capital on SASA

5. Agenda
► Latin America/South America (SASA) projection
► Brazil and the immigration scenario
► SASA’s global mobility issues
Page 5 Human Capital on SASA

6. SASA projection

7. SASA: key countries
Investments in Latin America:
► In 2011, Latin America and the Caribbean received a
2011
record volume of US$153.4 billion in foreign direct
investment, which represents 10% of those global flows.
US$153.4 billion
US$137 billion
US$120.9 billion
2008 2010 2011
Source: http://www.brasil.gov.br
Page 7 Human Capital on SASA

8. SASA: key countries
Top four foreign investment receiver countries:
► Brazil — US$66 7 billion
US$66.7 For 2012 the
Investments in
I i
entries of direct
► Mexico — US$19.4 billion Brazil
investments in
represents,
► Chile — US$17 3 billion
US$17.3 the region may
g
43.8% f the
43 8% of th
y
vary between
► Colombia — US$13.2 billion total flow to the
2% and 8% in
region
respect of 2011.
p
Source: http://www.brasil.gov.br
Page 8 Human Capital on SASA

9. SASA: key countries
Rank in
world Country GDP (2011)
South America s GDP has
America’s 8 Brazil $2,102,018
$2 102 018 million
been in the spotlight in the 21 Argentina $694,690 million
international scenario. 26 Columbia $484,960 million
34 Venezuela $369,324 million
41 Peru $300,114 million
44 Chile $281,368 million
62 Ecuador $125,066 million
$
88 Uruguay $52,111 million
89 Bolivia $51,478 million
100 Paraguay $36,235 million
152 Guyana $5,842 million
154 Suriname $5,069 million
Source: CIA World Factbook
Page 9 Human Capital on SASA

10. SASA: key countries
Present and future of South America:
► Chile has an estimated GDP growth of 4.5% for 2012.
► Peru has an estimated GDP growth of 5% in 2012
2012.
► There are good economic perspectives for 2013.
► Brazil announced in August a US$66 billion stimulus plan
to complement investments for World Cup and Olympic
Games.
► Resilience before European international crises.
Source: CIA World Factbook
Page 10 Human Capital on SASA

11. Brazil and the immigration scenario

12. Business reactions: what we have seen as a
trend pattern
► Investment on education: ► External recruiting:
► Corporate universities ► Top management
► Post-graduation ► Regular job positions
► Research centers ► Technicians
► Attractiveness and retention:
► Compensation strategies Approximately 33,000
A number 19% higher
► Benefits and flexibility work visas were granted
when compared with the first
p
► Retirees in the first semester
two quarters of 2011.
of 2012.
Page 12 Human Capital on SASA

13. Immigration scenario: inbound/outbound
flows hit records year after year
Other
80,000
80 000
18%
70,524 North
70,000 66,690 America
60,000
56,006 35%
53,441 Asia/
50,000 Oceania
40,460
42,914 18%
40,000
32,913
29,065
Europe
30,000 29%
20,000
10,000 Top five countries 2009 2010 2011 2012*
2,565 3,834 3,848
2,454
United States 559 755 10,049
10 049 4,646
4 646
0 Haiti 6 15 720 2,302
2009 2010 2011 2012* Philippines 4,969 6,531 7,784 2,302
United Kingdom 3,496 3,809 4,817 2,083
Permanent visas Temporary visas Total Germany 1,454 2,904 3,142 1,695
* First two quarters of 2012
Page 13 Human Capital on SASA

14. Improving unemployment rates and rising
GDP per capita
Source: IHS Global Insight
14.0
► The unemployment rate in Brazil has
12.0
been decreasing. The average for 2011
g g
10.0 is 6.18%. Such a path is sustainable
8.0 once it is associated with investments
6.0 spread throughout the country and in
%
4.0
40
sectors such as energy, oil, agribusiness
gy, , g
and manufacturing.
2.0
► In addition, real GDP per capita is also
0.0
increasing.
-2.0
► Both factors indicate that social
conditions in the country are improving,
and as a result, the country has rising
Real GDP per capita (% yoy) Unemployment rates domestic demand and consumption.
Nasdaq Crisis Financial 2010 2011
Unemployment rates in Brazil 2000–2002
11.7%
Crisis 08–09
8% 6.7% 6.18%
have been decreasing
Page 14 Human Capital on SASA

15. Internal marketplace: manpower shortage in
the oil and gas industry
Engineering bachelor’s — number Local supply ability versus domestic
of new graduates per year demand
Source: Poli - USP Source: IG Estagio e Trainee
Brazil 32,000
, Current scenario
Ideal scenario
South
80,000
Korea
Russia 100,000 32,000 Gap
India
I di 250,000 60,000
60 000
China 20,000
40,000
60,000
400,000
Page 15 Human Capital on SASA

16. SASA’s global mobility issues

17. SASA’s global mobility issues
► Regarding last y
g g year:
► Legislative complexity: reaction, focus on compliance
► Aggravating: head count shortage and unplanned inheritance
► Result: inefficiencies, high costs, frustration
► Strategy versus execution:
► Lack of visibility about productive career
► Inefficient policies and processes
► Reactivity
► Challenge: global growth platform:
► Methodology, communication, risk management
► What makes great companies great? (peer to peer)?
► Return: consistency, continuity, flexibility
Page 17 Human Capital on SASA

18. Timeline: issues that impact the expatriation
programs
MERCOSUL Ibero-
Americano
Competitiveness Agreement*
Transit market
Argentina Argentina
Bolivia
Chile
Chil
Stakeholders Ecuador
Portugal Cape Verde Espain Germany* El Salvador Japan
Fiscalizations
Paraguay Spain
Paraguay
Portugal
Uruguay
Uruguay Belgium*
Luxemburg Italy Grece Chile Venezuela
Quebec
1943 1965 1969 1970 1979 1982 1984 1990 1991 1993 1997 2000 2002 2005 2007 2009 2010 2011 2012
Law 4,749 13th Law 8,036 IN 208 Tax RN 74 IN 84 IN 1,216
salary FGTS residency Work FGTS DIRF
authorization
Decree law Law 7,064 Law 8,212 Law 10,101
5,452 — CLT Reallocation of Social security Profit sharing
engineers Letter
L tt Law 11 962
11,962 New law
3,280 Labor contract
RMCCI
Law 11,638
* In process of ratification
Page 18 Human Capital on SASA

19. Recommendations to the market: general
rule is expatriate has no owner
Risks
Low Medium High
HR Tributary/
legal
High
Mediu
um
Controls/
finances
Low
L
► Inherited responsibility
$ ► Underestimated responsibility
► Reactivity
Low Operational complexity
p p y High
Page 19 Human Capital on SASA

20. Recommendations to the market: HR
responsibilities
Risks
Low High
Stocks
Medium Law 11,962
,
remuneration
High
RH
Policies
Mediu
FGTS
Chargeback
Low
L um
► Inefficiencies
► Costs
$
► Personal motivations
Low Operational complexity
p p y High
Page 20 Human Capital on SASA

21. Recommendations to the market: mapping
and work on synergies
Risks
Low Medium High L 11,962
, Stocks
remuneration
RH Tributary
/legal
High
Policies
Companies are failing on execution!
Mediu
FGTS
Chargeback
um
A
Controls/
finances
Low
L
► Compliance
$
► Estrategy
► Governance and reputation
Low Operational complexity
p p y High
Page 21 Human Capital on SASA

22. It is not just a problem of small companies
Automaker
► 18 special projects
Oil and
► Brazilian and foreigners, greatest ones gas
► Southeast, South and Mid-west Energy
► Foreigners in Brazil and Brazilians abroad Industry*
Banks
► Attention points Construction
*(General industries/factories
of benefit and production)
28%
25%
Unknown
100%
ramifications
14% 14%
11%
Pointed problems in execution,
Law 11,962
7%
communication and controls
Benefits
Treaties
4%
IN 99
Visas
FGTS
PS
V
B
T
L
F
I
Page 22 Human Capital on SASA

23. Why does problems happen?
► Policies/processes
p
► Outdating Overload
► Lack of flexibility
► Reactive culture
Inefficiencies
► People
► Head count
► Continuity Frustrations
► Low innovation
► Strategy versus execution
► Focus on potentiality, lack of attention to the
execution challenges
► Neglected operational aspects Motivation and
perception of value
► Lack of visibility of the “production chain”
Page 23 Human Capital on SASA

24. A situational exercise: indicators of what
makes a great company great
► Global American Company, Fortune 500
10 30
0
FTE/Expatriate
90
Preparation time (days, 0 120
expatriate)
2.5
Short-term cost 0 6
(comparison with local, in x)
3.5
Long-term cost 0 6
(local comparison)
80
0 100
Training/hour/year
9
0 10
Specific p
p policies
>2
0 100
Percentage of layoffs (%)
>80
Acceptance of new 0 100
expatriations
Page 24 Human Capital on SASA

25. Conclusion
► Growth perspectives for 2013
► Effective systems for information exchange
► Better communication between the different authorities
(fiscal, l b pension and F d l P li )
(fi l labor, i d Federal Police)
► Legislation complexity growth
► Tendency of authorities to recognize applicability of
T d f th iti t i li bilit f
international treaties
Page 25 Human Capital on SASA

26. Conclusion
Where to improve?
► Policy revision
► Constant review of internal procedures
► Improvement of market p
p practices
► Investment in skilled manpower
► Constant legislation update
Page 26 Human Capital on SASA

27. Questions
Page 27 Human Capital on SASA