1. BRAZIL – MACRO 1. Inflation Currently : Annual inflation rate is currently at 6,1%; it went down again last September. Forecast : Brazilian Central Bank: 4,85% end 2009. Economists cobering Brazil’s economy: 5,15% the coming 12 months (October 08 > October 09) Brazilian Inflation South African inflation note the high core inflation (inflation -impact of oil) Brazil South Africa Inflation Sep 08 (CPI) 6,1% 13,6% Forecast end 2009 4,85% 7,1% ( if oil price per barrel remains below 100 $ !!)

2. BRAZIL – MACRO 2. Prime interest rate Currently : After almost a year of a stable interest rate of 11,25%; the central bank moved the intrest rate up in April, June, July ad September to the current 13,75%. This very tight monetary policy of the Brazilian central bank (cf. Their inflation trauma’s) has been succesful in keeping inflation below 6%. Forecast : The projections for yearend 2009 are 13,5%. Brazilian prime interest rate

3. BRAZIL – MACRO 3. Growth Currently : Brazil’s economic growth reached 6,1% in the first half of 2008, surpassing expert’s estimates of 5-5,3%. The IMF foresees in it’s bearish report of October 8th a growth of 4,5% in 2008 and 3,5% in 2009. Forecast : The IMF foresees in it’s bearish report of October 8th a growth of 4,5% in 2008 and 3,5% in 2009. In the same report, the IMF foresees South African GDP growth to be 3,5% in both 2008 and 2009. Brazilian trade Brazilian trade remained very stron in August and September, a trend that started during the second quarter of the year. Brazilian industrial production Brazil South Africa Belgium GDP growth 2008 4,5% 3,5% 1,4% GDP growth 2009 3,5% 3,5% 0,6%

4. BRAZIL – MACRO 4. Current account deficit / surplus Currently : The current account of Brazil will be 0,3% of the GDP, however I personally see this ending slightly negative after the recent trends. In the meantime, the current account deficit of South Africa soared to -7,25% of the SA GDP. World debt 2007 Current account SA 1953 - 2007 Brazil South Africa Current account 2008 -0,5% -7,5% Current account 2009 -0,8% ? Trade balance 2008 24,9 billion US$ -6,2 billion US$ Trade balance 2009 16,5 billion US$ ?

5. BRAZIL – MACRO 5. Currency Currently : From June on, the BRL went well above the 0,375 against the € and reached in september peaks above 0,40. At that level I’ve been seriously concerned of the currency being overvaluated. I wrote on August 5th that the R$ could devaluate 15 – 20%; from September 12th (6 weeks later) on till today it devaluated ... 17% ! Anything in the band 0,35 – 0,375 BRL/EU makes us feel more comfortable.

6. BRAZIL – MACRO 5. Currency (2) Future : In the turmoil of this week, the R$ dipped for a minute to 0,32 against the €. This was mainly due to Brazilian exporters who had speculated en masse on a further appreciation of the R$ and had taken futures on their sales contracts, which created a sudden shortage in dollars on the market. On October 9th, the R$ gained 7% (biggest gain since August 2002) as the inrtrest rate cuts by central banks eaded investor aversion to higher-yielding assets and as the Brazilian Central Bank drew on it’s considerable foreign reserves to support the currency. Yet for sure the global currency market will remain volatile for the coming months. With the current tight monetary focus there is no reason why the currency would be at structural risk. Bloomberg projected on Ocober 7 the BRL trading at 1,82 per USD by yearend 2009. Currently 1 USD= 2,2 BRL (a 22% rise against today).

7. BRAZIL – MACRO 5. Currency (2) Future : In the turmoil of this week, the R$ dipped for a minute to 0,32 against the €. This was mainly due to Brazilian exporters who had speculated en masse on a further appreciation of the R$ and had taken futures on their sales contracts, which created a sudden shortage in dollars on the market. On October 9th, the R$ gained 7% (biggest gain since August 2002) as the inrtrest rate cuts by central banks eaded investor aversion to higher-yielding assets and as the Brazilian Central Bank drew on it’s considerable foreign reserves to support the currency. Yet for sure the global currency market will remain volatile for the coming months. With the current tight monetary focus there is no reason why the currency would be at structural risk. Bloomberg projected on Ocober 7 the BRL trading at 1,82 per USD by yearend 2009. Currently 1 USD= 2,2 BRL (a 22% rise against today). Update November 2 : The Real moves back to pre-crisis patterns as predicted: see this analysis of Bloomberg: http://www.bloomberg.com/apps/news?pid=20601086&sid=a_Sq2axtn_UY&refer=news

8. BRAZIL – MACRO *. Brazilian economy conclusion While inflation in the country remained slowed down a bit during August, both on a monthly basis as well as on a year-over-year basis, the central bank’s fear was until end September that a continuation of the current strong economic performance could put pressures on inflation over the next several quarters. In the current context where the stagflation phantom is raising above Europe and the US, growth will be lower then the 6,1% of the first half year. On the other hand, the recent downward pressure on the domestic currency could also contribute to higher pressure on inflation in the future. This means that the central bank will probably keep prime on 13,75%. This inflation-focus is a good choice in the mid-long term for the country. For this reason, I project, as the IMF (and contrary to most other analysts), a growth of 3,5% in 2009 (other analysts foresee 4,5%, see below).

11. BRAZIL - MACRO ANNEX 1: Public Debt as GDP