Brazil’s Economic Outlook

June 08, 2021

J.P. Morgan Live Teleconference

Brazil’s Economic Outlook and Agenda BC#

Roberto Campos NetoGovernor of Banco Central do Brasil

0

100

200

300

400

500

600

700

800

900

Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21

2

COVID-19Covid-19: new cases and new deathsGlobal scenario

Source: Our World in Data. Last data: 06 June, 2021, except Latin America (01 June 2021)

New cases/million(7-day rolling average)

UK

US

Brazil

Europe ex UK

Lat. Am. ex Brazil

New deaths/million(7-day rolling average)

0

2

4

6

8

10

12

14

16

18

20

0

2

4

6

8

10

12

14

16

18

20

Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21

2151.3 (27.6%)

777.9 (54%)

301.6 (91.1%)

269.2 (60.5%)

228 (16.5%)

71.7 (33.7%)

68 (100.2%)

34.5 (26.7%)

30.9 (36.6%)

30.7 (21%)

338.8 (9.5%)

World

China

United States

European Union

India

Brazil

United Kingdom

Mexico

Turkey

Russia

Rest of the world

GLOBAL ECONOMYCovid-19 vaccinationVaccination

The biggest vaccination campaign in history

3

Millions of administered doses(millions and % of population*)

Vaccine doses per capita

Note: * The number of administered doses is higher than or equal to the number of people vaccinated. In some countries, some people have already taken the second dose. Therefore, the percentage in relation to the population should be understood as “maximum percentage of the vaccinated population”.

CanadaUSA

Europ. UnionUK

JapanAustralia

IsraelChile

MexicoPeru

Argentina

Source: Natwest, based on pharmaceutical company data, Bloomberg, Reuters, NY Times, Fierce Pharma, Financial Times.

BrazilIndia

South KoreaSwitzerland

Czech Republic Hungary

TurkeyIndonesiaColombia

PolandPhilippines

UruguaySouth Africa

ThailandMalaysia

Brazil

Coronavac

AZ-Oxford

Registered vaccination

0

500

1,000

1,500

2,000

1-Jan 1-Feb1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct

Pfizer

DOMESTIC ECONOMYVaccination

4Sources: Ministry of Health, press, https://coronavirusbra1.github.io, BCB.

Accumulated doses Estimated offer x registered (millions)

Daily dosesEstimated offer x registered (thousands/day)

Dose schedule

Availability of doses based on a schedule published by the Ministry of Health on June 2, with adjustments that reflect news published by the press. Scenario considersAstrazeneca-Oxford, Coronavac, Pfizer-BioNTech and Janssen vaccines. There is uncertainty about the dose delivery schedule. Monthly distribution of Pfizer-BioNTech andAstrazeneca-Oxford (Fiocruz) vaccines in the 3rd quarter is estimated based on previous Ministry of Health schedules (ref. 15/Mar and 19/Mar) and may not represent the mostcurrent forecast of the Ministry. Registered vaccination based on data from the health departments collected at http://www.giscard.com.br/ andhttps://coronavirusbra1.github.io/.

Vaccination in Brazil

Estimated offer

Registered vaccination

0

50

100

150

200

250

300

1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-Oct

Laboratory Expected doses Schedule

CoronaVac

(Butantan)130m

52m at 1st

Half +

48m at 3rd

Quarter +

30m at 4th

Quarter(*)

AZ Oxford

(Fiocruz)200m

62m at 1st

Half +

38m at 3rd

Quarter +

100m at 4th

Quarter(**)

AZ Oxford

(Serum Inst.)12m

4m at 1st

Half +

8m at 4th

Quarter

Pfizer /

BioNTech200m

16m at 1st

Half +

84m at 3rd

Quarter +

100m at 4th

Quarter

Covax

Facility42m 10m at 1

st Half

Janssen 38m 4th

Quarter

Covaxin

(Bharat Biot.)20m

Without Anvisa's

approval

Sputnik V

(União Quím.)10m

Without Anvisa's

approval

Moderna 50m In negociation

* Doses in negociation.

** Part of the doses still in negociation.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1-Feb 1-Mar 1-Apr 1-May 1-Jun 1-Jul

Degree of protection in relation to deaths

compared to a scenario without vaccinaion

Effective protection 14 days after the 1st dose

Effective protection 14 days after the 2nd dose

80 +

DOMESTIC ECONOMYVaccination in Brazil: a simplified exerciseVaccination

5

Availability of doses compiled from schedule released by the Ministry of Health on June 2, with adjustments that reflect news published by the press. Population groups generally followthe National Plan for the Operationalization of Vaccination against Covid-19 (7th edition). Only vaccines with a signed delivery contract and authorization for use by Anvisa wereconsidered (Astrazeneca-Oxford via Fiocruz, Coronavac, Pfizer-BioNTech, Astrazeneca-Oxford and Pfizer-BioNTech via Covax consortium). Sputnik V and Covaxin vaccines are notconsidered as they have not yet been authorized for use by Anvisa. It was not considered the Moderna vaccine, as it is still under negotiation. There is uncertainty about the dosedelivery schedule – graphs generally indicate a possible scenario for the campaign. Registered vaccination based on data from the health departments collected byhttp://www.giscard.com.br and https://coronavirusbra1.github.io.

This is a simplified scenario for the purpose of indicating the degree of protection over time afforded by vaccination.

The scenario assumes 90% efficacy of vaccines regarding to deaths by Covid-19 and a simplified vaccination strategy based on age.

Notes:

Vaccination order for priority groups follows in a simplified form the National Plan for the Operationalization ofVaccination against Covid-19 (7th edition). Only vaccines with a signed delivery contract and authorization for useby Anvisa were considered. There is uncertainty about the dose delivery schedule. Degree of protection isobtained, at each date, based on the multiplication of the supposed efficacyfor the vaccines by the percentage ofvaccinated in age group and by the participation of each age group in the total of deaths per Covid. Indicatedefficacy is hypothetical - actual efficacy and its evolution between doses should vary according to the vaccine.Exercise is only indicative of the benefit resulting from the vaccination campaign, taking into account theconcentration of serious events among priority groups. Other hypotheses adopted: a) 100% of each target groupis vaccinated; b) effective vaccination follows the offer of doses; c) mortality reference by age group follows the2020 pattern of deaths by SRAG Covid (ref. Epidemiological Bulletins of the Ministry of Health); d) the 2nd dose isassigned to the groups according to the order of priority, although, in reality, the 2nd dose of some high priorityindividuals occurs after a longer period, due to the longer interval between doses of the AZ vaccine; e) thesupposed effect for the vaccines occurs in full 14 days after the 1st or 2nd doses; f) prior immunity fromcontamination is not considered.

Source: BCB

0

20,000

40,000

60,000

80,000

100,000

120,000


Tho

usa

nds

Vaccined with 1 dose

AZ + CV + Pfizer

40 to 49

50 to 59

30 to 39

60 to 64

65 to 6970 to 74

75 to 7980 +

Health care workers

Registered

Vulnerable Communities

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000


Tho

usa

nds

Vaccined with 2 doses

AZ + CV + Pfizer

60 to 64

65 to 69

70 to 74

75 to 79

80 +

Health care workers

Registered

Vulnerable Communities

4.0 3.1 3.5 3.3

-4.3-2.3

1.4 2.6

11.61.1 2.1 1.4 2.5

-1.4

4.9 2.22.5

4.5

1.2 0.9 1.0

-1.1

0.61.3

1.4

2.2

5.8

-6.8

3.2 4.9 6.5

18.3

-10

-5

0

5

10

15

20

Mar-19 Sep-19 Mar-20 Sep-20 Mar-21

YoY

(%)

an

d c

on

trib

uti

ons

(p.p

.)

Consumption (p.p) Investiment (p.p) Net Exports (p.p) GDP (%YoY)6

GLOBAL ECONOMYGlobal economic activity

Global economic recovery continues to be directly linked to the evolution of the pandemic and containment measures.

Sources: Bloomberg, BEA, National Bureau of Statistics

GDP*Average 2019 = 100

*Series at constant prices, seasonally adjusted. The series 'Asia ex. Japan and China' was calculated as a weightedaverage of Singapore, South Korea, Hong Kong, India, Indonesia, Philippines, Malaysia, Thailand, Taiwan and Turkey.

The series of Singapore, India and Indonesia are not seasonally adjusted.

USA

GD

P(Q

4 1

9 =

10

0)

Ch

ina

GD

P

99.1100.0

104.9

88.4

101.1100.9

75

80

85

90

95

100

105

4Q 19 1Q 20 2Q 20 3Q 20 4Q 20 1Q 21

GDP (6.4) Consumption (11.3)Investments, ex inventories (11.3) Exports (-2.9)Imports (6.7) Government (5.8)

Numbers in ( ) represent Q1 21 % changes, in % QoQ SAAR.

75

80

85

90

95

100

105

110

Q12019

Q2 Q3 Q4 Q12020

Q2 Q3 Q4 Q12021

Ave

rage

20

19

= 1

00

China Asia ex Japan and China USA Japan Euro area UK

7

GLOBAL ECONOMYGlobal mobility

Economies have adapted: the impact of mobility on activity has fallen by half in the recent period

Sources: Google, Bloomberg, Vinland.

Dependent Variable: Δ PMI Services

Method: Panel Least Squares

Sample: 2020 - M3 - 2021 M3

Cross-sections (countries): 13

Specifications

Full mar/20 - oct/20 -

Sample sep/20 mar/21

Períods: 13 7 6

Total panel (balanced) 169 91 78

Independent variables

Constant 0.89 1.11 0.72

(0.51)* (0.79) (0.63)

Δ Google retail/recreation 0.39 0.51 0.25

(0.06)*** (0.08)*** (0.07)***

Fixed effects: Cross-section

Fixed effects: Period

R² adj. 0.69 0.76 0.08

DW 2.06 1.80 2.38

( ) Standard-deviation

Significance level: *10%, **5%, ***1%.

Google Mobility x PMI Services (grouped)

Delta Mobility Google – Retail and Recreation (%)

De

lta

PM

I Se

rvic

es

-12 -10 -8 -6 -4 -2 0 2 4 6 8 10

Russia

Brazil

South Africa

Mexico

Argentina

Colombia

Chile

Malaysia

Peru

2022

2021

2020

Brazil

ColombiaMexico

South Africa

RussiaChina

27

32

37

42

47

52

57

62

67

Jan-20 May-20 Sep-20 Jan-21 May-21

Manufacturing PMI

8

GLOBAL ECONOMYEmerging marketsOngoing recovery

Sources: Markit; ABSA (South Africa); NBS (China). Sources: Bloomberg and Focus Report.

Retail sales (YoY)

GDP forecasts (%)

Brazil

India

-50

-30

-10

10

30

50

Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21

Brazil Chile Colombia Mexico South Africa Russia

9

Covid-19 Government Fiscal Responses

Source: IMF WEO April 21

GLOBAL ECONOMY

Advanced Countries Emerging and Middle-Income Countries

Above line: Additional spendingandforgone revenue. Below line: Equity, loans and guaranteesFiscal announcements until March 17th (except for Brazil). USA includes American Rescue Plan Act (US$ 1.9tril lion, 9.1% GDP).

For Brazil, numbers include the following measures approved in 2021. Above line: New EmergencyCash Transfer program (R$ 44 bi), budget expansion of family allowance program “Novo Bolsa Família”(R$ 5 bi) and extension of furlough program “BEm”(R$ 10 bi), total R$ 59 bi (0.8% GDP). Below line:SME support program “Pronampe” (R$ 5 bi, 0.1% GDP).

2.5 4.2 4.2 4.5 4.5 5.1 5.4 7.3 7.6 7.6 8.0 8.5 11.0 14.6 15.9 16.0

16.1

16.2 16.4

19.3

25.5

7.5 4.3 5.3

10.28.2

13.615.4

6.2

14.4 15.611.8

35.327.8

4.0

28.3

4.71.8

16.111.3

2.8

2.4

0

10

20

30

40

50

Fin

lan

d

No

rway

Swed

en

Ko

rea

Net

he

rlan

ds

De

nm

ark

Cze

ch R

ep

Swit

zerl

and

Spai

n

Fran

ce

Be

lgiu

m

Ital

y

Ge

rman

y

Can

ada

Jap

an

Sin

gap

ore

Au

stra

lia UK

AEs

New

Ze

ala

nd

USA

% G

DP

Above line Below line

0.71.6 1.9 2.0 2.0 2.2 2.2 2.4 2.5 2.7

2.7 3.33.9 4.0 4.1 4.3 4.5 4.5

4.8

5.9 6.1 7.3 7.8 8.2 8.2 9.11.2

0.1

9.4

0.0 1.6 0.8

4.43.1

0.0 0.8 0.9

5.1

2.0 2.5

5.7

1.5

3.9

0.91.3

4.1

0.0

11.4

5.4

1.8

4.2

6.3

0

3

6

9

12

15

18

21

Mex

ico

Egyp

t

Turk

ey

Pak

ista

n

Alb

ania

S A

rab

ia

Ro

man

ia

Kaz

akh

stan

UA

Em

irat

es

Tun

isia

Ph

ilip

pin

es

Ind

ia

Arg

enti

na

EMM

IEs

Co

lom

bia

Ru

ssia

Bu

lgar

ia

Ind

one

sia

Ch

ina

Sou

th A

fric

a

Ge

org

ia

Per

u

Po

lan

d

Ch

ile

Thai

lan

d

Bra

zil

% G

DP

Above line Below line

0

14

28

42

56

70

84

98

112

126

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

202

1

Angola

Egypt

South Africa

Morocco

Algeria

Nigeria

India

Pakistan

China

Malaysia

Turkey

Kazakhstan

Azerbaijan

Russia

Thailand

Philippines

Croatia

Hungary

Ukraine

Romania

Belarus

Brazil

Uruguay

Bolivia

Colombia

Ecuador

Peru

Chile

Mexico

Dominican Rep.

Oman

Islamic Re. of Iran

Un. Arab Emirates

Source: IMF WEO Apr/21.

GLOBAL ECONOMYFiscal responseFiscal Policy

10

Historical pattern of general government debt(% of GDP)

Advanced Emerging

140

120

100

80

60

40

20

0

Gross Debt – emerging markets(% of GDP)

AFR

ICA

ASI

A E

X M

IDD

LE E

AST

EUR

OP

ELA

TIN

AM

ERIC

AM

IDD

LE E

AST

Brazil

Differentiation in risk appetite for emerging economies with unfavorable economic fundamentals remains.

11

EME Group 1:Chile, Indonesia, Malaysia and Russia.Gross Debt/GDP (average 2017-21) = 34.9%

EME Group 2:Brazil, Colombia, India, Mexico, South Africa and Turkey.Gross Debt/GDP (average 2017-21) = 65%

Risk Appetite

GLOBAL ECONOMYRisk AppetiteMarkets

Sources: BCB, Bloomberg, Refinitiv, IMF, Fed St Louis. Gross Debt: IMF. Data up to May 7th, 2021.

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

Jan Mar May Jul Sep Nov Jan Mar May

2020

Advanced economies

EME (Group 1)

EME (Group 2)

1.03

0.77

-1.14

2021

0

20

40

60

80

2018 2019 2020F 2021F

Gross Debt/GDP

Group 1 Group 2

-7

-6

-5

-4

-3

-2

-1

0

1

2

2017 2018 2019

Stan

dar

d d

evi

atio

ns

fro

m th

e a

vera

ge

12

GLOBAL ECONOMYFinancial conditions and yieldsMarkets

Financial conditions more stimulative in the US. Increase in long term yields, especially in the US and the UK.

*Accumulated change since January 1st, 2021.

Change in 10-year yield* (YTD b.p.)GS Financial Conditions Index

Source: Bloomberg

-5

10

25

40

55

70

85

Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21

USA UK Germany Japan

97

98

99

100

101

102

103

104

Jan

-20

Feb

-20

Mar

-20

Ap

r-2

0

May

-20

Jun

-20

Jul-

20

Au

g-2

0

Sep

-20

Oct

-20

No

v-2

0

De

c-20

Jan

-21

Feb

-21

Mar

-21

Ap

r-2

1

May

-21

Jun

-21

US UK Euro Area Japan

13

Inflation expectations

Source: Bloomberg

Implicit inflation (5-years break-even)

GLOBAL ECONOMYMarkets

-1

0

1

2

3

4

Jun-20 Sep-20 Dec-20 Mar-21 Jun-21

UK

USA

Australia

Germany

Japan

14

Housing Prices

Source: Bloomberg, H@R


19.1

13.0

12.0

10.9

8.1

7.9

7.1

6.1

3.6

1.6

0 10 20

Nova Zelândia

Suécia

EUA

Noruega

Alemanha

Canadá

Reino Unido

França

Austrália

Itália

Pré pandemia Atual

7.9

8.1

10.9

12.0

13.0

19.190

103

116

129

142

155

FIN

CH

L

EST

JPN

BEL

AU

S

NO

R

IRL

GB

R

FRA

TUR

EA1

7

NZL

**

SVN

SWE

MEX

DE

U

CZE

RU

S

SVK

LUX

2020-Q4

2019-Q4

* 2021-Q1; ** 2020 - Q3

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

199

3Q2

199

5Q1

199

6Q4

199

8Q3

200

0Q2

200

2Q1

200

3Q4

200

5Q3

200

7Q2

200

9Q1

201

0Q4

201

2Q3

201

4Q2

201

6Q1

201

7Q4

201

9Q3

202

1Q2

Percentil 5 Média Percentil 95 Ocorrida

Italy

Australia

France

UK

Canada

Germany

Norway

USA

Sweden

NZ

Pre-pandemic Today

1.6

3.6

6.1

7.1

Housing Prices Price-to-rent House@RiskHousing prices in the US – 3 years changeOCDEYoY (%)

**2020 – Q3

15

US housing prices and inflation

Source: Bloomberg, FRED St. Louis


9.49

4

6

8

10

Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21

US Housing Components Rent Price Expectation 1 Year Ahead

-25

-20

-15

-10

-5

0

5

10

15

20

-1

0

1

2

3

4

5

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

CPI Owner´s Equivalent Rent CPI Primary Rents Case-Shiller Index

%

YoY%

YoY%

16

GLOBAL ECONOMYEmerging markets: yield curves Markets

Source: Bloomberg

Rat

e (%

)Va

riat

ion

(b.p

.)

sinc

e Ja

n 20

th

South AfricaBrazil

Colombia

Indonesia

Mexico Russia

Chile

Yield curves Slope for 2 x 5 years (b.p.)

Brazil

South Africa

Mexico

Russia

Colombia

Tenure

Yields and food inflation

Yields and food CPI – Selected countries

Source: Bloomberg

17

GLOBAL ECONOMY

Change in 5-year yield (YTD b.p.)

-35

65

165

265

365

465

565

665

-35

65

165

265

365

Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21

Brazil Chile Colombia

Indonesia Mexico Russia

South Africa Turkey (right) India

125

120

110109108108108105

103

97

90

95

100

105

110

115

120

125

130


CPI Food (Jan/2020 = 100)

TurkeyBrazilRussiaColombiaSouth AfricaMexicoChileIndiaPeruChina

Commodity prices: disagreggated

Brent, metals, iron ore and grains

Source: Bloomberg

18

GLOBAL ECONOMY

25

50

75

100

125

150

175

200

Brent Metals Index Grains Subindex Iron Ore

19

DOMESTIC ECONOMYBrazil: GDPEconomic Growth

Sources: IBGE and Focus Report.

GDP Forecast for 2021

(Median of market expectations –

Focus)

2021+4.36%

GDP(2019=100)

88

90

92

94

96

98

100

102

104

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I

2014 2015 2016 2017 2018 2019 2020 2021

2020-4.1%

20

DOMESTIC ECONOMYHigh frequency indicatorsEconomic growth

Sources: ONS, seasonally adjusted by BCB; Fenabrave. Source: Câmara Interbancária de Pagamentos (CIP)

Vehicle sales(2019=100; s.a.)

20

40

60

80

100

120

140


Cars and lightcommercials

Trucks

Electricity demand(mm7d; 2019=100)

Debit card salesmm7d; Nominal values (BRL billions)

85

90

95

100

105

110


F1.3

1.8

2.3

2.8

3.3

3.8


21

DOMESTIC ECONOMYMobility

Partial recovery in mobility

Fontes: Google, Moovit and Waze.

TransportPublic transport and car use– change (%)

-75

-65

-55

-45

-35

-25

-15

-5

5

15

Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21

non-essential retail locations and leisure workplacesF

Google Mobility Indicator(mm7d; change (%) comparing to a 1 to 7 Mar/2020)

-75

-65

-55

-45

-35

-25

-15

-5

5

15

Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21

Public transport - Movit indicator in selected capitals - change (%) comparing to 2-8Mar/2020Car use - Waze indicator, MM7D - change (%) comparing to 11-25 Feb/2020

55

60

65

70

75

80

85

90

95

100

105

110

115

120

Nov-19 May-20 Nov-20 May-2155

60

65

70

75

80

85

90

95

100

105

110

115

120

Nov-19 May-20 Nov-20 May-21

DOMESTIC ECONOMYConfidence indicators

Sources: FGV. Seasonally adjusted data.

22

< R$ 2.1 thousand

Business confidence X consumer confidence Consumer confidenceBy income range (in BRL thousand)

Manufacturing

ConstructionCommerceServices

Average 2018-2019= 100

Average 2018-2019= 100

> R$ 9.6 thousand

R$ 4.8 to 9.6 thousand

Consumer

R$ 2.1 to 4.8 thousand

DOMESTIC ECONOMYConsumer inflation: IPCAInflation

Sources: IBGE, BCB, Relatório Focus.

23

2.9

3.3

3.7

4.1

4.5

4.9

5.3

5.7

Jan-20 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 May-21

2021

2022

2023

IPC

A fo

reca

sts

-0.80

-0.35

0.10

0.55

1.00

1.45

Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21Monitored Services Industrial Goods Food

(p.p.)

Co

ntr

ibu

tio

n to

M/M

ch

ange

0

1

2

3

4

5

6

7

8

9

10

11


IPCA

Target 6.76

IPC

A –

YoY(

%)

-6

1

8

15

22


Food at home Administered prices Industrials goods Services

Infl

atio

n b

reak

do

wn

Brazil, 104Chile, 103

Mexico, 105

Colombia, 102

China, 100

Turkey, 120

Russia, 107

S. Africa, 105

99

102

105

108

111

114

117

120


CPI Core: Brazil and other countries (Index, jan/20 =100)

DOMESTIC ECONOMYCore inflation: Brazil x other countriesInflation

Sources: IBGE, Bloomberg, BCB

24

April/21USA: 3.0Brazil: 2.9

0

1

2

3

4

5

6

7

8

9


Core inflationYoY (%)

25Sources: BCB. Rates estimated from DAP.

Inflation expectations – Brazil

DOMESTIC ECONOMYInflation Implicit inflation

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

Break-even 2021 Break-even 2022

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

Break-even 2023 Break-even 2024

DOMESTIC ECONOMY

26

• In its 238th meeting, the Copom unanimously decided to increase the Selic rate by 0.75 p.p. to 3.50%p.a.

• The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and it is consistent with convergence of inflation to its target over therelevant horizon for monetary policy, which includes 2022.

• Without compromising its fundamental objective of price stability, this decision also implies smoothing ofeconomic fluctuations and fosters full employment.

• At this moment, the Copom's baseline scenario indicates that a partial normalization of the policy rate remainsappropriate to keep some degree of monetary stimulus during the economic recovery. However, the Committeeemphasizes that there is no commitment with this plan, and that future steps of monetary policy could beadjusted to assure the achievement of the inflation target.

• For the next meeting the Committee foresees the continuation of the partial normalization process with anotheradjustment of the same magnitude in the degree of monetary stimulus. The Copom emphasizes that its viewwill continue to depend on the evolution of economic activity, the balance of risks, and inflation projections andexpectations.

Monetary policy

238th Copom meeting – May 2021

27

DOMESTIC ECONOMYFiscal budget: decomposition

Source: STN, BCB

Improvement in fiscal accounts.

10

5

1

8Non recurring

Recurring - residual

Recurring linked toreal GDP

Recurring linked toGDP deflator

Total: 25 %

*Exercise prepared considering the elasticity of net recurringrevenue/nominal GDP of 1.1. The same elasticity was considered forthe real component and for the deflator. Preliminary figures for Aprilnominal GDP.

Net Revenues of the Central GovernmentDecomposition of Variation*

Accum. Jan-April/21 (%YoY)

Recurring:17 p.p.

400

600

800

1,000

1,200

1,400

1,600

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Jan

-16

Jan

-17

Jan

-18

Jan

-19

Jan

-20

Jan

-21

Deflated by IPCA Deflated by GDP deflator

Spending ceiling

Recurring expenses of the Central GovernmentAccum. 12 months (BRL billions – Jan/21)

28

DOMESTIC ECONOMYStock marketsMarkets

Source: B3

Accumulated flows into the stock market

BRL -18.4 bi

BRL -31.5 bi

BRL +67.1 bi+ R$ 67.4 bn

-100

-80

-60

-40

-20

0

20

40

60

80

100

Individuals Institutionals Foreigners

BRL bln

+ R$ 63.1 bln

- R$ 0..4 bln

- R$ 47..4 bln

29

DOMESTIC ECONOMYForeign exchange derivativesMarkets

Source: B3

-50

-40

-30

-20

-10

0

10

20

30

40

50

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21

Institutionals Non-residents Banks Central Bank Net Flow

USD Billions

Investors’ position change in foreign exchange derivatives at B3

External sector

30

DOMESTIC ECONOMY

Sources: BCB, Bloomberg.

Effective foreign exchange rate and terms of trade

-0.84%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

Apr-09 Apr-11 Apr-13 Apr-15 Apr-17 Apr-19 Apr-21

Trade balance Services Income Current account

Current Account(12 months accumulated, % of GDP)

-10

-6

-2

2

6

10

14

18

2240

60

80

100

120

140

160

Apr-03 Apr-06 Apr-09 Apr-12 Apr-15 Apr-18 Apr-21

Real Effective Exchange Rate (Jun/94=100) Terms of Trade (reversed)

20%

13%

25%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Apr-17 Apr-18 Apr-19 Apr-20 Apr-21

Cen

ten

as

31

DOMESTIC ECONOMYCredit in the National Financial SystemCredit Market

Credit continue to increase. Interest rates close to historically low levels.

Source: BCB

Households Corporate Total

Interest rates(% per year)

Outstanding credit(YoY)

15%

16%

14%

-9%

-5%

-1%

3%

7%

11%

15%

19%

23%

Apr-17 Apr-18 Apr-19 Apr-20 Apr-21

32Source: BCB

DOMESTIC ECONOMYFirms: financial flows

mar/20 jun/20 sep/20 dec/20 mar/21 apr/21-201 apr/21-192mar/20 jun/20 sep/20 dec/20 mar/21 apr/21-201 apr/21-192

mar/20 jun/20 sep/20 dec/20 mar/21 apr/21-201 apr/21-192

Public Adm. and NGOs 9% -4% -2% 2% 0% 28% 21% 1% -11% 3% 5% 8% 16% 7% 14% -2% 3% 15% 0% 5% 10%

Agriculture 22% 28% 40% 38% 56% 66% 102% 18% 22% 25% 23% 39% 50% 81% 30% 33% 17% 21% 40% 48% 107%

Food 22% 14% 27% 31% 36% 51% 63% 8% 10% 17% 21% 32% 39% 44% 14% 16% 15% 24% 27% 33% 49%

Automotive 11% -7% 23% 37% 46% 89% 55% 2% -30% -4% 17% 29% 50% 27% -2% -50% -21% 3% 27% 52% 11%

Beverage and tobacco 28% 13% 34% 45% 51% 88% 82% 5% 0% 15% 18% 15% 27% 18% -10% -13% 15% 12% 16% 28% 5%

Const., wood and furn. 17% 3% 24% 35% 40% 72% 65% 9% -6% 9% 22% 31% 45% 45% 1% -13% 16% 31% 44% 66% 49%

Animal husbandry 27% 24% 46% 50% 51% 64% 86% 12% 9% 24% 33% 39% 48% 53% 14% 8% 19% 32% 27% 34% 40%

Electronics 16% 1% 26% 33% 38% 71% 57% 0% -10% 5% 21% 35% 51% 33% 12% -10% 29% 59% 34% 53% 37%

Energy 2% -10% -11% 17% 47% 47% 34% 23% -4% 18% 35% 37% 45% 56% 13% -5% 25% 18% 26% 31% 25%

Mach. and equipment 12% -4% 10% 26% 41% 62% 55% 11% -5% 7% 35% 37% 49% 51% 18% 4% 19% 33% 41% 72% 125%

Media and Leisure 13% -38% -22% -1% 3% 63% 1% -1% -47% -41% -19% -11% 3% -25% 9% -37% -36% -20% -16% -5% -21%

Paper and cellulose 13% -4% 16% 37% 81% 129% 109% -1% -14% -2% 27% 53% 76% 63% -4% -26% -17% 7% 28% 44% -8%

Petrochemicals 20% -9% 12% 24% 37% 83% 62% 11% -20% -1% 14% 27% 44% 37% 5% -33% -9% 0% 24% 51% 25%

Chem., pharma and hyg. 17% 14% 22% 27% 31% 29% 46% 8% 3% 11% 21% 32% 38% 37% 12% 6% 5% 10% 20% 24% 30%

Health, san. and educ. 18% -2% 2% 8% 18% 36% 37% 8% 1% 1% 8% 19% 27% 32% 2% -8% -11% 0% 17% 31% 29%

Services 16% -9% 11% 21% 33% 76% 53% 11% -5% 4% 10% 15% 25% 22% 21% 15% 36% 33% 35% 41% 61%

Steel and metallurgy 7% -3% 23% 41% 84% 129% 103% 1% -14% 8% 31% 78% 100% 92% -3% -29% 1% 18% 85% 119% 63%

Sugar and alcohol 14% -9% 47% 22% 36% 46% 20% 31% 8% 19% 10% 27% 65% 69% 15% -15% 4% -1% 8% 17% 13%

Telecom 35% 34% 40% 46% 53% 60% 109% 15% 45% 28% 19% 30% 34% 33% 21% -26% -20% -5% -16% 7% -16%

Textiles and others 9% -26% -5% 12% 18% 84% 20% 2% -34% -19% 6% 20% 43% 13% 2% -44% -27% 1% 12% 36% -1%

Transports 7% -5% 9% 19% 34% 57% 46% 6% -9% -2% 7% 20% 36% 32% 8% -22% -20% -14% 2% 13% 6%

Retail 22% 17% 32% 39% 39% 50% 62% 19% 20% 22% 27% 27% 29% 43% 13% 8% 17% 18% 17% 16% 20%

Others 5% -11% 3% 46% 42% 85% 50% 15% -4% 16% 27% 23% 34% 43% 4% -4% 24% 17% 25% 27% 23%

SectorMediumMicro and small Corporate

Financial flowsPercentual change in financial inflows (quarterly average current year x quarterly average previous year)

Quantity of Firms

¹ Variation between April/21 and April/20

² Variation between April/21 and April/19

* Quantity of firms with financial transactions in the National Financial System (SFN)

*

0

2

4

6

8

10

1 2

0

30

60

90

120

150

1 2

0

1

2

3

4

5

1 2

Mic

ro a

nd

sm

all

(mil

lio

ns)

Me

diu

m(t

ho

usa

nd

s)

April/19 April/21

April/19 April/21

April/19 April/21

Co

rpo

rate

(th

ou

san

ds)

33

DOMESTIC ECONOMYCorporate financial indicators

Source: Economática

ProfitabilityNet profit/Average shareholders' equity

-30

-15

0

15

30

Mar2015

Mar2017

Mar2019

Mar2021

%

0

5

10

15

20

Mar2015

Mar2017

Mar2019

Mar2021

Interest Coverage RatioEBITDA/Interest expense

0.0

2.5

5.0

7.5

10.0

Mar2015

Mar2017

Mar2019

Mar2021

Net debt/EBITDA

34

35

TechnologyAgenda

36

33.5 144.6 200.4 275.5 393.7 500.0

29.6

121.5

160.1

197.7

278.4

322.0

0.010.020.030.040.050.060.070.080.090.0100.0110.0120.0130.0140.0150.0160.0170.0180.0190.0200.0210.0220.0230.0240.0250.0260.0270.0280.0290.0300.0310.0320.0330.0340.0

- 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 110.0 120.0 130.0 140.0 150.0 160.0 170.0 180.0 190.0 200.0 210.0 220.0 230.0 240.0 250.0 260.0 270.0 280.0 290.0 300.0 310.0 320.0 330.0 340.0 350.0 360.0 370.0 380.0 390.0 400.0 410.0 420.0 430.0 440.0 450.0 460.0 470.0 480.0 490.0 500.0 510.0 520.0

Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21

Number of transactions (millions) Volume (R$ billions)

351 354 314 306 358 336

22 17 14 9

9 8

192 189

123 112

120 111

34145

200 275

394 500598

704652

702

880

954

-

80

160

240

320

400

480

560

640

720

800

880

960

1,040

Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21

PIX gains space

37Source: BCB.

households

million keys

Total : 254.3 miin May/2021

PIX keys(in millions)

87.8 mi

243.9

5.8 mi

10.4

legal entities

Number of transactions and volume(in million of transactions and BRL billions)

Pix versus other instruments(in million of transactions)

Total ◼ Pix ◼ TED ◼ DOC◼ Bank Billet (‘boleto’)

million keys

PIX: Next steps

contactless Pix(For transactions carried out through short-range wireless connectivity technology)

offline Pix

.Payer offline and payee online

.Both offline

mechanism of transaction reversal (for fraud or operational error)

3º quarter 2022

4º quarter

Pix Saque (cash withdrawal) and Pix Troco (cashback)

scheduled payments

no-priority settlement

scheduled guaranteed transactions

direct debit

Pix for cross-border payments

[...]

*Linked to Open Banking: Payment initiator at Pix

Future Agenda

14/May

Pix Cobrança(invoice payments - for payments with due date)

In public consultation: Pix Saque (cash withdrawal)| Pix Troco (cashback)

General remarks

To increase the capillarity of cash withdrawal places for the final users

Public objectives

To improve the withdrawal offering conditions by the digital institutions, promoting more competition at the financial system

Premise

Service available to anyone who have account in any Pix participant

How does it work today?

Open banking

40

Open BankingAGENDA BC#

Devices to Compare Services and Fees

Financial Advice and Planning for Households

Apps

Payments Initiation in Social Medias Credit Marketplace

• Implementation will be phased throughout 2021.

• Solutions that can be developed from Open Banking:

Goals:

• To promote competition, efficiency and data safety

• Proper balanced conditions between existing financial institutions and new players

41

Regulatory SandboxAGENDA BC#

BCB’s Regulatory Sandbox starts in 2021 with the Cycle 1.

During the sandbox licensing process, BCB will assess whether the submitted projects comply with the definition of innovative project and whether their development is under the regulatory scope of BCB and CMN, among other criteria.

Legal persons, notary and registration service providers, public companies, and semi-public companies can participate, even when not yet fully licensed by BCB.

Simplified monitoring procedures will be adopted, considering the complexity and risks associated to each innovative project and, should BCB deems appropriate, additional limits and criteria may be applied.

By the end of cycle 1, participants may obtain a permanent license from BCB to operate. The projects may be a stepping stone for the improvement of the regulation issued by BCB and CMN.

TO UNDERSTAND THE REGULATORY SANDBOX

42

Text

Payments

Content

Financial Innovation

Intensive use of clouding

ConvergenceAGENDA BC#

43

Digital currencyOpen Banking

• Simplification• Internationalization• Convertibility

Innovation in the currency

Innovation in the financial systemAGENDA BC#

A CBDC for Brazil:

The Digital Real

45

One more instrument for BCB to fulfill its mission

A CBDC for Brazil – The Digital Real

• Extension of the Brazilian real

- Emission by BCB

- Custody and distribution by the payment system

• Retail payments

- On-lineand, eventually, off-line

• Innovative models development

- smart contracts, IoT, programmable money

• Not be interest-bearing

• Guarantee of legal certainty

• Data privacy and security

- Bank secrecy and Brazilian General Data Protection Act

• Preventing and combating money laundering

- Compliance with court orders to track illicit transactions

• Interoperability and integration

- Cross-border payments

• High cyber security

Guidelines:

Next step: Open discussion with society

CBDC

Measures:

• BCB’s S&E Responsibility

• Partnerships

• Policies

• Supervision

• Regulation

Sustainability

Common factors in recoveryMore sustainable and more inclusive growth

More technologyThe epidemic has accelerated technological change

in medicine, education, finance, communication

Low interest rates and high liquidity in the world

There are challenges, but also opportunities to reinvent the economy with private resources

Changes in global value chains

World trade

Vision for the future

Impact of possible reflation global conditions on EMEs

Thank you!

Roberto Campos NetoGovernor of Banco Central do Brasil

June 08, 2021

Brazil’s Economic Outlook

Documents