PERU CAPITAL MARKETS DAY - BRADESCO - 2013

LATAM and EMERGING MARKETS, opportunities in changing times

JOAQUIM LEVY Lima - September, 2013

2

Chile

Colômbia

África do Sul

México

Brasil

Turquia

ÍndiaIndonésia

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

0 1 2 3 4 5 6 7

Var

iaçã

o da

s Bo

lsas

Moedas e Bolsas dos países emergentes (base 31/dez/12 =100)

Peso Chileno

Peso Colombia

Zar Africa do Sul

Peso México

Real Brasil

Lira Turquia

Rupia IndiaRupia Indonesia

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

0 1 2 3 4 5 6 7

Des

valo

riza

ção

das

Moe

das

Déficit em Conta Corrente(% PIB)

Currencies and Equity Indexes* – Jan-Sept 2013

Current Account Deficit (% GDP)

* Equity indexes in local currency

soles

Peru

Latam x Other Emerging:

currency more stable

more adjustment in equities

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201 3: a year of transition, with impact on emerging markets

3

So… should we be very worried about Latam or Brazil?

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Fund Forum Latam

November 2012

The Global Crisis and Latin AmericaOutperformance or Short-Lived Decoupling?

Economic Outlook: How Is Latin American Region Facing In the Global

Context and How Much Has the Euro and US Crisis Impacted the Regional Outlook?

Fernando Honorato BarbosaChief EconomistExecutive General Manager

Not so much… if we anticipate and understand the markets

BRAM presentation and cover of a major business newspaper in

Brazil… a year ago!

Swings in prices are natural in public markets and in funds with daily NAV – it may be the cost of transparency

5

Realignment affected all asset prices

AUS IND TRK

6

Market performance of LATAM provides cushions for the economy

Stock Exchange

Market Cap

30/08/13 (USD Mn) Dec-07 Jan-03 Dec-07 Jan-03 Dec-07 Jan-03

Brazil 920.625 -41,6% 235,2% -25,4% 20,2% -34,2% 370,3%

Mexico 474.960 9,3% 304,6% -18,5% -17,7% 19,2% 260,5%

Chile 272.244 24,7% 196,5% -2,4% 22,7% 30,8% 235,2%

Colombia 222.947 69,3% 1018,3% 4,4% 49,0% 146,1% 2337,9%

Peru 78.716 1,5% 877,1% 6,7% 23,6% -2,0% 382,9%

Russia 541.740 -46,9% 161,8% -26,1% -10,1% -64,2% 145,6%

South Africa 441.435 -2,5% 190,6% -33,2% -32,9% -3,2% 195,0%

Turkey 232.490 -30,9% 208,4% -42,6% -27,2% -17,5% 322,5%

Poland 178.984 -33,5% 195,4% -23,9% 25,0% -14,1% 430,1%

Bulgaria 5.611 -77,3% 11,3% -9,6% 13,3% -70,1% 495,9%

Hong Kong 3.229.861 -21,4% 78,6% 0,6% 0,1% -9,1% 260,0%

China 3.159.983 -52,5% 110,6% 19,3% 35,2% -17,9% 686,4%

Australia 1.264.070 -18,6% 95,5% 1,7% 25,6% -10,6% 154,6%

India 905.279 -45,7% 157,9% -40,0% -31,0% -50,1% 313,6%

Taiwan 846.714 2,1% 50,6% 8,4% 13,5% 20,8% 108,6%

Indonesia 361.652 27,1% 403,8% -16,0% -24,0% 76,6% 654,4%

Philippines 203.601 55,5% 439,9% -7,5% 24,3% 99,7% 810,1%(*) (-) depreciation / (+) appreciation

Source: Bloomberg

Asia

Equity Index (in USD) Market CapCurrency Value (in USD)*

Change in

Latam

CEEMEA

Recent adjustments are healthy and help avoid the building up of distortions

7

Indonésia

Peru

Philipines

“Frontier” markets rose more than more mature ones in the wake of QE1&2

Stock Exchange indexes 2000-2013

8 Source: Bloomberg, JP Morgan

When bonds adjust, those with higher yields may recover quicker

CEMBI investment grade yields by region (%) USD performance against major currencies(ytd)

CEMBI EMBI

Corporate Sovereign

South Africa 45,52% 48,94%

Latin America 44,51% 51,16%

Asia 57,60% 48,73%

EM Europe 61,38% 50,22%

Treasury (7-10 y) 54,00%

Bonds’ Performance 2007-2013

Latam

9 Source: JP Morgan CEMBI, as of 30th August, 2013

Latam USD Bonds have deep markets and comprise strong companies

USD bn Market Cap

20%

15%

11%

8%

6%

5%

5%

3%

3%

3%

21%

4.6

4.2

5.2

3.8

6.4

5.9

5.5

6.6

6.1

7.3

6.5

$17

$18

$23

$33

$33

$42

$54

$76

$100

$136

0 20 40 60 80 100 120 140 160

Others

Singapore

Qatar

UAE

Korea

India

Mexico

Hong Kong

China

Russia

Brazil

Top 10 Africa Asia Europe Latin America Middle East

% Total Avg Yield %

10 10

US recovery: the engine beneath the changes in market conditions

50.050.8

55.7

47.0

49.0

51.0

53.0

55.0

57.0

59.0

61.0

Feb-1

1

Apr-

11

Jun-1

1

Aug-1

1

Oct

-11

Dec-

11

Feb-1

2

Apr-

12

Jun-1

2

Aug-1

2

Oct

-12

Dec-

12

Feb-1

3

Apr-

13

Jun-1

3

Aug-1

3

PMI: Desenvolvidos, Emergentes e EUA

Emergentes Desenvolvidos ex EUA EUA

3.8%

3.3%

2.8%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2000

Q1

2001

Q1

2002

Q1

2003

Q1

2004

Q1

2005

Q1

2006

Q1

2007

Q1

2008

Q1

2009

Q1

2010

Q1

2011

Q1

2012

Q1

2013

Q1

2014

Q1

2015

Q1

% aaSimulações - Treasury 10 anos

PIB = 3,0% PIB = 2,0% PIB = 1,0%

Projeção

10y US Treasury Yields PMI US, Developed & Emerging

135.7

146.1

138.0

144.3

123

128

133

138

143

148

jan-0

1

jan-0

2

jan-0

3

jan-0

4

jan-0

5

jan-0

6

jan-0

7

jan-0

8

jan-0

9

jan-1

0

jan-1

1

jan-1

2

jan-1

3

Pessoal Ocupado(milhões - dessazonalizado)

Fonte: Bloomberg3500

4500

5500

6500

7500

8500

9500

10500

11500

mar-

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set-

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set-

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EUA: Produção e Importação de Petróleo(Barris/Dia)

Produção Importação

Million of Jobs in the US Oil production and imports

11 11

How does LATAM fare against other emerging markets?

Median Age

Population

(2010)

Fiscal

Deficit

(% GDP)

- 2012

Current

Account (%

GDP) - Latest

Data

GDP (%) -

2012

GDP (%) -

2013

CPI (%) -

Latest Data

Benchmark

Interest Rates -

Latest Data

Government

Expenditures (%

GDP) - 2012

Brazil 29,8 -2,2 -3,2 0,9 2,3 6,1 9,0 38,6

Colombia 28,6 -1,9 -3,5 4,0 4,1 2,3 3,3 18,0

Chile 33,0 0,6 -4,0 5,6 4,4 2,2 5,0 21,4

Mexico 27,7 -2,4 -1,3 3,9 2,3 3,5 3,8 20,0

Peru 26,7 1,9 -3,5 6,3 5,5 3,3 4,3 19,7

China 36,3 -1,8 2,4 7,8 7,5 2,6 6,0 24,4

India 26,7 -7,2 -5,1 5,0 5,1 9,5 7,5 28,3

Indonesia 28,9 -1,8 -3,3 6,2 5,8 8,8 7,3 18,0

Poland 39,1 -3,9 -2,8 1,9 1,1 1,1 2,5 42,3

Russia 38,8 0,4 3,0 3,4 2,3 6,5 8,3 36,5

Turkey 29,2 -2,0 -6,6 2,2 3,6 8,2 4,5 39,2

South Africa 25,5 -4,9 -6,5 2,5 2,2 6,4 5,0 38,5

Sources: The Economist, Bloomberg, S&P

*

* *

*

LATAM stands out for:

Young population

Good Fiscal

Low inflation

Current Account in line

Moderate Growth

Small public sector

12 12

Debt in LATAM is as good as elsewhere (or better)

*

* * * *

Colombia Mexico Brazil Peru Chile Turkey Russia S. Africa Poland Indonesia Índia China

Rating (S&P) BBB BBB BBB BBB+ AA- BB+ BBB BBB A- BB+ BBB- AA-

Public Sector

Ext. Debt / GDP12,6 10,7 5,0 13,2 9,4 13,1 13,5 18,7 30,3 14,4 6,1 -

Public Sector

Ext. Debt /

Reserves132,9 82,0 29,9 43,1 59,9 104,9 57,8 174,0 155,4 111,8 43,8 -

External Debt (%

Reserves)225,2 227,1 121,7 95,7 279,8 342,8 133,5 333,9 363,0 222,7 148,1 22,3

External Debt (%

GDP)21,3 29,6 20,4 29,3 43,9 42,7 31,0 35,8 70,8 28,6 20,6 9,0

Short-Term Ext.

Debt (% of total

ext. debt)14,2 21,0 7,4 14,6 19,4 29,3 13,0 20,3 19,2 17,8 23,5 73,4

Govt Debt (%

GDP)32,2 28,7 58,7 19,8 11,9 36,1 10,8 40,1 55,6 23,6 68,3 29,4

Sources: S&P and Moody's (2012)

Latam CEEMEA Ásia

12

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Brasil 50-60%

México 20%-24%

Chile 8-12%

Peru 2-5%

Panamá 0-2%

Colômbia 2-6%

Typical allocation of BRAM’s LATAM

Equities Fund

(underweight Brazil

vis-a-vis MSCI)

Latam: diversity in commodities, manufacturing and services sectors Pacific Alliance/MILA and BRAIN can help providing liquidity and a common platform, ATTRACTING TRADING TO THE REGION A “LATAM passport” would help balance market weights across the region

Democracy and Commitment to the Market are transforming the Region

Correlation of Stock Prices 2003-2013

0,70

0,80

0,90

1,00

MEX COL CHL BRZ

Brazil

Peru

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Conventional Perception Reality

A Commodity-based Economy Service-based Economy

Highly dependent on Exports to China

Exports are 12.5% of GDP, and exports to China account for 18% of exports (< 2.5% of GDP)

Fiscal fragility

Primary surplus, total public debt < 60% of GDP (including subnational debt), international reserves of US$300+ billion

Credit / Property Bubble Total bank credit/GDP of 52% x 100%+ in OECD countries NPLs at 7% for households and 4% for Corporates. Stock of mortgage loans < 5 % of GDP Banks’ external liabilities account for 6% of GDP

Low-investment country Above-average investment in machinery & equipment, a gap in infra-structure and housing, being filled by the private sector through concessions and more corporate bonds (“12.431”)

Lack of Savings First-rate Pension Plans and individual savings schemes (PGBL)

Negative Sentiment towards Emerging Markets

Overall improved sentiment towards global equities can offer attractive buy opportunities

Brazil from the perspective of a USD 120+ billion AUM Asset Manager

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A sample of Brazilian Pension Funds

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A broad universe that offers growth and defensive stock picking opportunities.

P/E Growth EPS

2013 2014 2013 2014 BRAM Coverage

universe 15.0 13.6 12% 14%

Mid & Small Cap* 19.1 15.3 28% 21%

Relevant Market

Domestic Foreign

Suzano Cellulose yes

TIM Telco yes

Anhanguera Education yes

Gerdau Steel yes yes

Cosan Energy yes yes

Mills Engineering yes

BB Seguridade Financials yes

Hypermarcas Retail/Pharma yes

Marcopolo Mechanical yes yes

Embraer Aerospace yes yes

Sector

Brazil from the perspective of a Mid-Small equities portfolio

Diversification

Typical Holdings of Mid-Small Fund

Potential gains from market consolidation

Sector Rank Market Share % Brazil USA

Healthcare Plans Top 10 33 56

Shopping Malls Top 3 22 56 Supermarkets Top 5 36 62 Commercial Properties Top 10 9 n/a Car Rental Top 4 30 94 Private Education Top 3 22 n/a

Market share of top Brazil and US companies

Potential upside from “technical” pressure

17

1.8

1.6 1.5

1.9

1.7

1.4

2.6

2.0

1.31.2

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E

Job Creation (Million)

Brazil from the perspective of the streets

0

50

100

150

200

250

Dec

-11

Jan

-12

Feb

-12

Mar

-12

Apr

-12

May

-12

Jun

-12

Jul-

12

Au

g-1

2

Sep

-12

Oct

-12

No

v-1

2

Dec

-12

Jan

-13

Feb

-13

Mar

-13

Apr

-13

May

-13

Jun

-13

Jul-

13

Au

g-1

3

IBOV

AEDU

30,000

20,428

14,000

6,500 3,840 3,529 2,556 2,479 2,245 2,149

445

Ch

ina

USA

Ind

ia

Bra

zil

Jap

an

Turk

ey

Ger

man

y

UK

Fran

ce

Po

lan

d

Be

lgiu

m

Students in College (in 1000s) Anhanguera’s stock x Ibovespa (2011-13)

Million new (formal) jobs

18

Thank you !

Thank You

Gracias

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