Economics | July 2020 - Santander
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Economics | July 2020
Rodolfo Margato Executive Summary Santander Macro Research Team On the revenue side, the extended deferral of tax payments combined with the weakening economic activity could lead to primary revenue losses of around BRL225 billion in 2020 (3.1% of GDP), in comparison to the pre-crisis outlook. Regarding the expenditures side, we believe that the broad package of primary fiscal spending measures to deal with the current crisis will total nearly BRL505 billion (7% of GDP), an amount substantially larger than the average for other emerging economies. Based on these assumptions, we now anticipate the 2020 public sector primary deficit at BRL845 billion (12.2% of GDP). For 2021 and 2022, we forecast primary fiscal deficits of BRL250 billion (3.4% of GDP) and BRL195 billion (2.5% of GDP), respectively. Concerning the nominal fiscal deficit (which includes nominal interest payments), our projections show a noteworthy reduction from 16.4% of GDP in 2020 to 7.2% of GDP in 2021 and 6.3% of GDP in 2022. Considering the gross public-debt-to-GDP ratio, we foresee an expansion by 19 p.p. from 2019 to 2020 (from 75.8% to 94.8%) and further increases until 2027, when the indicator should peak at levels slightly above 100%, following a convergence path afterwards. It never hurts to emphasize our hypothesis that the unprecedented fiscal stimulus stemming from the pandemic will be limited to 2020. These forecasts also assume that government and Congress will continue to pursue the Brazilian fiscal consolidation in the long-term. Owing to the very challenging starting point for this, we calculate the need for a total fiscal adjustment of at least 5 p.p. of GDP (BRL350 billion) in the coming years. The first (and most important) step in order to ensure fiscal solvency would be to support the constitutional spending cap framework. On this matter, we reiterate our view that compliance with this fiscal rule, until 2022, would be facilitated by taking four measures: (i) real stability of the minimum wage; (ii) nominal stability of public servants’ wages; (iii) a hiring freeze in federal public services; and (iv) a ban on the creation of new mandatory expenditures. For 2023 onwards, nevertheless, we highlight that compliance with the spending-ceiling rule will be feasible only if the government is able to approve further measures to reduce mandatory outlays.
-2
10
14
18
22
2
6
Japan
Singapore
Australia
Austria
Switzerland
Chile
Peru
Iceland
Canada
Thailand
Germany
Advanced Economies
8.2
BRAZIL
7.3
United States
New Zealand
Greece
India
Emerging Economies
5.2
Romania
Sources: International Monetary Fund (IMF), Ministry of Economy and Santander estimates.
Turkey
United Kingdom
Italy
Impact on Government Primary Result
Indonesia
Fiscal Measures Around the World (% GDP)
Malaysia
China
Fiscal measures related to Covid-19 crisis – International Comparison
France
Argentina
Philippines
Russia
Argentina
ColombiaFiscal measures announced by the federal government in order to mitigate the economic hit from the pandemic Fiscal Measures with impact on central government's primary result BRL billion % GDP Emergency aid for informal and intermittent workers, self-employed, microenterpreneurs and low-income workers 254.2 3.50 Resource transfers to offset losses from tax collection and to streghten public health systems in states and municipalities 60.2 0.83 Compensation payments for workers with suspended or reduced empolyment contracts (reduction in worload and wages) 51.6 0.71 Emergency credit line for small and medium-sized companies to finance payroll for two months 34.0 0.47 Resources for Credit Guarantee Funds 20.0 0.28 Resource transfers to the subnational health systems (it includes transfers to the National Health Fund - FNS) 19.0 0.26 Securing level of transfers through state and municipal participation funds 16.0 0.22 National support program for small companies and microbusinesses (PRONAMPE, in Portuguese) 15.9 0.22 Temporary exemption of IOF (Financial Transactions Tax) for credit operations 14.2 0.20 Extraordinary funds for the Ministry of Health 11.6 0.16 Temporary suspension of municipal debt service payments with the social security system 5.6 0.08 Supplementary resource transfers to the National Health Fund 4.5 0.06 Zero import tariffs for medical, hospital and healthcare products 4.5 0.06 Extraordinary funds for the Ministries of Defense, Citizenship, Foreign Affairs and Science & Technology 3.1 0.04 Addition of 1.2 million households to the Bolsa Família entitlement program 3.0 0.04 Other Measures 11.5 0.15 TOTAL 528.4 7.28 Sources: Ministry of Economy, BNDES and Santander estimates. ✓ The emergency financial aid for informal workers and low-income households (“coronavoucher”) was extended for an additional two months (at its current value of BRL600 per month) - exactly in line with our expectation -, which implies a fiscal cost of ~BRL100 billion. ✓ We believe that the actual disbursement of some emergency lifelines will be below the authorized financial limit (~BRL25 billion). ✓ Therefore, we forecast that the wide set of emergency primary fiscal measures will total nearly BRL 505 billion (7% of GDP) in 2020. ➔ BRL485 billion from the expenditure side and BRL20 billion from the revenue side (only measures of tax exemption).
Fiscal Accounts – Public Sector’s Primary Result
Public Sector's Primary Result in 2020, 2021 and 2022
Losses of Primary Expansion in Primary Central Government's Public Sector's
GDP Growth (%)
Fiscal Scenarios Revenue (BRL bn) Spending (BRL bn) Primary Result (BRL bn) Primary Result (BRL bn)
2020 2021 2022 2020 2021 2022 2020 2021 2022 2020 2021 2022 2020 2021 2022
Base Case Before the Pandemic 2.0 2.5 2.8 - - - - - - -105 -76 -45 -99 -68 -35
Current Base Case -6.4 4.4 3.1 225* 150 135 490 10 10 -820 -237 -190 -845 -250 -195
* Our baseline scenario considers the extension of measures that allow for the deferral of tax payments (Brazilian government should allow tax debts to be paid in installments over the
next few years). We estimate this measure could expand the 2020 public sector primary deficit by about BRL85 billion, with a payback likely for subsequent years.
Sources: The National Treasury Secretariat, Brazilian Central Bank and Santander forecasts.
Public Sector’s Primary Deficit (% GDP) Public Sector’s Nominal Deficit (% GDP)
16.4
12.2
2020 2020
2021 2021
2022 2022
7.2
6.3
5.6
3.4 4.9 4.8
2.5
1.3 0.8 0.4
Baseline scenario before COVID-19 crisis Current baseline scenario Baseline scenario before COVID-19 crisis Current baseline scenario
Sources: The National Treasury Secretariat, Brazilian Central Bank and Santander forecasts.Fiscal Accounts – Public Sector’s Primary Result in coming years
Public Sector’s Primary Result (% GDP)
4 3.3 2.9
1.7
2
0.3
0
-2 -0.9
-2.5 -2.5
-4 -3.4
-6
-8 Forecasts
-10
-12
-12.2
-14
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Sources: Brazilian Central Bank and Santander forecasts.Fiscal Accounts – Revenues and Expenditures
Central Government's Primary Balance
Fiscal Items (% of GDP) 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Total Revenue 21.7 22.8 20.1 20.8 20.9 21.1 21.3 21.6 21.8 22.1 22.3 22.5 22.8
Revenues Collected by the Federal Revenue Office 13.3 13.2 12.2 12.4 12.5 12.6 12.7 12.8 12.9 13.0 13.1 13.2 13.3
Net Social Security Revenues 5.7 5.8 5.6 5.5 5.5 5.6 5.6 5.7 5.8 5.8 5.9 6.0 6.0
Revenues Not Collected by the Federal Revenue Office 2.8 3.8 2.3 2.8 2.9 2.9 3.0 3.1 3.2 3.2 3.3 3.4 3.5
Transfers by Revenue Sharing 3.8 4.0 3.7 3.7 3.7 3.7 3.8 3.8 3.8 3.8 3.9 3.9 3.9
Net Revenue 18.0 18.7 16.4 17.0 17.2 17.4 17.6 17.8 18.0 18.2 18.4 18.7 18.9
Total Expenditure 19.8 20.1 28.1 20.2 19.5 19.1 18.7 18.5 18.2 17.9 17.7 17.4 17.2
Social Security Benefits 8.6 8.7 9.8 9.5 9.4 9.3 9.3 9.3 9.2 9.2 9.2 9.1 9.1
Payroll 4.4 4.4 4.7 4.4 4.2 4.0 3.9 3.7 3.6 3.5 3.4 3.3 3.2
Other Mandatory Expenses 2.9 2.7 11.3 2.8 2.6 2.6 2.5 2.4 2.4 2.3 2.2 2.2 2.1
Mandatory Expenses with Cash Control 2.0 2.0 1.5 2.1 2.0 2.0 1.9 1.9 1.8 1.8 1.7 1.7 1.7
Discretionary Expenses 1.9 2.3 0.8 1.5 1.3 1.2 1.2 1.2 1.1 1.1 1.1 1.1 1.1
Central Government's Primary Balance -1.8 -1.3 -11.9 -3.2 -2.3 -1.7 -1.1 -0.7 -0.2 0.3 0.7 1.3 1.7
Nominal GDP (BRL billion) 6,827 7,183 6,919 7,377 7,856 8,314 8,761 9,222 9,708 10,219 10,757 11,324 11,920
Central Government's Net Revenue and
Total Spending (% GDP)
30
28.1
28 Net Revenue
26
Total Spending
24
22
20.2 19.9 20.2
20 18.8 18.9
18.6
18 16.5
17.4 17.8 17.2
16 16.8
15.6 16.4
14 14.8
Sources: The National Treasury Secretariat, Brazilian Central Bank
and Santander forecasts. 12
2020F
2022F
2024F
2026F
2028F
2030F
2002
2004
2006
2008
2010
2012
2014
1998
2000
2016
2018Fiscal Accounts – Public Sector’s Financing Needs
Public Sector’s Fiscal Balance (% GDP)
4
2
0
-2
-4
-6
-8
-10
-12 Primary Fiscal Result Forecasts
-14 Nominal Interest Payments
-16
Nominal Fiscal Result
-18
2020F
2021F
2022F
2023F
2024F
2025F
2026F
2027F
2028F
2029F
2030F
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sources: Brazilian Central Bank and Santander forecasts.Fiscal Accounts – Trajectories for the Brazilian Government Debt
➔ Main assumptions before the Covid-19 crisis: (i) Potential GDP growth = 2.2%; (ii) Neutral real interest rate = 2.8%; (iii) Long-term inflation =
3.0%; (iv) Net sales of foreign exchange reserves = USD20 billion in 2020; (v) Advanced payments from BNDES to the National Treasury = BRL60
billion in 2020, BRL40 billion in 2021, BRL30 billion in 2022, and BRL15 billion in 2023.
➔ Main assumptions for the current baseline scenario: (i) Potential GDP growth = 2.2%; (ii) Neutral real interest rate = 3.0%; (iii) Long-term
inflation = 3.0%; (iv) Net sales of foreign exchange reserves = USD25 billion in 2020; (v) Advanced payments from BNDES to the National Treasury =
no payment in 2020, BRL30 billion in 2021, BRL25 billion in 2022, and BRL20 billion in 2023.
General Government Gross Debt (% GDP)
105 101.5 (peak at 2027)
96.9
96.0
Baseline Scenario before
95 the Covid-19 crisis 94.8
85 Current Baseline 88.3
Scenario
75
75.5 74.7
73.8
71.0
65
59.2
55 51.5 59.8
45
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Sources: Brazilian Central Bank and Santander forecasts.Fiscal Accounts – Trajectories for the Brazilian Government Debt
Public sector’s primary result required for the stabilization of the gross public debt-to-GDP ratio at
90%, 100% and 115%:
Potential GDP Growth /
1.0% 1.5% 2.0% 2.5% 3.0%
Real Interest Rate
2.5% 1.3% 1.4% 1.6% 0.8% 0.9% 1.1% 0.4% 0.4% 0.5% -0.1% -0.1% -0.1% -0.5% -0.6% -0.6%
3.0% 1.7% 1.9% 2.2% 1.3% 1.4% 1.6% 0.8% 0.9% 1.0% 0.4% 0.4% 0.5% -0.1% -0.1% -0.1%
3.5% 2.1% 2.4% 2.7% 1.7% 1.9% 2.2% 1.2% 1.4% 1.6% 0.8% 0.9% 1.0% 0.3% 0.4% 0.4%
4.0% 2.6% 2.9% 3.3% 2.1% 2.3% 2.7% 1.7% 1.8% 2.1% 1.2% 1.3% 1.6% 0.8% 0.9% 1.0%
4.5% 3.0% 3.3% 3.8% 2.5% 2.8% 3.3% 2.1% 2.3% 2.7% 1.6% 1.8% 2.1% 1.2% 1.3% 1.5%
Sources: The National Treasury Secretariat, Brazilian Central Bank and Santander estimates.Fiscal Accounts – Simulations for Alternative Scenarios
General Government Gross Debt (% GDP)
120
109.2 (peak in 2030)
110 106.1
100 102.5
101.5
(peak in 2027) 97.8
90
88.3
80
70
Scenario with fiscal adjustment measures and structural
60 reforms (Santander base case)
50 Scenario for triggering the self-correction provisions of the
constitutional spending cap rule in 2021
40
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Sources: The National Treasury Secretariat, Brazilian Central Bank and Santander forecasts.Fiscal Accounts – Trajectories for the Brazilian Government Debt
General Government Gross Debt (% GDP)
International Comparison
130 Brazil
120 117.5
Emerging Economies
110 106.5 106.7
Advanced Economies
100 104.0 106.7
90 82.5
88.4
80 71.4 84.1
70 60.2
60 65.6 69.0
64.2
50 54.8
40 48.3
45.1
30 38.3
33.7
20
2020F
2021F
2022F
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sources: International Monetary Fund (IMF), OECD and Santander forecasts.Fiscal Accounts – Trajectories for the Brazilian Government Debt
Public Sector Net Debt (% GDP)
85
74.0 77.2 (peak at 2027)
75 Baseline Scenario before 71.8
the Covid-19 crisis
65 Current Baseline 67.5 67.2
Scenario
55
56.3 55.8 55.0
52.3
45 40.9
44.8
35 30.5
25
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Sources: Brazilian Central Bank and Santander forecasts.Government Debt Management
Net Redemptions of Public Debt Securities Federal Public Debt Maturities
(BRL billion) in the next 12 months (BRL billion)
130 1.000
80 900
30 800
(20) 700
Next 6 months = BRL448 billion
(70) 600 Next 9 months = BRL581 billion
Net redemptions of BRL166 billion from Next 12 months = BRL954 billion
(120) Jan/20 to May/20 500
Jun-20
Jan-21
Jun-21
May-20
May-21
Jul-20
Jul-21
Apr-21
Oct-20
Oct-21
Nov-20
Dec-20
Nov-21
Dec-21
Aug-21
Sep-21
Aug-20
Sep-20
Feb-21
Mar-21
(170)
2017 2018 2019 Jan/20 Feb/20 Mar/20 Apr/20 May/20
Average Term of Federal Public Debt Issuances
(in years) - 12-month rolling average ➢ In contrast to March and April, actual data for May and preliminary data
6
5.5 for June show that public securities issuances have been gradually
5.0 increasing, which is important for keeping the National Treasury’s “liquidity
5
cushion” at comfortable levels. We calculate this reserve (a management tool
4.0 4.6 that serves to mitigate the rollover risk in stress scenarios) is currently a bit
4
3.7 3.7 above BRL500 billion (6.9% of GDP), an amount enough to pay off
3 federal debt maturities until December 2020.
2.7
2 ➢ We reinforce the possible use of the Central Bank’s FX results in 1H20
1.7
(mostly due to a higher value of foreign exchange reserves in BRL) to
1
strengthen the “liquidity cushion”. We believe the total amount to be
Sep-05
Sep-07
Sep-09
Sep-11
Sep-13
Sep-15
Sep-17
Sep-19
May-06
May-08
May-10
May-12
May-16
May-18
May-20
May-14
Jan-05
Jan-11
Jan-13
Jan-15
Jan-19
Jan-07
Jan-09
Jan-17
transferred from the Central Bank to the National Treasury should
be around BRL400 billion (5.5% of GDP).
Sources: The National Treasury Secretariat, Brazilian Central Bank and Santander.Compliance with the Constitutional Spending Cap Rule
The compliance with the expenditure ceiling rule, until 2022, would be guaranteed by taking four measures:
(i) Real stability of the minimum wage; (ii) Nominal stability of the public servants’ wages; (iii) Hiring freeze in federal public services;
(iv) Ban on the creation of new mandatory expenditure.
For 2023 onwards, nevertheless, we draw attention that the compliance with the spending ceiling rule will be feasible only if
government is able to approve further measures to reduce mandatory outlays.
Surplus (+) or Insufficiency (-) to comply with the
constitutional spending cap rule (BRL billion)
34.0
26.2 ~BRL 130 billion (-1.4% of GDP)
13.9
4.7
-8.9
-23.9
-40.1
-58.4
0.47 0.38 0.19 0.06 -0.11 -0.27 -0.43 -0.60
2019 2020 2021 2022 2023 2024 2025 2026
Sources: The National Treasury Secretariat, Ministry of Economy and Santander estimates.(Possible) Fiscal Adjustment Measures in the Post-Crisis Environment: Just a few examples and preliminary estimates... Revenues (Annual Impact ~BRL115 billion / 1.6% of GDP) Expenditures (Annual Impact ~BRL65 billion / 0.9% of GDP) - Inheritance and Donation Tax - End of Wage Bonus (granted for formal workers) Raising the aliquot from 8% to 30%: BRL30 – BRL 35 billion Impact of BRL16 billion - Tax on Large Fortunes - Extending the grace period for the unemployment insurance benefit Incidence on Wealth > BRL20 million: BRL30 – BRL35 billion Impact of BRL12 billion - Exclusive Funds - 10% linear reduction in tax exemptions / tax waivers (One-off) Impact of BRL10 billion Impact of BRL27 billion - Changes in Personal Income Tax - Reduction of public servants’ working hours and wages (up to 25%) Aliquot of 35% on earnings > BRL25k per month: BRL6 billion Impact of BRL9 billion - Profits & Dividends Aliquot of 15%: BRL25 billion - End of JCP (“Interest on Equity Capital”) payment deduction Impact of BRL8 billion.
Santander Brazil Macro Forecasts
2015 2016 2017 2018 2019 2020 2021 2022
GDP (%)
GDP Growth -3,5 -3,3 1,3 1,3 1,1 -6,4 4,4 3,2
Inflation (%)
IPCA-IBGE 10,7 6,3 2,9 3,7 4,31 1,5 2,7 3,5
IGP-M 10,5 7,2 -0,5 7,5 7,30 6,5 4,0 4,0
FX Rate
BRL/USD - end of period 3,90 3,26 3,31 3,87 4,03 4,95 4,50 4,15
BRL/USD - average 3,33 3,49 3,19 3,65 3,94 4,95 4,64 4,27
Interest Rates (%)
SELIC - end of period 14,25 13,75 7,00 6,50 4,50 2,25 2,25 4,00
Labor Market
Unemployment rate (average) 8,5 11,5 12,8 12,3 11,90 13,9 13,1 12,0
Balance of Payments
Exports (USD bi) 191,0 185,2 217,7 239,3 225,4 199,9 222,2 248,3
Imports (USD bi) 171,5 137,6 150,7 181,2 177,3 139,3 157,0 173,2
Trade Balance (USD bi) 19,5 47,6 67,0 58,0 48,0 60,5 65,2 75,1
Current Account (USD bi) -54,5 -24,2 -15,0 -41,5 -49,5 1,4 -4,4 -7,4
Current Account (% of GDP) -3,0 -1,3 -0,7 -2,2 -2,7 0,1 -0,3 -0,4
Fiscal Accounts
Primary Balance (% of GDP) -1,9 -2,5 -1,7 -1,6 -0,9 -12,2 -3,4 -2,5
Net Public Sector Debt (% GDP) 35,6 46,1 51,4 53,6 55,7 67,5 71,8 74,0
Gross Public Sector Debt (% GDP) 65,5 69,8 73,7 76,5 75,8 94,8 96,0 96,9Brazil Macroeconomic Research Team
Ana Paula Vescovi* Mauricio Oreng*
Chief Economist Head of Research & Strategy
anavescovi@santander.com.br mauricio.oreng@santander.com.br
Everton Gomes* Jankiel Santos*
Modeling External Sector
everton.gomes@santander.com.br jankiel.santos@santander.com.br
Mateus Rabello* Rodolfo Margato*
Global Economics Fiscal Policy
mrabello@santander.com.br rodolfo.silva@santander.com.br
Daniel Karp* Lucas Seabra*
Inflation Economic Activity
daniel.karp@santander.com.br lucas.maynard.da.silva@santander.com.brContact/Important Disclosures
CONTACTS / IMPORTANT DISCLOSURES
Macro Research
Maciej Reluga* Head Macro, Rates & FX Strategy – CEE maciej.reluga@santander.pl 48-22-534-1888
Juan Cerruti * Senior Economist – Argentina jcerruti@santander.com.ar 54 11 4341 1272
Ana Paula Vescovi* Economist – Brazil anavescovi@santander.com.br 5511-3553-8567
Juan Pablo Cabrera* Economist – Chile jcabrera@santander.cl 562-2320-3778
Guillermo Aboumrad* Economist – Mexico gjaboumrad@santander.com.mx 5255-5257-8170
Piotr Bielski* Economist – Poland piotr.bielski@santander.pl 48-22-534-1888
Marcela Bensión* Economist – Uruguay mbension@santander.com.uy 598-1747-6805
Fixed Income Research
Juan Arranz* Chief Rates & FX Strategist – Argentina& FX jarranz@santanderrio.com.ar 5411-4341-1065
Mauricio Oreng* Senior – Argentina
Economist/Strategist
Strategist – Brazil mauricio.oreng@santander.com.br 5511-3553-5404
Juan Pablo Cabrera* Chief Rates & FX Strategist – Chile jcabrera@santander.cl 562-2320-3778
Equity Research
Miguel Machado* Head Equity Research Americas mmachado@santander.com.mx 5255 5269 2228
Alan Alanis* Head, Mexico aalanis@santander.com.mx 5552-5269-2103
Andres Soto Head, Andean asoto@santander.us 212-407-0976
Claudia Benavente* Head, Chile claudia.benavente@santander.cl 562-2336-3361
Walter Chiarvesio* Head, Argentina wchiarvesio@santanderrio.com.ar 5411-4341-1564
Daniel Gewehr* Head, Brazil dhgewehr@santander.com.br 5511-3012-5787
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which is wholly owned by Banco Santander, S.A. "Santander"), on behalf of itself and its affiliates (collectively, Grupo Santander) and
is provided for information purposes only. This document must not be considered as an offer to sell or a solicitation of an offer to buy
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Investment Bolsa, Sociedad de Valores, S.A. (“Santander Investment Bolsa”), and in the United Kingdom by Banco Santander, S.A.,
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Santander London and Santander Investment Bolsa are members of Grupo Santander.Contact/Important Disclosures ANALYST CERTIFICATION: The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed, that their recommendations reflect solely and exclusively their personal opinions, and that such opinions were prepared in an independent and autonomous manner, including as regards the institution to which they are linked, and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report, since their compensation and the compensation system applying to Grupo Santander and any of its affiliates is not pegged to the pricing of any of the securities issued by the companies evaluated in the report, or to the income arising from the businesses and financial transactions carried out by Grupo Santander and any of its affiliates: Ana Paula Vescovi*. *Employed by a non-US affiliate of Santander Investment Securities Inc. and not registered/qualified as a research analyst under FINRA rules, and is not an associated person of the member firm, and, therefore, may not be subject to the FINRA Rule 2242 and Incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Within the past 12 months, Grupo Santander has managed or co-managed a public offering of securities of Eletrobras. Within the past 12 months, Grupo Santander has received compensation for investment banking services from Eletrobras. Santander or its affiliates and the securities investment clubs, portfolios and funds managed by them do not have any direct or indirect ownership interest equal to or higher than one percent (1%) of the capital stock of any of the companies whose securities were evaluated in this report and are not involved in the acquisition, disposal and intermediation of such securities on the market. The information contained herein has been compiled from sources believed to be reliable, but, although all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading, we make no representation that it is accurate or complete and it should not be relied upon as such. All opinions and estimates included herein constitute our judgment as at the date of this report and are subject to change without notice. From time to time, Grupo Santander and/or any of its officers or directors may have a long or short position in, or otherwise be directly or indirectly interested in, the securities, options, rights or warrants of companies mentioned herein. Any U.S. recipient of this report (other than a registered broker-dealer or a bank acting in a broker-dealer capacity) that would like to effect any transaction in any security discussed herein should contact and place orders in the United States with SIS, which, without in any way limiting the foregoing, accepts responsibility (solely for purposes of and within the meaning of Rule 15a-6 under the U.S. Securities Exchange Act of 1934) for this report and its dissemination in the United States. © 2020 by Santander Investment Securities Inc. All Rights Reserved.
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