Northeastern Brazil: Opportunities for Investment and Investing in Opportunities

 Introduction

•  Governors and guests, I’m delighted to welcome you to Washington.
•  When we met in Pernambuco last June, hosted by Governor Campos, all of you presented to my colleagues and me an excellent picture of the challenges and opportunities faced by the Northeast states.  I left with a sense of great potential, and I wanted to see how the World Bank Group could offer more support.
• So, thank you for coming. Let’s keep up the momentum.
• It is also my pleasure to welcome Rubens Gama, Minister and Director of Commercial Promotion at the Ministry of Foreign Affairs; and Jurandir  Santiago, President of the Bank of the Northeast, and Luciano Coutinho, from the Brazilian National Development Bank.
• And I’m pleased that my good friends, Luis Alberto Moreno from the IADB and former U.S. Ambassador to Brazil, Cliff Sobel, will be joining us today.
• Thanks as well to participants from the private sector. You are the key to the success of this venture.
•  Let me start by mentioning a few important changes at the World Bank.
• Makhtar Diop, who has done an outstanding job as the World Bank’s Country Director over the past three years, is becoming our VP for the Africa region.
•  While I’m sorry to take Makhtar from you in Brazil, I’m sure his relationship with Brazil will remain strong, and we will rely on him to help push forward our South-South agenda, bringing the best of Brazil to the Africa region. 
• Hasan Tuluy has recently become our new Vice President for Latin America. Hasan , who is from Turkey, has served the Bank in West Africa, the Middle East, and MIGA, our political risk insurance agency. Most recently Hasan has been our Vice President for human resources. He is a fine economist and leader, who will bring global perspectives to our work in Latin America.
• I would also like to introduce Debbie Wetzel, our new Country Director for Brazil. Some of you may know Debbie from her previous work in Brazil between 2006 and 2009. She was instrumental in developing our focus on the states of Brazil.  Most recently Debbie has worked with me as the Bank’s Chief of Staff.  Knowing her work well, I am confident that she will do a great job in taking the Brazil program forward.

WB Work in Brazil

•  My visit with you last year showed me first-hand the dynamism and opportunity that Brazil has to offer. 
•  Brazil has demonstrated resilience in the global crisis and has done a remarkable job in overcoming poverty. Between 2003 and 2009, we calculate that some 22 million Brazilians emerged from poverty, and almost 13 million rose above extreme poverty.
• There is rapid social progress in health and education. When I was in Brazil, I was able to participate in President Dilma Rousseff’s launch of the Brasil Sem Miséria Program, which advances inclusion even further.  We are happy to be a partner in this endeavor. 
• While in Brazil, I also visited the favelas in Rio and saw what progress has been made in their pacification and renewal. 
• But most important, I had an opportunity to meet with you, the Governors of the Northeast, to discuss the challenges that you as Governors face and how the Bank could help partner with you.  
• We discussed the importance of maintaining fiscal balance and improving service delivery; the need to build infrastructure to support economic development; and the importance of the private sector as an engine of growth that could help create jobs. 
• I could see that the heart of your mission is to create opportunities for the citizens of the Northeast, to help them find jobs that support their families as well as a growing economy.
• We have made good progress on the items that we discussed last June.  
• Our Brazil Country Partnership Strategy, approved by our Board of Directors this past September, redoubles our commitment to the Northeast region of Brazil. Your region comprises 1.6 million square kilometers – the size of France, Germany and Italy combined.  Some 55 million people live in the Northeast, representing 29 percent of Brazil’s population.  Yet the Northeast accounts for only 14 percent of Brazil’s GDP.  More than two-thirds of Brazil’s rural poor live in the Northeast. But the Northeast is the fastest growing region of Brazil, with growth rates above those of the rest of the country.
•  In line with President Rousseff’s program to eradicate extreme poverty, the World Bank envisages some $3.7 billion in loans to the Northeast for this fiscal year, ending June 30th, and next. The IFC is also doubling its Northeast program in line with its strategic focus on frontier regions. The IFC program has 28 projects in the Northeast, amounting to $280 million and 13 percent of the IFC’s non-trade finance portfolio.
• Since we met last summer, the World Bank has already approved more than $ 1. 1 billion in loans to the Northeast states and the work is underway. These include:

o    a project to support the water sector in Sergipe (US$70.3 million),
 
o    the Piauí Green Growth Development Policy Loan to help the government promote green, inclusive growth in rural areas through the improvement of land tenure security, sustainable agriculture, and environmental sustainability; this project will also promote access to basic education and fiscal sustainability (US$350 million).
 
o    the  Pernambuco Rural Economic Inclusion project to help reduce inequalities across the  state and improve the prospects for livelihood beyond the metropolitan area (US$100 million);
 
o    the Pernambuco Expanded Opportunity Development Policy Loans, which  supports the establishment of a policy and regulatory framework in the State to address issues of social inequity and gender inclusion comprehensively ($US500 million); and
 
o    The Ceará rural sustainability project to help strengthen regional development in micro-regions away from capital to deepen economic opportunity across the state (US$100 million).

• Each of these projects focuses on generating demonstrable results that will help strengthen growth, inclusion and opportunity– while building the accountability and transparency of the state.

•  So you can see that we’ve been busy.  In the coming months, we expect to move forward further projects in support of the Northeast:

o    In May, we expect our Board to approve the Recife Education Swap, which draws on a results –based approach to improve the quality and outcomes for education in order to provide a better foundation for the youth of  Pernambuco, while at the same time strengthening public sector management (US$130 million).
o    In June, we expect to approve the Bahia Development Policy loan, that will support progress in social and productive inclusion; development of social, physical and institutional infrastructure; and the strengthening of planning and management in the public sector. (US$700 million);
 
o    We are also working on an investment loan to support Rio Grande de Norte (US$360 million); and other projects to support Alagoas , Sergipe and Ceará.

• We believe we’ve made important progress since last June in building programs designed to support your needs. But we know that there is much more to do.

IFC Work in Brazil and Lessons Learned

• Our investments through the public sector are designed to lay a sounder foundation for private sector investment, growth and jobs.
•  IFC, our private sector arm, has developed a strategy focusing on the frontier areas of Brazil.  IFC’s activities will promote regional competitiveness and job creation; opportunities for the urban poor; the integration of the Northeast with the rest of Brazil and the region; and local emerging industries driven by innovation.  IFC’s efforts will cover a wide range of sectors, including agribusiness, logistics, micro-finance, mining, telecom & IT and water and sanitation.
• IFCs work to date in the Northeast has provided some valuable lessons.
• First, we need to draw on regional players. A two-tier approach, in which we bring together local companies and what one might call the “southern blue chips” helps to obtain good results and scale.  
• Second, large logistical investment s are improving the competitiveness of  sectors such as fruit exports, pharmaceuticals and mining. There is also a need to focus on new industries – such as renewable energy, IT and digital industries.
•  Third, there are enormous private sector opportunities for supporting the education and health sectors, which are experiencing double digit growth. You will hear about some of the innovations in these sectors later today.
•  Fourth, we’ve also found that traditional family-owned industries are being managed by a new generation – one that is outward-focused and less reliant on the traditional model of support from development banks. This suggests a change in the local business culture that can be leveraged to provide new opportunities.
• As the Northeast region continues to grow, there will be benefits for all of Brazil. For its closest neighbors such as the Amazon and the Cerrado, building an engine of growth in the Northeast can reduce the pressures of migration, reducing social tensions and help to address environmental sustainability. Growth in the Northeast also helps all of Brazil in reducing inequality.
   

The Agenda Ahead

• You know well that these efforts are just the start for the New Northeast.  So the goal of today’s meeting is to hear from the Governors about their progress and plans, and to see how to leverage the good work they have been doing by bringing in and building relationships with the private sector.
•  In 2008, the IFC, the Brazilian National Development Bank (BNDES), and the Inter-American Development Bank joined together to create a unit to help facilitate the structuring of public private partnerships.   This unit has been very successful, generating almost a billion US dollars of private investment in toll roads, hospitals, schools and irrigation. Now we need to do more.
• BNDES can tell us how it has promoted private sector engagement in the Northeast and across Brazil. The Bank of the Northeast will also share its experiences.  We hope their work can prompt investments of others.
• The Multilateral Guarantee Agency – or MIGA – the World Bank’s private sector guarantee arm – will describe how guarantees can reduce risk and  leverage your innovative ideas.
• The Federal Government is doing its part to support efforts to strengthen competitiveness and growth.  In addition to its flagship program, Brazil without Extreme Poverty” , the Government has launched the Plan Brasil Maior guided by Minister Pimentel and his team headed by Mr. Lemos, which is setting an ambitious new agenda for strengthening innovation and competitiveness throughout Brazil.
• There are real opportunities to scale up public-private partnerships and direct investment in the Northeast. So I hope today’s conference can facilitate interactions that will increase private sector engagement and create even further opportunity for the people of Brazil.

Conclusion

• The work you are doing is helping to fulfill Brazil’s enormous potential. It can also be a model for other countries.
• The efforts you are making to strengthen agricultural productivity, to leverage infrastructure, and pursue sustainability can help countries around the world - especially in Africa – so that others, too, can learn from successful methods and technology.  Brazil is a global leader and we hope to draw on this across the World Bank Group.
•  We are delighted to be a partner in the valuable work that you are doing to catalyze growth, overcome poverty, and pursue inclusion and opportunity for all Brazilians.
•  I believe firmly in the importance of the emerging market economies and in Brazil.
• The larger middle income countries need to be strategic partners of the WBG in the years ahead – as beneficiaries and as contributors of experience, ideas, knowledge, business, and even as contributors to poorer countries.  
• I look forward to hearing what comes out of your deliberations today and wish you all the best for a successful event.