Week ended January 01th 2010            EDJAN012010.doc

Editorial: The industrial production in the period 2008 - 2009 in Brazil

The table below shows the evolution of the index of industrial production in Brazil in a comparison between the months of 2008 and 2009, for the overall production, capital goods and consumer goods.Comparing 2009 to 2008 in the overall index, we note that only in November 2009 the number was higher than 2008 figures and the sum of the first eleven months in 2009 was 9.3% below 2008, whereas in the period January - October, all months of 2009 were lower than 2008.

Now with respect to the index of capital goods, the "gap" was greater, because the variation of eleven months showed a decrease in 2009 against 2008 of 20.2%; all the months of 2009 were below those of 2008. The companies producing capital goods took the hardest hit by the effects of what President Lula called a "small wave". It is clear that the waves were much bigger than Lula prediction.

The sector of industrial production of consumer goods, as shown in the chart, was the least affected, with two months of the eleven, October and November 2009 higher than the equivalent of 2008, but in the accumulation of 11 months of the year, 2009 was 4.1% below 2008.

Entrepreneurs that believed in the first two semesters of 2008 and invested, or in machinery or in production, were without working capital to cope with the dropping of the second half of 2008 and followed up in 2009. For this reason, the program of working capital from BNDES called PEC, which was closed in December 2009 should be extended for longer time. It is our opinion.