Prospective Foresight in Brazil: An overview and cases MUTUAL LEARNING WORKSHOP ON SCENARIOS CGEE, Brasília (Brazil), 5 December 2012 Prospective Foresight in Brazil: An overview and cases Claudio Porto CEO Macroplan, Prospectiva, Estratégia & Gestão

Claudio Porto CEO of Macroplan – Prospectiva, Estratégia & Gestão 30 years working on prospective foresight Macroplan is recognized in the Brazilian marketplace as one of the most experienced consulting Brazilian companies in prospective studies and strategic management Almost 80 prospective studies produced to date

Contents The evolution of Prospective Foresight in Brazil Five emblematic cases Scenarios of the Brazilian Economy, BNDES (1984-90) Scenarios about the future of the Amazon Region (ELETRONORTE) (1988, 1998) Introduction and Consolidation of the use of Scenarios in Petrobras (1989, 1992) Scenarios in the State of Minas Gerais (2003-2007) Brazil in transition: current landscape and future trends 2011-2022 (2011) Summary and conclusions

The Evolution of Prospective Foresight in Brazil - From the 1970’s to today Until the 1970’s: embryos (IDESP and IUPERJ) 1980’s: emergence (the precursors) 1990’s: dissemination 2000 to today: generalization in large companies or institutions

The choice of cases Criteria: the relevance of its impacts, using an elegant application of the idea of the “Greek Triangle” built by Michel Godet (1991) Anticipation (Reason) The Greek Triangle Appropriation (Desire) Action (Accomplishment)

The 1980’s

1980’s - The Brazilian Context External crisis (including the consequences of the oil prices shock in our economy and default of the Brazilian external debt) Low economic growth (“the lost decade”, average 1.55% /year) and social crisis (39% of population in poverty in 1989) Hyperinflation (1,973% in 1989) Economy: closed and technologically outdated Politics: transition from a military regimen to democracy.

First Case BNDES economy scenarios (1984) 1º The National Bank for Economic and Social Development – BNDES is currently the main financial institution for long-term investments in all segments of the Brazilian economy. In 2011 the ampount of it’s disbursements was about US$ 70 billion 1984: BNDES implemented a strategic planning process that included the use of two macroeconomic scenarios: Adjustment Scenario (The “official” vision) Scrolling annual external debt Economy: continuity of restrictive policies in accordance with the IMF Economic growth Scenario External debt renegotiation in the long term and with better conditions Economic policy: resumption of development Confidencial Information leak High repercussion in society Competitive integration scenario Updated industrial structure Open and competitive economy External debt renegotiation in the long term and with better conditions

First Case BNDES economy scenarios (1984) - Impacts 1º ANTICIPATION The possibility of a new cycle of economic growth APPROPRIATION By the elected President of the Republic (1989), supported by a strong national desire to overcome recession ACTION AND CONSEQUENCES Beginning of the openness of the Brazilian economy

Second Case (Part one) The scenarios of the Amazon Region and electric energy (Eletronorte, 1988) 2º ELETRONORTE is a state-owned company that generates and provides electric power to the nine states of the Amazon Region and also provides energy to buyers from other regions of the country. Total installed capacity = 9.294,33 megawatts and transmission systems have over 9.888,02 km of lines. Mission: Acting in energy markets in an integrated, cost-effective and sustainable way Amazon Region = 49,29% Brazil´s total area

Second Case (Part one) The scenarios of the Amazon Region and electric energy (Eletronorte, 1988) 2º Aim: supporting its assessments of demand for electric energy and investment plan. Three scenarios of Amazon Region from 1989-2010 Two important contributions of this study introduced the embryo of the sustainable development concept  increasing influence in the company’s decisions Introduced the use of scenarios to prospect the market of electrical energy in Brazil instead of extrapolative forecasts  A pioneering initiative that becomes standard in the electrical sector in the 1990’s. Integration with the National Project Focus on Endogenous Development Ecologic and Cultural Restriction 1 2 3

The 1990’s

1990’s - The Brazilian Context Stabilization of the economy after the Real Plan in 1994 Continuous opening of the Brazilian economy Privatization in several economic sectors, end of monopolies and increased competition Modernization of public institutions (remarkable: regulation) Increased soundness of the financial system Consolidation of democracy http://www.imf.org/external/np/exr/facts/banking.htm: How the IMF helps to promote financial system soundness The IMF promotes financial system soundness in member countries through its ongoing multilateral and bilateral surveillance, the design of its lending programs, and the provision of technical assistance. Technical assistance provided by the IMF helps member countries to implement specific reforms to develop and strengthen their financial system. Such assistance may include training and advice on improving monetary and fiscal management; foreign exchange and capital market development; the design of payment systems and deposit insurance arrangements; the development of the legal, regulatory and supervisory frameworks governing the activities of financial institutions; and strategies for crisis management and resolution.

Third Case Scenarios of Oil & Gas Industry – (PETROBRAS, 1989, 1992, 1996) 3º Petrobras is a publicly traded joint-stock corporation whose main shareholder is the Government of Brazil. It acts as an energy company in the following sectors: exploration and production, refinement, marketing and transportation of oil and natural gas, petrochemicals, distribution of oil, electricity, biofuels and other renewable energy sources. The company leads the Brazilian oil sector. Petrobras Business Plan 2012-2016: investments totaling US$ 236.5 billion (R$ 416,5 billion) - an average of US $ 47,3 billion per year. Strategic planning was formally adopted by PETROBRAS in 1989 and based on scenario analysis.

Third Case Scenarios of Oil & Gas Industry – (PETROBRAS, 1989, 1992) 3º A participative process The scenarios and strategic Options in 1992 (Strategic Plan 1992- 2001) Petrobras’ Scenarios Global Scenarios and Focus on Oil Industry Trans-nationalization - hegemony of big private oil companies Fragmented Cooperation - shared hegemony in the petroleum industry National Scenarios and Focus on Oil Industry Neoliberal Permanency of the crisis Welfare state Strategic Options Consolidation and strengthening in the national market Expansion of international operations Integration, competitiveness and business excellence

Third Case Scenarios of Oil & Gas Industry – (PETROBRAS, 1989, 1992) 3º ANTICIPATION Loss of monopoly and emergence of competition Increasing uncertainty and new challenges in the industry APPROPRIATION Assimilation of scenarios and prospective methods by a large portion of the senior management and technical staff of the company ACTION AND CONSEQUENCES Preparation of the company and its managers and professionals to deal successfully with the end of monopoly, increasing competition and higher uncertainty PETROBRAS developed a skilled decision making process when faced with uncertainties. Today, the construction of scenarios, which started in the company over 23 years ago, is part of their culture and strategic management process

Second Case (Part two) The scenarios of the Amazon Region and electric energy (Eletronorte, 1998) 2º In 1998, ELETRONORTE decided to revisit the 10 years old prospective study The prospects of 1989 against the real events of the previous 10 years were evaluated Four scenarios were devised for the Amazon Region looking into the following 20 years: Sustainable Development Regional Development, Moderate Integration And Better Quality Of Life Economic Growth at the expense of Environmental Degradation 1 2 3 Stagnation and Poverty 4

Second Case (Part two) The scenarios of the Amazon Region and electric energy (Eletronorte, 1988) - Impacts 2º ANTICIPATION A systemic view of the main issues and challenges resulting from the economic exploitation of the Amazon Region APPROPRIATON Relevant contribution to a gradual formation of a political convergence concerning the sustainable development of the Amazon Region. Recognizing of the potential of economic exploitation of biodiversity ACTION AND CONSEQUENCES The search for new sustainable production standards for the Amazon Region

Construction Process of the Amazon Region Scenarios 1998-2020 Mapping of Actors and their Alliances Structural Analysis Future Conditioning Factors Selection of Uncertainties Elaboration of Hypotheses about the Future Consistency Analysis of Plausible Scenarios Most Plausible Scenarios Retrospective Study Impact-Uncertainty Matrix Morphological Assessment Matrix

Structural Analysis | Amazon Region - 2000-2020 10 20 30 40 50 60 70 100 80 90 Dependency Motricity Environmental policy Agrarian policy Foreign trade policy National defense policy Indianist Policy Regional development policy Policy for the education and science and technology Dynamism of the national economy Demand for natural resources and agricultural products Regional demand for goods and services in the region Non-registered economic activities Demand for bio-products Demand for genetic information Scientificand technological capacity in the region Information technology and network Migration flow into the region National population dynamics The role of the State Dynamics of the regional economy Global and national demand for energy-intensive products Global and national demand for manufactured products Public expenditures and investments in the region Private investments in the region National demand for eletric energy Regional demand for eletric energy Production structure Form of exploration of natural resources Transportation supply Energy supply Communication supply Availability of natural resources Energy policy Regional population dynamics Urbanization Social and cultural standards Social status Agricultural factors Continental integration Spatial distribution of social and economic activities in the region Driving forces

Morphological Analisys - Amazon Region - 2000-2020 CRITICAL UNCERTAINTIES HYPOTHESES Liberalization / Regulation Fragmentation / Integration Instability / Stability REGULATED AND STABLE INTEGRATION INTEGRATED LIBERALIZATION WITH UNSTABLE FINANCIAL BALANCE FRAGMENTED AND UNSTABLE LIBERALIZATION Global integration of Brazil CONSOLIDATED MERCOSUR AND FTAA CONSOLIDATED MERCOSUR AND PARTIALLY IMPLEMENTED FTAA MINIMUM MERCOSUR AND BROAD FTAA PARTIALLY IMPLEMENTED MERCOSUR AND FTAA Decrease in raw materials content RAPID MODERATE SLOW Global expansion of tourism Role of the State Economic growth STABILITY WITH HIGH GROWTH AND ACTIVE REGULATING STATE STABILITY WITH MEDIUM GROWTH AND LIBERAL STATE STABILITY WITH MEDIUM GROWTH AND SOCIAL PROMOTING STATE INSTABILITY WITH LOW GROWTH AND DISORGANIZED STATE Spatial reconfiguration of the Brazilian economy SMALL DIVERSIFICATION MODERATE DIVERSIFICATION HIGH CONCENTRATION MODERATE CONCENTRATION Structuring investments BROAD AND ARTICULATED MODERATE AND ARTICULATED MODERATE AND DISCONNECTED LIMITED Environmental Management INTENSE AND EFFECTIVE MODERATE AND EFFECTIVE NORMATIVE Development of Sustainable Technology Degradation of natural resources LOW IMPACT MODERATE IMPACT HIGH IMPACT Pan Amazonian integration BROAD CORE IDEAS SUSTAINABLE DEVELOPMENT High growth with low environmental impact and broad integration REGIONAL DEVELOPMENT AND QUALITY OF LIFE Medium economic growth with moderate impact and moderate integration ECONOMIC GROWTH AND ENVIRONMENTAL DEGRADATION Medium economic growth with high environmental impact and moderate integration STAGNATION AND POVERTY Economic stagnation with high environmental impact and limited integration

2000’s to Today

2000’s to Today – The Brazilian Context Prolonged economic stability Overcoming of external restrictions Increasing social inclusion: “Brazil, a medium class country” Increasing insertion of Brazil into global economy Brazil emerges as an attractive land of economic opportunities New challenges and uncertainties facing the future of the country in the medium and long terms

“To turn Minas Gerais into the best state to live in” Fourth Case Scenarios and development strategy of the state of Minas Gerais (2003, 2007) 4º Area: 586,528 km² (larger than France) Population: nearly 20 million people Economy: third among brazilian states “To turn Minas Gerais into the best state to live in” Strategic Guidelines Projects

Fourth Case Scenarios and development strategy of the state of Minas Gerais (2003, 2007) 4º Scenarios for Minas Gerais State 2003-2023 I CONQUEST of a better future II WASTE of opportunities III OVERCOMING adversities IV DECADENCE and impoverishment Sustained development of domestic economy Domestic economy with intermittent growth Brazil Minas Gerais’ environment Creative Competitive Inclusive Conservative Inefficient Excluding Minas Gerais Area: 586,528 km² (larger than France) Population: nearly 20 million people Economy: third among brazilian states “To turn Minas Gerais into the best state to live in” Strategic Guidelines Projects

Fourth Case Scenarios and development strategy of the state of Minas Gerais (2003, 2007) 4º Investment &Business Network Cities Equity and Welfare Environmental Sustainability Competitive Territorial Integration Integrated Perspective of the Human Capital State for results Area: 586,528 km² (larger than France) Population: nearly 20 million people Economy: third among brazilian states “To turn Minas Gerais into the best state to live in” Strategic Guidelines Projects

“to turn Minas Gerais into the best state to live in” Fourth Case Scenarios and development strategy of the state of Minas Gerais (2003, 2007) 4º After the development of the four scenarios, the first one of them was chosen as a reference for the creation of the Vision of the future for Minas Gerais over a period of 20 years: “to turn Minas Gerais into the best state to live in” Area: 586,528 km² (larger than France) Population: nearly 20 million people Economy: third among brazilian states “To turn Minas Gerais into the best state to live in” Strategic Guidelines Projects

“To turn Minas Gerais into the best state to live in” Fourth Case Scenarios and development strategy of the state of Minas Gerais (2003, 2007) 4º The vision was then split into: Strategic guidelines Portfolio of structuring and leveraging projects for the development of the State Area: 586,528 km² (larger than France) Population: nearly 20 million people Economy: third among brazilian states “To turn Minas Gerais into the best state to live in” Strategic Guidelines Projects

Fourth Case Scenarios and development strategy of the state of Minas Gerais (2003, 2007) 4º ANTICIPATION The threat of losing many opportunities unless making severe adjustments in the state and its government APPROPRIATION Choice of strategies aligned with the scenarios Realization of the urgent need for modernization of the state government toward higher efficiency ACTION AND CONSEQUENCES Public policies aligned with the scenarios “The shock of management” in state government

Brazil in transition - current landscape and future trends 2011-2022 A. “Back to the 70´s” B. “Chinese capitalism on Brazilian way” Intense & wide Insertion of Brazil in global economy Limited, moderate Wide & increasing D. “A new isolation” C. “A clash of orthodox capitalism” Moderate & selective Presence of the State in the economy

Summary and Conclusions

Anticipation Appropriation Action BNDES (1984) ELETRONORTE (1988, 1998) PETROBRAS (1989, 1992, 1996) MINAS GERAIS (2003-2023) Anticipation The possibility of a new cycle of economic growth The anticipation of political, economic, and environmental issues resulting from the economic exploitation of the Amazon Region Loss of monopoly and emergence of competition Increasing uncertainty The threat of losing many opportunities unless making severe adjustments in the state and its government Appropriation By the elected President (1989) A strong national desire to overcome recession Contribution to a gradual formation of a political convergence concerning Amazon region’s biggest challenge. The potential of economic exploitation of biodiversity Assimilation of prospective methods by a large portion of the senior management and technical staff of the company Choice of strategies aligned with the scenarios Realization of the urgent need for modernization of the state government toward higher efficiency Action The beginning of the openness of the Brazilian economy The search for new production standards on sustainable base Preparation of managers and professionals to deal successfully with the end of monopoly, competition and higher uncertainty Public policies aligned with the scenarios “The shock of management” in state government

Conclusions The use and dissemination of prospective foresight in Brazil made significant progress during the last 30 years. Unfortunately, we are still missing a long term prospective and strategic view for the country. We – society, state, companies – are excessively focused on short term tactic questions. However, there has been an increasing demand for a long term view from new leaderships. Our current development stage itself requires such view. I am, therefore, optimistic: this is likely the decade when Brazil – as a nation and a society – will pursue and build a long term vision of development. And all of us, with the methods and tools of prospective foresight , will be able to make relevant contributions to this project. Thank you. cporto@macroplan.com.br

References

Remarkable Prospective Projects supported by Macroplan Construção de Cenários para o Setor Energético e o segmento de Óleo e Gás 2002-2010 e elaboração da Visão de Futuro do Projeto Tendências Tecnológicas para o CTPETRO – Fundo Setorial do Petróleo (Mar-Jul, 2002). Atualização dos Cenários Sócio-Econômicos e Energéticos da Amazônia para o Horizonte 1998/2020 - ELETRONORTE (Out, 2000 - Abril, 2001) Elaboração dos cenários focalizados no mercado de distribuição de combustíveis no Brasil – horizonte 2002/2006 (2001) Mapeamento das Incertezas e Construção dos Cenários do Mercado de Energia Elétrica – Horizonte 2001-2011 ( 2001). Cenários da Educação a Distância no Brasil – Horizonte 2010; como etapa integrante do processo de planejamento estratégico do desenvolvimento da Educação à Distância do SENAC São Paulo para o horizonte 2000-2005 (Fev-Abril 2000) Cenários do setor de Telecomunicações no Brasil no Horizonte 1996/2010 para a EMBRATEL (1996) Consultoria metodológica à Secretaria de Assuntos Estratégicos da Presidência da República na construção de Cenários Exploratórios do Brasil no Horizonte 2020 (Jan - Jun, 1996) Consultoria à elaboração de análise prospectiva e Cenários de Educação Profissional e do ambiente de atuação do SENAI – Horizonte 1995-2010 ( 1995) Cenários para o Mato Grosso do Sul no horizonte 1995-2010 (Mar-Set, 1995) Cenários do ambiente de atuação das micro e pequenas empresas do Rio de Janeiro 2012-2013 (2012) Análise de tendências de longo prazo e elaboração do Plano Mineiro de Desenvolvimento Integrado horizonte 2030 (2011) Quatro cenários da cidade de Belo Horizonte 2010-2030 (2009) Cenários do Ambiente de Atuação do do Sistema Eletrobras 2020 (2010) Quatro Cenários Econômicos para o Brasil 2008-2014 Cenários Exploratórios do Rio de Janeiro no Horizonte 2007-2027 (2007) Cenários Exploratórios de Minas Gerais no Horizonte 2007-2023 (2007) Cenários do ambiente de atuação das organizações públicas de PD&I do Agronegócio no Horizonte 2023 (Embrapa, 2007) Três Cenários para o Desenvolvimento do Estado do Espírito Santo (2006) “O Ensino Superior no Mundo e no Brasil – Condicionantes, Tendências e Cenários para o Horizonte 2003-2025” (2003) Cenários de Desenvolvimento para a elaboração do Plano Estratégico do Sistema Petrobras – 2004-2015 (2003 – 2004)

Bibliography BELFORT-SANTOS – “Avaliação do Modelo de Planejamento Estratégico de uma Empresa - O Caso Petrobras”. Dissertação de Mestrado. Departamento de Engenharia Industrial – PUC-Rio, 1996. BNDES – “BNDES Trimestral”, BNDES: 28 de janeiro de 2010. Disponível em www.bndes.gov.br. Acessado em 09.02.2010. BNDES – “Cenários para a economia brasileira até o ano 2000”. BNDES, Depto. de Planejamento. Rio de Janeiro, 1987. BNDES – “Cenários para a economia brasileira 1984-1990”. BNDES, Depto. de Planejamento. Rio de Janeiro: agosto, 1984. ELETRONORTE – “Dez Anos de Cenários Exploratórios da Amazônia. Eletronorte, maio, 1998. ELETRONORTE – “Cenários Socioenergéticos para a Amazônia – 1998-2020”. Eletronorte, janeiro, 1999. GODET, Michel. – “Prospective et Planification Stratégique”. Paris: Economica, 1985. GODET, Michel – “De L’anticipation à l’action - Manuel de Prospective et de Stratégie”. Paris: Dunod, 1991. GODET, Michel & DURANCE, Philippe – “Prospective Stratégique – Problèmes et Méthodes”. Cahier du Lipsor nº 20, Janvier, 2007, 2ème édition. HEIJDEN, Kees Van Der – “Scenarios: the art of strategic conversation”. England: John Wiley & Sons, 1996. KAHN, Herman & WIENER, Anthony – “The Year 2000”. The Hudson Institute, 1967. MARQUES, E. – “Geração de cenários para o planejamento estratégico”. BNDES, Depto. de Planejamento. Rio de Janeiro, maio, 1984. MARQUES, E. – “Um modelo de geração de cenários em planejamento estratégico”. In:Monteiro Filha, D. & Modenesi, R. (org.) – “BNDES, um banco de idéias. 50 anos refletindo o Brasil”. BNDES, Rio de Janeiro, p. 291. 2002. MOURÃO, Júlio – “A Integração Competitiva e o Planejamento Estratégico no BNDES”. Revista do BNDES, V. 1, Nº 2, pp 3-26, dez, 1994. MOURÃO, Júlio (coord.) – “Vitória do Futuro - Plano estratégico da cidade 1996-2020”. Prefeitura de Vitória, 1996. PETROBRAS – “Plano Estratégico de Negócios 2009-2013”. Disponível em www.petrobras.com.br. Acessado em 09.02.2010. PMDI 2003-2023 – “Plano Mineiro de Desenvolvimento Integrado 2003-2023”. Disponível em: http://www.planejamento.mg.gov.br/governo/publicacoes/plano_mineiro_des_integrado.asp. Acessado em 04.02.10. PMDI 2007-2023 – “Plano Mineiro de Desenvolvimento Integrado de Minas Gerais 2007-2023”. Disponível em: PORTO, Claudio – “Cenários no Brasil”, Seminário Internacional MILLENIUM: Prospectiva e Estratégia para a Era da Nova Economia. Rio de Janeiro, Fundação Getúlio Vargas, set, 2000. PORTO, Claudio – “Macrocenários da Amazônia 2000 – 2020”. PARCERIAS ESTRATÉGICAS, N. 12 ISSN 1413-9375, setembro, 2001. PORTO, Claudio e GIAMBIAGI, Fabio, orgs – “2022 - Propostas para um Brasil Melhor no Ano do Bicentenário” PREFEITURA DE BELO HORIZONTE – “Planejamento Estratégico de Belo Horizonte 2030 – A Cidade que Queremos”. Belo Horizonte, 2009. REVISTA SENHOR – “Sem Mudança o Brasil Acaba”. São Paulo, Brasil, Nº 175, julho, 1984. SAE/PR – “Cenários Exploratórios do Brasil 2020”. Secretaria de Assuntos Estratégicos da Presidência da República. Brasília, setembro, 1997. SAE/PR – “Projeto Brasil 3 Tempos – Cenários Prospectivos”. Cadernos NAE, Nov, 2006. Disponível em www.sae.gov.br. Acessado em 05.02.10. WACK, Pierre – “Cenários: Águas Desconhecidas Adiante”. Harvard Business Review, Boston, Set/Out 1985. WACK, Pierre – “Cenários: Atravessando as Torrentes”. Harvard Business Review, Boston, Nov/Dez 1985.