Two important economic indicators rose significantly in 2015 and 2016: inflation and interest rates. The Broad Consumer Prices Index (IPCA), which is officially used to measure inflation, ended 2015 at 10.67%; at year-end 2016 the index stood at 6.28%, according to the Brazilian Institute for Geography and Statistics (IBGE). In an attempt to curb inflation, the Central Bank raised the basic interest rate successively from 11.65% in 2015 to as high as 14.15% in July that year. In 2016, two rate decreases were approved in October and November.

13.75%

basic interest rate at 2016. In December 2015, the basic interest rate was 14.15%

6.28%

inflation at year-end 2016 (IPCA) according to the iBGE – lower than the inflation target ceiling

The Brazilian Central Bank faced budget restrictions in 2014, 2015 and 2016 that led to a reduction in banknote and coinage orders. The result was a decrease in revenue from circulating coinage and banknote production. In response, the Mint adopted a strategy to minimize the impacts from the negative business environment. With the projected decline in production rates at our coin and banknote manufacturing plants, material purchases were reduced until inventories matched demand. Contracts with suppliers were reviewed to renegotiate prices and terms and conditions, and the Mint’s new demand levels were communicated to our procurement staff. Fixed costs were also reduced by limiting overtime work to an absolute minimum and reducing the number of commissioned positions. Our efforts to improve cash flows were effective in reducing the Mint’s indebtedness by approximately R$ 50 million in August 2015, and by a further R$ 50 million in October 2016. Lower indebtedness reduced the Mint’s debt service costs by approximately R$ 10 million.

R$ 10 million

reduction in debt service costs in 2015/2016

Material handling at one of our plants: inventories have been matched to demand

With the projected decline in production rates at our coin and banknote manufacturing plants, material purchases were reduced until inventories matched demand.

Strategy and outlook [GRI G4-2]

The Mint’s activities under an exclusive legal mandate – which include the production of Brazil’s circulation currency, postage and revenue stamps, and passport booklets – mean the organization has a mandatory commitment to its primary government customers. However, we have continued to diversify our product portfolio and develop new markets to optimally use our production capacity and reduce dependence on our two primary federal government customers, the Brazilian Central Bank and Federal Tax Authority.

Our manufacturing facilities are state-of-the-art thanks to substantial investment in technology between 2009 and 2013. Also as part of our product and service diversification strategy, in 2015 a total of R$ 18 million was invested in new equipment and another R$ 12.6 million in maintenance and upgrades.

The graph below shows that service revenues have also improved since 2010:

Changes in gross revenue R$ million

Our manufacturing facilities are state-of-the-art thanks to substantial investment in technology between 2009 and 2013.

R$ 18.3 million

invested in new equipment in 2015 and 2016

R$ 26.3 million

allocated to facilities maintenance and upgrades in 2015 and 2016

167.8 million

100 pesos banknotes produced for Argentina

Argentine 100 pesos banknotes: an example of the Mint’s export products

The Banknote and Coinage Division, while primarily serving the Brazilian Central Bank, also works to develop new customer accounts in foreign jurisdictions. The Stamps Division is engaged in efforts to incorporate new value chain tracking technologies for products such as cigarettes and cold beverages. As part of these efforts, the division has invested in training and in programs in collaboration with universities and research centers. The Passports and Security Print Division is working to improve competitiveness and develop new customer accounts in segments in which the Mint does not have a monopoly.

In 2015 and 2016, the Mint produced 167.8 million 100 pesos banknotes for Argentina.