The Brazilian economy was very positive in 2011, in spite of the adverse situation in the international arena that urged for cautionary measures. Following the 2008/2009 financial crisis, when the whole world was getting prepared for a period of recovery, fiscal problems in Euro Zone's peripheral countries brought about new uncertainties. Within this context, the resilience of the domestic economy contributed to enable Brazil to become the sixth largest economy in the world, only behind the United States, China, Japan, Germany and France, according to the Economist Intelligence Unit (EIU).

The Central Bank remained steadfast and nimble in taking the necessary measures to correct the course of the economy in view of the threats of economic downturn, which had a positive impact on the strengthening process of the internal economy. In 2011, the unemployment rate hit a record low at 4.7%, the lowest ever since the Brazilian Institute of Geography and Statistics (IBGE) started to build up the historical series, and there was a real increase by 2.7% in the workers’ average income. Coupled with the rise in consumption boosted by increased credit supply, such factors altogether benefited the Algar Group’s companies’ operations within their respective business segments.

In the telecommunications industry, the uptrend in demand for services, particularly for cellular phones and Internet access services, continued to rise among end-users, who want to be connected to the whole world, anywhere and at any time, due to the popularity of social networks. Concerning cable TV, there are good prospects for HDTV resolution channels, a product that Algar Telecom introduced in December 2011 and has been accepted well by a portion of the clients. The corporate sector market also remained strong throughout the year. In addition to higher demand for connectivity among existing companies, the economic stability in Brazil is conducive to entrepreneurship. The more companies are created, the higher the demand for telecom products and services.

The rise in consumption boosted by increased credit supply also benefited the domestic market for executive aviation, in which The Algar Group is present through the subsidiary Algar Aviation. The positive situation also favored the food industry, which is one of Algar Agro’s main source of business in the domestic market.

As for exports, although the Brazilian real continued appreciating over the U.S. dollar, Algar Agro showed a good performance and exported 39% of the soybean originated, representing an exports volume worth US$307 million. The economic rebound also favored the performance of Algar Segurança. The increase of the amount of wealth produced (the Brazilian GDP grew by 2.7% in 2011), along with the the diffusion of new technologies, results in growing demand for security systems aimed at the protection of people and property.

As regards the challenges, one of the major concerns of the industry throughout last year was the shortage and high costs of manpower. In 2011, these factors once again impacted the Algar Companies’ operations, particularly in the Telecom segment, but were offset by the consistent Human Talents management policy, whose main pillars is the valuation of its professionals.