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Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril 15-16 de 2010 TREASURY MANAGEMENT PRACTICES IN LATIN AMERICA -Results of a Survey of State.

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Presentation on theme: "Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril 15-16 de 2010 TREASURY MANAGEMENT PRACTICES IN LATIN AMERICA -Results of a Survey of State."— Presentation transcript:

1 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 TREASURY MANAGEMENT PRACTICES IN LATIN AMERICA -Results of a Survey of State Treasuries- Holger van Eden, IMF Fanny Weiner, WB

2 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Content 1.Survey Participants 2.Legal Basis for Treasury Management 3.Cash Flow Forecasting 4.Treasury Single Account (TSA) 5.Commercial Bank Accounts & TSA 6.Active Cash Management 7.Treasury & Central Bank 8.Treasury Management at the subnational level 9.Tentative Conclusions - for Discussion 2

3 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de Survey Participants Argentina Chile Colombia Costa Rica Ecuador Brazil El Salvador Guatemala Mexico Nicaragua Panama Peru 12 Countries* 3 *Data in charts not adding up to 12 is due to missing answers or non-applicable questions

4 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de Legal Basis for Treasury Management *All countries with NO Treasury Law, have regulations on Treasury Management in other Public Financial Management laws. 4

5 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de Cash Flow Forecasting 5 Cash Flow Forecasting

6 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Projecting Inflows 6 Cash Flow Forecasting

7 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Cash Flow Plan Revision 7 Cash Flow Forecasting

8 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Cash Management Responsibility 8 Cash Flow Forecasting

9 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Cash Flow Policy Making 9 Cash Flow Forecasting

10 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Policy Making Committees CountryMembers ArgentinaSecretaries of Finance and Economy ColombiaSub-directors of Treasury, Internal Finance, External Finance, Multilateral Finance, Risks, and Sub-Director of Operations ChileBudget Directorate, General Treasury, and Central Bank Costa RicaTreasury, National Sub-Treasury, Coordinator of the Account Programming Unit, Manager of Debt Management PeruVice Ministers of Hacienda and Economy, Director of Budget Directorate, General Managers of the Central Bank, and Banco de la Nación EcuadorSub-Secretary of Budget and Treasury BrazilBudget Execution Board: Ministry of Economy and Finance, Planning and "Casa civil 10 Cash Flow Forecasting

11 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de Treasury Single Account (TSA) 11 Treasury Single Account

12 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Resources Included in the TSA 12 Treasury Single Account

13 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Central Government Resources NOT Included in TSA (other than mentioned before) 13 CountryOther resources% of budget ArgentinaFiduciary Funds40% El Salvador N/A30% ColombiaPublic-Private Joint Ventures ChileFunds not included in the budget PanamaUniversities, Public Financial Entities, and Hospitals35% Costa RicaN/A60% PeruDirectly collected resources (own revenues), Resources from official credit operations, Donations, and Transfers 20% MexicoLegislative and Judiciary, autonomous entities35% EcuadorFinancial Institutions22% BrazilIndependent Public Enterprises, other funds that by law are authorized to have separate budgets Treasury Single Account

14 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Structure of TSA 14 Treasury Single Account

15 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Determination of Daily TSA Balances 15 Treasury Single Account

16 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Reconciliation of TSA Mainly manual reconciliation of the accounts Task mainly performed by Treasury and/or Central Bank 16 Treasury Single Account

17 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Tax Collection 17 Treasury Single Account

18 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Speed of Transfer of Tax Revenues Most countries have formal agreements with commercial banks Regulates time and fees of transfers 18 Treasury Single Account

19 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Fees for Collection and Transfer of Tax Revenues 19 Treasury Single Account Transaction- based % -based How is this fee set?

20 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Payment Arrangements 20 Treasury Single Account

21 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Extent of Electronic Payment Country% of Expenditures% of Agencies Argentina90% Colombia98%100% Chile100% of payroll, payment system for suppliers in test Panama56% of private suppliers80% Guatemala99.99% Costa Rica100% Peru28% (excluding Regional Governments) Mexico100% to suppliers, 71% of payroll Ecuador100% Nicaragua30% of payroll, and suppliers financed through external resources Brazil100% of Federal Government 21 Treasury Single Account

22 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Accounts Outside of the Treasury Control CountryAccounts outside of the TSA El Salvador/Colombia/ Brazil/Chile None EcuadorCentral Government: None; decentralized governments have own accounts PanamaApprox GuatemalaAll decentralized and autonomous entities and the implementing agencies of the central government PeruThe 1834 local governments have accounts outside Mexico Treasury Single Account

23 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de Commercial Bank Accounts 23 Do central government agencies hold accounts at commercial banks? Commercial Bank Accounts & TSA

24 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 No. of Commercial Bank Accounts and Government Agencies Ministries and associated institutions/dependencies (4x) Entities part of the general budget Ministries and Municipalities Agencies in the TSA (ministries, universities, etc.) Agencies of the Federal Public Administration Health, Education, Police, Defense, and Cultural Institutions 24 Commercial Bank Accounts & TSA

25 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Purposes for Holding Commercial Accounts Petty cash (3) Receive funds from the Treasury (2) General Budget execution (2) Payroll Expenses (3) Management of certain Financial Funds (Trust Funds, Fiduciary & Revolving Funds, Donations, Loans, Subsidies etc.) (5) Manage revenues of services and goods sales (1) 25 Commercial Bank Accounts & TSA

26 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Monitoring of Commercial Accounts 26 Commercial Bank Accounts & TSA

27 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Transfer of Balances to Treasury *Other: Transferred after 2 months of excess funds Transferred if not executed after 5 days Balances (petty cash) are never transferred back, but fixed amount can be reduced 27 Commercial Bank Accounts & TSA

28 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Government Institutions Own Revenue 28 Commercial Bank Accounts & TSA

29 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de Active Cash Management 29 Commercial Bank Accounts & TSA

30 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Short–term Investments 30 Short-Term investments & Borrowing

31 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Short-term Borrowing Instruments 31 Financial Instruments used for liquidity needs* Short-Term investments & Borrowing

32 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Payment of Government Obligations with Government Securities 32 Commercial Bank Accounts & TSA

33 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Coordination of cash and debt management 33 Maturity of Treasury Bills: 360 days (5) (AR, SV, GT, NI, EC) 90, 180 and 360 days (CO) 3 and 6 month (PA) Less than 3 months (CR) Less than 1 year (PE) 28, 91, 182 and 364 days (MX) 6 months (BR) Short-Term investments & Borrowing

34 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Financial Information System 34 Short-Term investments & Borrowing

35 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de Relationship Treasury and Central Bank 35 The relationships between Treasury and the Central Bank are defined through

36 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de Treasury Management at the Subnational Level 36

37 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de Tentative Conclusions - for Discussion (I) 1.The legal basis for Treasury Management can be strengthened - would clarify role, enhance powers 2.TSAs have been established but coverage and Treasury control needs to be increased 3.Progress has been made in centralizing payment mechanisms and introducing electronic transfers 4.Integration of commercial bank accounts in TSAs is just starting (daily zero-balancing needs to be introduced) 5.Monitoring and control over central government liquidity still needs to be further enhanced (requires connectivity, IFMIS systems, and forecasting capacity) 37

38 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Tentative Conclusions - for Discussion (I) 6.Payment for banking services needs to be made more transparent (tax and other revenue inflows need to be accelerated, the float reduced) 7.Cash rationing still part of cash management in quite a few countries 8.Active cash management still in phase of rough-tuning (further money and capital market development is needed) – institutional role not always clearly assigned to Treasury 9.Issuance of IOU needs to be discontinued – bad for credit rating and for payment terms government 10.Relationship with Central Banks can be made more structured, transparent and communicative 38

39 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de 2010 Thank you very much for your attention! Muchas gracias por su atenciόn! 39

40 Seminario Latinoamericano sobre Gestión de Tesorería Lima, Abril de


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