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MINISTRY OF FINANCE National Treasury Secretariat Fabio de Oliveira Barbosa Secretary of the National Treasury XIV Seminar on Regional Fiscal Policy -

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Presentation on theme: "MINISTRY OF FINANCE National Treasury Secretariat Fabio de Oliveira Barbosa Secretary of the National Treasury XIV Seminar on Regional Fiscal Policy -"— Presentation transcript:

1 MINISTRY OF FINANCE National Treasury Secretariat Fabio de Oliveira Barbosa Secretary of the National Treasury XIV Seminar on Regional Fiscal Policy - ECLAC Santiago de Chile, January 2002 Fabio de Oliveira Barbosa Secretary of the National Treasury XIV Seminar on Regional Fiscal Policy - ECLAC Santiago de Chile, January 2002 BRAZIL : Latest Developments in Public Debt Management

2 MINISTRY OF FINANCE National Treasury Secretariat Brazil: Macroeconomic Framework Brazil: Macroeconomic Framework 4The Real : 8 consecutive years of stable economic environment, in spite of several international crises (Mexico, Asia, Russia, Argentina) 4 4Remarkable transition to the floating exchange rate regime: –GDP growth; –New BOP profile: # Declining current account deficit : USD 23 billion (2001) from USD 34 billion (1998); # Large FDI flows financing C.Account deficit: USD 22,6 billion (2001) 4 4Inflation Targeting Framework: building a strong track record 4 4A New Fiscal Regime in Place: - Since 1998, an impressive shift in primary flows was delivered; - Structural reforms:. Privatization. Administrative Reform - Social Security Reform. States and Local Governments´ Refinancing Agreements. Fiscal Responsibility Law

3 MINISTRY OF FINANCE National Treasury Secretariat Source: Central Bank of Brazil Fiscal policy: Primary targets met for 13 consecutive quarters...

4 MINISTRY OF FINANCE National Treasury Secretariat Source: Central Bank of Brazil... together with a much better distribution of the fiscal effort

5 MINISTRY OF FINANCE National Treasury Secretariat Total States and Municipalities State-owned enterprises Central Government * November The increase of net public sector debt reflected not only the fiscal policy and the domestic and international economic environment in the last 8 years...

6 MINISTRY OF FINANCE National Treasury Secretariat Source: Central Bank... but also decisive actions towards fiscal transparency, 9,2 8,3

7 MINISTRY OF FINANCE National Treasury Secretariat Domestic debt dynamics: growth components Source: National Treasury and Central Bank Includes remunerating factors. Privatization and Primary Surplus: basic interest rate (SELIC rate) Public Programs R$ 44,8 billion Exchange Rate R$ 74,4 billion States and Municipalities R$ 329,4 billion Contingent Liabilities R$ 87,6 billion Nominal Interest R$ 118,2 billion R$ 626,9 billion R$ 60,7 billion Primary Surplus R$ 75,1 billion Privatization R$ 58,2 billion Debt Management (cushion) R$ 44,8 billion... and the implementation of key government programs, several of them associated with the consolidation of the fiscal regime.

8 MINISTRY OF FINANCE National Treasury Secretariat Brazil´s Debt Management Strategy: Predictability, Transparency, Simplicity –Focus on Domestic Capital Markets Objective: Cost minimization in the long-term, prudent risk levels considered. Guidelines: # Refinancing risk at safe levels; # Gradual reduction of market risks: * Short term interest rates; exchange rate; Increasing share of fixed-rate instruments # Consolidation of the domestic yield curve: * fixed-rate: firm bid offer for long-term securities; regular auction for indexed bonds; # Standardization of debt instruments: Domestic exchange-offers; fungible instruments; # ALM Framework HOWEVER, along with the recorded growth in public debt, its funding structure has improved remarkably...

9 MINISTRY OF FINANCE National Treasury Secretariat... together with the successful sovereign presence in the most relevant capital markets in the world. Guidelines : International Capital Markets –Brazil: Predictable, regular but moderate borrower; –Consolidation of Brazilian yield curves in strategic markets (USD, EURO, YEN) with liquid benchmarks; –Pave the way for other borrowers to access long term financing, not yet available in domestic capital markets; –Broadening of the investor base in Brazilian risk; role in FDI/privatization; –As market conditions allow, gradual retirement of restructured debt.

10 MINISTRY OF FINANCE National Treasury Secretariat The results have been impressive... BRAZIL: Federal Government Domestic Debt

11 MINISTRY OF FINANCE National Treasury Secretariat - Improved debt profile - Gradual increase of the average life - Focus on short term maturities (up to 12 months) - Prudent cash management... as showed by the sharp reduction of the refinancing risk. 34,97 25,59

12 MINISTRY OF FINANCE National Treasury Secretariat A very comfortable debt profile was achieved... Federal Government Debt Maturity Profile: 2002/03

13 MINISTRY OF FINANCE National Treasury Secretariat... and a significant reduction of the average funding cost has been observed. Federal Government Domestic Debt:Average Funding Cost 18,98

14 MINISTRY OF FINANCE National Treasury Secretariat The somewhat volatile macroeconomic environment has prevented further progress also towards debt duration

15 MINISTRY OF FINANCE National Treasury Secretariat Assets and Liabilities Imbalances - R$ billion... which now could be sought, given the prudent refinancing risk level embedded in domestic debt structure. December, 2001

16 MINISTRY OF FINANCE National Treasury Secretariat - Continued focus on refinancing risk: # A # A verage maturity # Limit for short term debt - Gradual duration increase; - Further development of the domestic yield curve; - Smoothening of debt maturity profile (buyback operations); - Debt instruments standardization: proactive stance. Annual Borrowing Plan: 2002

17 MINISTRY OF FINANCE National Treasury Secretariat Strategy for 2002 Comparative Analysis

18 MINISTRY OF FINANCE National Treasury Secretariat Fabio de Oliveira Barbosa Secretary of the National Treasury XIV Seminar on Regional Fiscal Policy - ECLAC Santiago de Chile, January 2002 Fabio de Oliveira Barbosa Secretary of the National Treasury XIV Seminar on Regional Fiscal Policy - ECLAC Santiago de Chile, January 2002 BRAZIL : Latest Developments in Public Debt Management


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