Public Debt: The Brazilian Experience

Transcription

1 D M F S T A K E H O L D E R S F O R U M B E R N E, S W I T Z E R L A N D J U N E, Public bt: The Brazilian Experience Paulo Valle Undersecretary for Public bt National Treasury Secretariat Improvement of the economic fundamentals The Brazilian experience 90 s: large number of different renegotiations by the federal government. 1993: renegotiation of states and municipalities debt with federal enterprises. Federal government assumes the risk against creditors. Innovation: mechanism to retain government transfers in case of default. 1994: Real Plan new currency and significant reduction of the inflation. 1997: last renegotiation with states and municipalities. Innovations: design of incentives, program of fiscal adjustment, guarantees. 2 1

2 Stabilization in perspective Evolution of inflation CPI monthly 90,0 80,0 Summer Plan Collor I Plan Collor II Plan 70,0 Bresser Plan 60,0 Cruzado Plan Real Plan 50,0 % 40,0 30,0 EW 20,0 MACROECONOMIC OVERVI 10,0 0,0-10,0 Source: Economic Research Institute Foundation (Fipe) abr/81 abr/82 abr/83 abr/84 abr/85 abr/86 abr/87 abr/88 abr/89 abr/90 abr/91 abr/92 abr/93 abr/94 abr/95 abr/96 abr/97 abr/98 abr/99 abr/00 abr/01 abr/02 abr/03 abr/04 abr/05 abr/06 abr/07 abr/08 abr/09 abr/10 abr/11 3 Improvement of the economic fundamentals The Brazilian experience 1999: Inflation Target regime. 1999: Floating FX regime. 2000: Fiscal Responsibility Law Consolidation of legal framework; Limits and conditions for debt stock, debt service, credit operations, current expenditures, expenditures near elections etc; Increase in transparency, release of information, accounting; Prohibition of credit operations between entities of the federation. 4 2

3 Fiscal Responsibility Public Sector Balance (in 12 months) Primary 2.8 Nominal EW MACROECONOMIC OVERVI ec/02 ec/03 ec/04 ec/05 ec/06 ec/07 Source: Central Bank / Does not consider Petrobras and Eletrobras. * BGL estimates ec/08 According to the Budget Guidelines Law for 2012, the primary surplus target for the following three years (2012 to 2014) will be 3,1% of GDP, which is expected to reduce the nominal deficit to roughly until the end of the period. ec/09 ec/10 c/11* c c/12* c c/13* c c/14* c 5 allowed a consistent downward ratio over time Net Public Sector bt / GDP 65% 60.4% 60% 55% 50% 45% 45.5% 42.8% 40.4% 37.8% 40% 35% 30% 38.5% 34.9% 31.9% 28.5% EW MACROECONOMIC OVERVI 25% 20% Source: Central Bank (until 2010). * 2011: Brazilian Economy in Perspective (Government Estimates; 2012 until 2014: Budgetary Law for This ratio has dropped to its lowest level in the recent past Government is committed to keep this stance in the future * 2012* 2013* 2014* 6 3

4 FX liquidity and active debt management mitigated risks on the External Sector Total Gross External bt (public and private) / FX Reserves EW MACROECONOMIC OVERVI Source: Central Bank (until 2010). * 2011: Market estimate Institutional advances and improved governance tandem with solid macroeconomic pillars resulted in a better debt structure Federal Public bt Profile 100% 90% 80% Exchange Rate 70% Floating Rate 60% 50% 40% Inflation-LInked 30% 20% D E B T M A N A G E M E N T 10% Fixed Rate 0% Jul 94 c 94 May 95 Oct 95 Mar 96 Aug 96 Jan 97 Jun 97 Nov 97 Apr 98 Sep 98 Feb 99 Jul 99 c 99 May 00 Oct 00 Mar 01 Aug 01 Jan 02 Jun 02 Nov 02 Apr 03 Sep 03 Feb 04 Jul 04 c 04 May 05 Oct 05 Mar 06 Aug 06 Jan 07 Jun 07 Nov 07 Apr 08 Sep 08 Feb 09 Jul 09 c 09 May 10 Oct 10 Mar 11 Substitution of floating rate and exchange rate bonds by fixed rate and inflation-linked securities. 8 4

5 Advances In the Institutional Field In 1999, it was implemented a new model for the public debt management based on a DMO framework (back, middle efront offices), thatt put the National Treasury in line with the best international practices. In the Middle Office, it was created an Institutional relations unit: adirect channel with the press and market agents in order to provide information about the public debt. In 2003, it was created a bt Committee, with (i) tactic monthly meetings, to K I N S T I T U T I O N A L F R A M E W O R K decide the bonds issuance schedule for the following month and (ii) strategic meetings, every quarter, to approve the Annual Borrowing Plan and its periodic revisions. The committee has the participation of the Undersecretary for Public bt and of the heads of the back, middle and front offices. 9 K I N S T I T U T I O N A L F R A M E W O R K Advances In the Governance Field In 2000, the Fiscal Responsibility Law was approved. Based on that, the Central Bank was not allowed to issue bonds to execute monetary policy, using then the securities issued by the National Treasury (separation between monetary policy and public debt management). In 2005 the centralization of Federal Public bt, with the transference of the administration of external debt from Central Bank to the Treasury. This centralization was fundamental for the Treasury to enhance the debt management: (i) the objectives and guidelines defined started to be fully reflected on the day-to-day debt strategy. (ii) the Institutional relations unit started to continuously assist the rating agencies latter Brazil was considered the emerging country with the most efficient relationship with investors (according to IIF); (iii) road shows were organized regularly in the main international financial centers to promote the Brazilian macroeconomic advances and the public debt management; and (iv) the operations desk was created to execute the external debt operations. 10 5

6 Advances In the transparency field: In 2001, it was published the first Annual Borrowing Plan, that presents the objectives, short and long term guidelines, the financing needs, as well as the strategy for the debt and the lower and upper limits for debt indicators at the end of the year. K I N S T I T U T I O N A L F R A M E W O R K In 2004, it was published the first bt Annual Report, a document that analyzes the debt indicators evolution, based on the Annual Borrowing Plan approved the year before. In 2007, the Monthly Federal Public bt Report was first published, consolidating both domestic and external debt statistics. The domestic debt was published since Advances In the field of disseminating information about the public debt: In 2002, creation of the Tesouro Direto Program, which aims at selling bonds directly to individuals through internet. K I N S T I T U T I O N A L F R A M E W O R K 12 6

7 Rating Evolution The major credit rating agencies have granted the Investment Grade Status for Brazil Brazil s kept its positive economic path amidst the external turmoil. Rating Agencies reaffirmed the outlook among global ratings reviews. Speculative Grade InvestmentGrade Outlook S&P D... BB BB 2007 BB BBB BBB BBB+... AAA (positive) Fitch D... BB BB 2007 BB BBB BBB BBB+... AAA (stable) 2005 Moody's C... Ba Ba Ba Baa3 Baa2 Baa1... Aaa (positive) DBRS D... BBL BB 2007 BBH 2008 BBBL BBB BBBH... AAA (stable) JCR D... BB BB BB BBB BBB BBB+... AAA (stable) R&I D... BB BB 2006 BB BBB BBB BBB+... AAA (positive) Source: Rating Agencies D E B T M A N A G E M E N T Brazil was the only country to become Investment Grade in 2009 Strengths: Track record of policy continuity through political transitions based on a inflationtargeting framework and floating FX-regime; Remarkable reduction on external vulnerabilities Improving debt profile 13 Book: Public bt: The Brazilian Experience 2009, in August, The National Treasury, with the patronage of the World Bank, publishes the Portuguese version of the book: Public bt: The Brazilian Experience. Two thousand units were distributed. 2010, in June, it was launched the English version of the book. An edition of two thousand books. A Z I L I A N E X PE R I E N C E B O O K: P U B L I C D E B T: T H E B R A Both versions, in Portuguese and English, are available at the National Treasury website for download, in 16 chapters and 23 authors (the majority was head of divisions or departments) The chapters are complementary and independent at the same time. It is possible for the reader to select the most interesting chapters from his perspective without getting lost. The book is divided in three parts: 14 7

8 BOOK STRUCTURE Introduction PART 1 UNDERSTANDING THE BRAZILIAN PUBLIC DEBT Chapter 1 Origin and history of Brazil's public debt up to 1963 Chapter 2 History of public debt in Brazil: from 1964 to the present Chapter 3 Public bt sustainability Chapter 4 Public bt concepts and statistics PART 2 MANAGING THE BRAZILIAN PUBLIC DEBT Chapter 1 Institutional structure and recent developments in FPD Management Chapter 2 Strategic Planning of the Federal Public bt Chapter 3 Federal Public bt risk management Chapter 4 The Federal Public bt budget Chapter 5 Regulatory frameworks and government auditing of public debt PART 3 - THE PUBLIC DEBT MARKET IN BRAZIL Chapter 1 Recent evolution of the Federal Public bt market Chapter 2 Pricing federal public securities Chapter 3 Organization of Brazil's financial market Chapter 4 Primary market of the Federal Public debt Chapter 5 The investor base of the Federal Public bt in Brazil Chapter 6 The secondary market for Federal Public bt Chapter 7 Tesouro Direto : internet public securities retail sales program A Z I L I A N E X PE R I E N C E B O O K: P U B L I C D E B T: T H E B R A Statistic Annex About the Authors 15 For additional information access Brazilian National Treasury site: Or contact Institutional Relations area: brazildebt@fazenda.gov.br 19 8