5th Annual OECDWorld Bank Bond Market Forum Comments on the Monday Morning Session EMERGING MARKET D

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5th Annual OECD/World BankBond Market
ForumComments on the Monday Morning
SessionEMERGING MARKET DEBTdemand supply
factors in 2003 and ahead
MINISTÉRIO DA FAZENDASecretaria do Tesouro
Nacional

Joaquim Vieira Levy Secretário do Tesouro
Nacional Washington, June 2003
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Brazil Understanding Debt Dynamics

• Debt management is closely linked to the overall
  fiscal stance and prospects. Fiscal relaxation in
  the mid 1990s proved to be costly, despite the
  improvements in debt management occurred since
  and the relative depth of Brazilian financial
  markets.

Actual and Alternative Debt GDP Path
Public Sector Fiscal Results
surplus
deficit
Alternative path 3,5 of GDP surplus throughout
the second half of the 1990s
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Cornerstone of Fiscal StrategyReduce the
Debt/GDP ratio
60
40
2006
2010
By late March 2003 it was already close to 54
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What about foreign debt?

• Changes in market sentiment throughout 2002
  created significant turbulence, despite the
  nimble response of the economy to the changing
  environment. A BOP swing of about 3 points of GDP
  was achieved without a recession.
• Successful sovereign issuance, with CAC. C-bond
  price doubling.

Current Account Deficit
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Domestic debt
Return of Fixed-rate instruments
decline in premia in floating rate instruments
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Plumbing Relations in Brazil
Clear Public Policies Curbing Debt/GDP ratio
Continued improvement of regulations Timely,
comprehensive, accurate data Well filled yield
curve and clear program Access to Officials good
relation with domestic investors (e.g., mutual
pension funds) Non-deal Road Shows
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Further Improving the Quality of Debt
Affordable Safety Net
Enterpreneur ship
Fiscal and Monetary Responsibility
Social Security Reform
Fiscal and Monetary Targets, Abiding to
contracts, LRF
Tax Reform, Capital Markets, Chapter 11
No non-sense reforms