Treasury will reward fiscally responsible states and municipalities

The National Treasury will hold public hearings starting this week on a new rating system for states and municipalities, which will reward those that carried out reforms to improve their long-term fiscal situation.

The Treasury secretary, Ana Paula Vescovi, told Valor that the consultation will last one month and the rule will come into force already in 2017. She advanced that the Treasury will offer guarantees to as much as R$17 billion in loans and also authorize R$3 billion more in unsecured loans to the local governments.


“The big novelty is that the Treasury will reward who does the homework. The states and municipalities will have their rating based on their statistics, but we will add a layer that is an incentive bonus,” Ms. Vescovi said. “The Treasury will give additional points to the unit that has passed a bill that expresses to us a long-term commitment to fiscal balance.”

Under the Treasury rules, based on the Fiscal Responsibility Law (LRF), states and municipalities with below-B rating can’t be authorized to take loans. In this sense, the bonus that the Treasury is creating may be the path for the local government to move from a C to a B rating, being entitled to take a loan secured by the federal government.

The bonus system will allow states to jump ahead in the queue of credit authorization and guarantee. Currently, the demand for Treasury guarantees is more than twice the amount that the government set aside for next year. Ms. Vescovi said that the next release of the states’ and municipalities’ rating, slated for May, would already consider the new system.

But the Treasury is taking the rating methodology beyond the bonus issue. “Today, the methodology looks too much to the past, and this is a complaint of the evaluated governments. We will look back and ahead,” Ms. Vescovi said. She pointed out that often the rating is contaminated by past problems that had been fixed. São Paulo, for example, recently complained of the Treasury’s methodology, which rates the state with a C-.

She said that with the new formula, the Treasury will evaluate, among other things, the “current savings,” which is the capacity of making investments with its own funds or to generate its own savings that can be allocated according to the end that the manager considers most adequate. “The savings capacity says a lot about the intertemporal balance of these accounts. This is a variable that will be present, consolidating several others,” she says, explaining that the current savings are calculated by the difference between current revenues and expenses (including financial ones).

Ms. Vescovi stressed that the entire system of granting guarantees is in the process of updating that has two goals: more efficiency in providing guarantees and more security for the process to be solvent for the public sector over time.

Regarding the security of the process, one of the new definitions is that the Treasury will no longer guarantee loans with very long grace periods. The idea is that the secured loans have at most one and a half year before the beginning of the repayments. In the past, the Treasury guaranteed loans with five-year grace period. “The reduction in the grace period aims to better align the cost and benefit of credit,” she said.

Another definition is that the loans can only be directed to investments. The intention is to veto situations in which the credit would ultimately serve to cover current expenditures. For that, the guarantee will be linked to the specific investment project.

The Treasury decided that it will act in the negotiation with banks of the costs of loans it guarantees. “The Treasury knows the financial cost in the country and has greater bargaining power than the unit individually,” Ms. Vescovi said. Every quarter the Treasury will set the maximum cost it will accept. The first definition, already in effect, has set a limit of 118% of the CDI, the benchmark short-term market rate. It already served as reference for a loan by the state of Amazonas.

In terms of efficiency, the goal is to make the processes of providing guarantees take two to at most six months. One measure is to concentrate the presentation and analysis of all documents by the state or municipality at the end of the process. “We will give a vote of confidence to the agent that it has the proper documentation. We will make the analysis of the transaction per se, and then we will demand the documentation at the end of the process to check, as rules and laws demand,” she said. “This means there is not this process of resubmission and expiration of documents that is costly for both sides.”

She also pointed out that the Treasury recently decentralized to banks the analysis of loans under R$5 million, which even though represented less than 3% of the total value assessed by the Treasury consumed 90% of the time of its staff.

“These are some examples that, with management, optimization of flows and procedures, we will, under the same legislation, achieve a more efficient delivery,” Ms. Vescovi said. “For those who can, who did the homework, the state must be more efficient. If you have fiscal conditions, is balanced, wants to make investment projects, then this must be agile enough.”

The process of reformulating the guarantee system to federation units provides online access to state and municipal governments to the progress of the process and the document needs. Moreover, a rating simulator will be available for the units to have an idea of their situation and what they can do to improve their payment capacity in order to have access to the Treasury guarantees.

“Throughout the year 2017 we will implement this new system and soon people will be internalizing how the Treasury operates in granting guarantees,” Ms. Vescovi said. “It is an important modernization process, aimed at greater efficiency and more security. When we say no, this transaction is not viable, we want to believe that the players will believe they in fact have no conditions of getting more into debt,” she said.

valor.com.br 19dez16