This Post considers the Fundo Soberano do Brasil (Brazil Sovereign Wealth Fund).
[N]o final de 2007 o debate sobre a constituição de um “fundo soberano” brasileiro se fazia presente na mídia. . . . Naquele momento a falta de consenso quanto ao papel destinado a um fundo desta natureza já se explicitiva no seio do governo e mesmo entre outros especialistas. Para alguns membros do governo o acúmulo de reservas internacionais tendência crescente seria usado (essa era a expectativa de então) na criação de um fundo soberano, que serviria para o governo investir recursos na eventualidade de uma crise financeira de grandes proporções. Entretanto, a falta de consenso alcançava até mesmo o objetivo do fundo. O presidente do Banco Central, Henmrique Meirelles, refutava a idéia de que o fundo poderia fazer um uso alternativo das reservas do país. Id., at 23-24. (At the end of 2007 the debate on the creation of a Brazilian "sovereign fund" was reported in the media. . . . At that time the lack of consensus about the role intended for such a fund had been already pointed out within the government as well as other specialists. For some members of the government the accumulation of upward trending international reserves would be used (this was the expectation at the time) to create a sovereign fund, which would provide the government with resources to invest in the event of a financial crisis of major proportions. However, the lack of consensus even included the goal of the fund. The chairman of the Central Bank, Henrique Meirelles, refuted the idea that the fund serve as an alternative use of nation’s reserves.)
Nonetheless, a SWF of some kind was in the offing. The critical question was reduced to one of control—whether the fund would come under the control of the Central Bank or the Ministry of Finance. And that question subsumed within it the question of funding. In other words, if the Central Bank was opposed to the idea of the SWF and unwilling to allow funds under its control to be used for that purpose, could the Ministry of Finance go forward with the fund and without the Brazilian reserves controlled by the Central Bank?
Em maio de 2008, ganhava relevo a criacão de um fundo de poupança fiscal, denominação então utilizada pelo ministro da fazenda para o fundo soberano brasileiro, cujos recursos, aplicados em dólar, seriam usados para financiar, a taxas subsidiadas, empresas brasileiras com atuação no exterior. A proposta do ministro Guido Mantega estava praticamente formatado e aprovada faltando fechar uma questão importante: quem iria administrar esse fundo, se a Fazenda ou o Banco Central. A mídia noticiava que o BC permanecia não muito entusiasmado com a proposta, particularmente porque temia influências indevidas na formaçã da taxa de câmbio. Por isso, no caso de criação do fundo, defendia que a administração ficasse com a diretoria da autoridade monetária. Id., at 24. (In May 2008, the creation of a tax savings fund gained prominence, [the tax savings fund being] then the name used by the finance minister for the Brazilian sovereign wealth fund, whose resources were to be applied in dollars, to be used to finance, at subsidized rates, Brazilian companies with operations abroad. The proposal of the Finance Minister Guido Mantega was essentially structured and approved except with respect to an important issue: who would manage this fund, the Finance Ministry or the Central Bank. The media reported that the Central Bank was still not very enthusiastic about the proposal, particularly because of the fear of undue influence in setting the exchange rate. Therefore, in the case of creation of the fund, the Central Bank insisted that administration stay with the board of the monetary authority.).
As in China, the ultimate decision favored the Finance Ministry over the Central Bank apparatus. But in the case of Brazil, there was a twist.
A decisão então tomada seria a de criação de um fundo soberano de US $10 bilhões para atender à demanda de financiamento de BNDES [the Brazilian Development Bank, see http://inter.bndes.gov.br/english/] para 2008. Tratava-se, portanto, de um fundo que seria alimentado pela “aquisição de dólares que estão sobrando no Mercado. . . . O BNDES tinha a intenção de captar pelo menos R$ 25 Bilhões, metade dos recursos já disponíveis. Id., at 24. (The decision taken would be to create a sovereign fund with $ 10 billion to meet the demand for financing from BNDES [the Brazilian Development Bank] for 2008. It was, therefore, a fund that would be powered by the "acquisition of additional dollars from the market. . . . BNDES intended to raise at least $ 25 Billion, half of the resources already available.)
Portanto, qualquer posicionamento definitivo sobre o erro ou acerto a respeito da criação do FSB, parece hoje precipitado, mas a título de conclusão ficamos com a afirmação do próprio Paulo Nogueira Batista: “Por que então a barulho na imprensa e a indignação da turma da bufunfa? Arrisco uma hipótese: a criação de um fundo soberano com parte das reservas, ou com reservas adicionais a serem adquiridas no mercado pelo Tesouro, resultaria em uma certa redistribuição de poder dentro do governo. Perderia o Banco Central, ganhariam o Tesouro e o BNDES.” Id., at 27 (Therefore, any definitive statements about the error or arrangement concerning the creation of the SWF, now seems premature, but in conclusion we get the affirmation of the very Paulo Nogueira Batista, "Why then the fuss in the press and the indignation of the monied classes? I venture a hypothesis: the creation of a sovereign wealth fund with part of the reserves, or with additional reserves to be acquired by the Finance Ministry in the market would result in the certain redistribution of power within the government. The central bank’s loss would be the gain of the Finance Ministry and BNDES).
•Mitigar os efeitos dos ciclos econômicos;
• Formar poupança pública;
• Promover investimentos em ativos no Brasil e no exterior; e
• Fomentar projetos de interesse estratégico do País localizados no exterior. (FSB, About)
“Gerir poupança pública de longo prazo, que possibilite ao FSB atuar, de forma eficaz, como instrumento de política econômica, visando à mitigação dos efeitos dos ciclos econômicos no Brasil” ["Managing public long-term savings, which allows the FSB to act, effectively, as an instrument of economic policy aimed at mitigating the effects of economic cycles in Brazil"]
“Consolidar-se, até 2023, como instrumento eficaz de gestão de riqueza soberana e de mitigação dos efeitos dos ciclos econômicos no Brasil” [Strengthen its role through 2012 as an effective tool for managing sovereign wealth and mitigate the effects of economic cycles in Brazi] (FSB, About)
Of course there is no reason for Brazil to have such a fund, which should be better denominated as a “Sovereign Debt Fund”. SWF are instruments to manage the flow of foreign exchange for countries with large current account surplus. Brazil, as everyone knows, has a large and growing current account deficit of around 2.25% of GDP. It’s SWF then becomes just a mechanism to shift around imaginary fiscal surpluses, which also only exist in the questionable way the so-called primary surplus target is calculated, since the country runs a nominal deficit of 3.3% of GDP. With nominal and current account deficits, the SWF only concrete purpose is to give the Ministry of Finance a way to interfere in the foreign exchange market without having to go through the Central Bank (BCB). (Jonathan Wheatley, The rising BRL: Brazil’s sovereign debt, sorry, wealth fund to the rescue, Financial Times, Sept. 21, 2010 (quoting Tony Volpon at Nomura)).
Investment Strategy. Its investment strategy is not unlike other SWFs--long term wealth maximizing investment strategies across markets and forms of financial investment instruments. (Ibid).
The Decree 7,055/2009 has brought the following rules for the FSB:
1) the benchmark for foreign investments is the six-month LIBOR;
2) the benchmark for domestic investments is the TJLP (a long run rate as determined by the National Monetary Council);
3) financial statements shall be published twice a year; and
4) financial assets are required to be rated as investment grade by at least two rating agencies. (FSB ABout).
The FSB presents an interesting contrast to the Chilean SWF, discussed earlier., with which it shares some similarities Much of the FSB's investments are internal, and based on fiscal policy and targeted development aims of the state. Thus, for example, through the FFIE, in 2010, the FSB participated in the Public Offering of Offering of Common Shares issued by Banco do Brazil SA , through the subscription of 62,500,000 shares totaling R $ 1,540,625,000.00. This was made possible by Act No. 487, (April, 2010) a measure amending Law No. 12,096 , 2009 , authorized capital increases in state enterprises, through the transfer of rights arising from advances for future capital increases. On May 27, 2010 , was issued Decree No. 7,184 , of 2010 authorizing the capital increase of Banco do Brazil SA , with the issuance of up to 286,000,000 common shares through a public offering of primary distribution of shares. (FSB Investments).
In a similar set of transactions, Decree No. 7295 of 2010 in its Article 2 authorized the National Bank for Economic and Social Development SA - (BNDES) and Caixa Economica Federal (CEF) to sell or exchange up to 217,395,982 common shares issued by Petrobras , to FFIE. FFIE then acquired, on September 10, 2010, 77,641,422 common shares (PETR3), equivalent to 0.60 % of the share capital of Petrobras. (Ibid).
Besides applications in Brazil , carried out exclusively through the FFIE , the FSB can apply their resources through the application of special interest-bearing deposits in federal financial institution or directly by the Treasury foreign financial assets . The application of resources FSB abroad will occur from strategic decision of the Deliberative Council and in line with its investment policy . (Ibid).
FSB strategic decisions are taken by the FSB deliberative council, CDFSB, established by Decree No. 7113 , 2010. This Council is composed of the Minister of Finance , who presides , by the Minister of Planning, Budget and Management and the Governor of the Central Bank of Brazil. (Ibid).
The work of the FSB is undertaken by two organs established under Resolution No. 11 , 2013. The first is the Technical Advisory Board of the FSB - CCT , which acts in compliance with the art. 6 of Decree No. 7,113 , of 2010. The second is the Board of Investment Planning - CPLIN , which aims to guide the decision making process relating to the powers described in art. 2, II , Decree No. 7055 , 2009 . In general , it is the CCT advise, discuss and propose relevant to CDFSB resolutions , while competing CPLIN to discuss the tactical and operational issues related to the implementation of the Investment Policy of the FSB , as well as other determinations of CDFSB. (Ibid)
A National Treasury Secretariat - STN has been established as the body responsible for implementing CDFSB actions and for the management of the FSB . Pursuant to Decree No. 7,055 , 2009 , it is the STN which is charged with the investment work of the FSB to acquire and dispose of the securities . Moreover, the STN plays the role of the Executive Secretariat CDFSB and performs the activities related to the monitoring of the management of FFIE. Within the STN , the activities related to the management of the FSB and the Executive Secretariat of the CDFSB are the responsibility of the Secretariat for Planning and Fiscal Statistics , implemented through the General Coordination Management Sovereign Fund of Brazil - COFSB / STN under Decree No. 7,482 , of 2011 and the Internal Rules of the STN. (Ibid).