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This article is the second part of the article on “Côte d'Ivoire - Brazil, a meeting of champions (Part I)” describing the sharing of experiences between these two countries during a study tour that took place in February 2024 in Brasilia. Part I described organizational and IT systems aspects.
During the study tour, Côte d'Ivoire and Brazil also exchanged views on domestic debt management, debt strategy, annual borrowing plan and investor relations. The Ivorian delegation returned home very satisfied with this study visit to Brazil debt office.
Domestic debt management
Over the years, the composition of Brazil's debt portfolio has shifted from predominantly external financing to a portfolio in which securities account for over 90%; the remainder being made up of bilateral and multilateral loans. The Brazilian Debt Office also manages a number of contingent liabilities, mainly subnational guarantees.
Côte d'Ivoire is following a similar evolution in the composition of its debt portfolio, with a growing proportion of domestic debt. Today, Ivorian debt comprises 54% domestic debt and 46% external debt. The Debt Office is also responsible for monitoring contingent liabilities.
As Brazil issues a large volume of securities, the Brazilian DMO has put in place well-established auction mechanisms. Of particular interest to the Ivorian delegation, the front office operates in a trading room equipped with the latest technology, surrounded by glass walls which gave it the nickname “aquarium”. The front office receives high-quality market data that feed into their advanced analytical models. In Côte d'Ivoire, the trading room is still in its infancy, and the Ivorian delegation intends to build on this experience to further develop it.
Côte d'Ivoire, like Brazil, also sporadically issues global bonds on the New York Stock Exchange in US dollars. These issuances are strategic to maintain access to foreign currency debt, notably for pricing/referencing purposes and as part of the debt strategy.
Debt strategy
The Brazilian Medium-Term Debt Strategy (MTDS) includes three deterministic scenarios to guide debt managers over a 5-year period. The strategy process reflects the sectoral interest and behaviors of various financial agents as well as incorporates the impact of the country's rating by the major agencies. The DMO produces a Portfolio Benchmark with an analysis that covers a horizon of over 10 years, whose cost and risk analysis can be readjusted every 3 year.
During the discussions, the Ivorian delegation learned about the way the Brazilian DMO conducts simulations and analysis resulting in high quality results that are ultimately incorporated in the strategy. This was of special interest for them as Côte d'Ivoire is also publishing its medium-term debt strategy in the Direction Générale des Financements’ website since April 2024, in line with the latest reforms. The Ivorian strategy is adopted by Parliament through the Finance Act to which it is annexed and is updated annually
Annual borrowing plan
It is important for countries issuing debt securities to prepare and publish an annual borrowing plan (ABP) to guarantee transparency, ensure rational indebtedness and build trust with investors.
As precursor in this area, Brazil shared its experience with the Ivorian delegation in producing and publishing their ABP. It is a concise document providing information on the national and global outlook, describing government's borrowing requirements and financing objectives, and presenting forecasts.
At present, Côte d'Ivoire produces an annual securities issuance calendar and prepares a forecast analysis of debt repayments. They intend to develop a more detailed ABP in the near future.
Investor relations
The Investor Relations Office (IRO) is a key entity of the Brazilian Debt Office that centralizes and disseminates debt related information to promote transparency, accessibility and predictability. It aims at broadening the investor base for Brazilian securities and to monitor rating agency assessments.
IRO representatives presented the Ivorian delegation their methods and tactics for dealing with rating agencies. The Brazilians and Ivorians jointly prepared a simulation using Ivorian data available on Bloomberg. This approach was of great interest to the Ivorian delegation as a source of inspiration for Côte d'Ivoire in implementing ongoing reforms.
In conclusion, this study tour was an opportunity for the Ivorian delegation to benchmark its debt management practices and future reforms with those in Brazil. The delegation came away with a wealth of ideas in terms of IT system integration, institutional organization, including trading rooms, and investor relations.
The DMFAS Programme and Côte d'Ivoire warmly thank the Brazilian authorities for hosting the delegation and sharing their experience, a cooperation that will continue beyond this study tour.
