The Deputy Managing Director of the International Monetary Fund (IMF), Murilo Portugal, emphasized the need for Brazil to reduce its gross debt, extend the maturity of debt and restrict the portion linked to fixed interest rates (currently about 31% of the debt ) to improve the economic conditions of the country. Murilo Portugal participated, on Thursday (5th), in a hearing of the Investigative Committee (CPI) of the Public Debt.

Murilo Portugal has chosen to use the concept of gross debt (which includes all the debts of the federal, state and local governments) to enable comparison with other countries that also adopt this reference. According to Portugal, under this methodology, Brazil's debt is around 61% of Gross Domestic Product (GDP), while in his opinion "a optimal debt would be below 50% of the product."

Net debt
In another hearing of the CPI, held in late October, the Secretary of the Treasury, Arno Augustin, presented the evolution of the net debt to GDP ratio and said that it has enabled the country to cross and the international financial crisis. Augustin said that in 2003, the debt meant 53.53% of GDP, falling to 38.8% at the end of 2008.

Net debt is the difference between the public sector debt and credits it is entitled to receive.

"The fact that the gross debt is much larger than the net one does not affect the economic scenary in Brazil, but indicates that the situation is not as golden as many people think it is," said the rapporteur of the CPI, Deputy Pedro Novais (PMDB-MA). "It's the trick of economists, who instead of giving the real value of the gross debt together with the net debt prefer to hide the gross," he added.

Foreign reserves
Murilo Portugal praised the composition of Brazilian foreign reserves - currently over $ 220 billion - as one of the elements that helped the country overcome the international financial crisis. "The reserves have helped Brazil to face the crisis more favorably. It's like an insurance, when you need it is great to have it, but if you do not need, it seems useless," he compared.

This analysis coincides with that of a study by the Legislative Consulting Services of the Chamber of Deputies which examines the costs and effects of the increase in the international reserves of the Brazilian Central Bank. Since 2006, the rate of accumulation of international currencies has increased steadily from 6% of GDP in 2005 to almost 16% in September 2009 after a brief reduction in 2008.

"The high level of international reserves played an important role in the acute stage of the crisis. However, the high cost of these reserves and the expectation of a strong inflow of dollars in the coming months amplify the debate about the appropriateness of maintaining the same policy adopted in recent years ", warns the study.

The hearing was proposed by Deputy Luiz Carlos Hauly (PSDB-PR). The CPI was installed in August and aims to investigate the internal and external debts of the country, the payments of interests andamortizations, the beneficiaries of these payments and the impact of the debt on social policies and the sustainable development of the country.

Report - Rodrigo Bittar
Edition - Pierre Triboli
Translation – Adriana Resende