Brazilian Domestic Public Debt in the Recent Period

Abstract

Abstrat: This article reviews the first forty years of the domestic federal securities debt in Brazil and sheds a light on the specific features of its development. It points out that creative public policy stimulus is needed for this market to develop and to consolidate. Early in its life, indexation played a crucial role. It is also worth noting that the government has to play a leading role in financial innovation through diversification of its own debt instruments so thus increasing attractiveness to investors. Such strategy is not costless, as it was shown by the episode of exchange-rate indexation after the Real Plan. The article evaluates the exchange-rate linked component of the debt as well, which has received little attention in the literature. The paper also analyses losses of credibility from securities indexation below inflation and considers an index to evaluate the quality of the composition of the public debt, the Index of Composition of the Securities Debt.