Godoy: technocrat takes the helm at the Brazilian Treasury.

Investors and bankers are starting to shape opinions on Tarcísio José Massote de Godoy, the interim secretary of Brazil’s National Treasury since January, the third to hold the position over the last year. They like his in-depth knowledge of the institution, abilities as a technocrat and seasoned team but worry his inexperience outside the Treasury, lack of star quality and the ‘interim’ tag that he still holds are causes of concern.

Preceded by Joaquim Levy, who quit in March 2006, and then Carlos Kawall, who lasted just nine months, Godoy was appointed in January. The ‘interim’ tag is likely to be dropped once Minister of Finance, Guido Mantega, is confirmed in his role for the second mandate of President Luiz Inácio Lula da Silva. “I am working in my capacity as a full secretary and there are no restrictions on me. I have no concerns about this,” Godoy himself says.

If his appointment is indeed confirmed, as most analysts believe, his priority will be to maintain and run the institution rather than build it, a role that his predecessors undertook, he says. The Ministry of Finance has been investing heavily in professionalizing the Treasury function and focusing on training and developing in-house teams. That is paying dividends with senior staff having long levels of experience and solid training, says Godoy. “I have very experienced teams in the areas of fiscal policy, debt management and relations with sub-sovereign issuers. My only real concern is the institutional function,” he says.

Godoy believes his career at the Treasury means he is well positioned to oversee an institution he knows intimately. He has been there since 1993 and by working in different key functions—for example, he worked as the general coordinator of public debt management and as deputy secretary in charge of fiscal policy—has gained a good bird’s eye view of the institution. He is puzzled by critics who say he has no direct experience of markets. He points out that he has seven years’ experience of public debt at the Treasury, in which time he built strong relations with investors. Furthermore, he has a highly experienced debt management team under Paulo Valle, he points out. Valle has been with the Treasury since 1992 and overseeing debt operations for seven years.

On debt issuance, Valle notes that the Federal Republic has reached long-term, quality investors through its programme of global, reais-denominated bonds. “The type and number of investors has improved greatly. These are investors that buy and carry debt,” says Godoy. “You can see the strength of appetite by looking at the secondary markets. The global bond issue of ’28 has tightened since its launch in February and is now yielding 10.25% compared to 10.68% at issuance,” adds Valle. Recent emerging market bond turbulence has had little impact on Brazilian government bond prices and the real has remained stable too, at around 2.10 to the dollar, he adds. Godoy says that for now market movements are well within Treasury projections and they have not had to reconsider the scale or timing of issuance.

Some overseas investors worry that liquidity in the dollar bond markets is suffering as a result of the emphasis on local currency issuance. Valle says that with the plan to reduce the stock of dollar-linked bonds from 12.7% at the end of 2006 to 10-12% by the end of this year, the issues will be focused on key points of the curve, particularly 10- and 30-years. “We reopened the ’37 at the beginning of the year with $500 million in issuance and we now have $2.5 billion outstanding at this point,” he notes.

Lisa Schineller, director, sovereign ratings group at Standard & Poor’s, says Godoy has many positive attributes. “He knows the country’s fiscal accounts intimately. He has a strong respect for prudent fiscal policy and is respected by his peers,” she says. She acknowledges that the previous two incumbents either had direct market experience or had worked with those that had and that many Treasurers and investors like to deal with someone with direct experience of markets.

Ilan Goldfajn, economics professor at the Pontifical Catholic University of Rio and ex-deputy Central Bank governor, is more critical of the appointment. He believes that overall the quality of managers appointed by the Federal government at financial institutions is weakening and undoing years of good work. He points to the appointment in February of Paulo Nogueira Batista, economics professor, as executive director for Brazil to the IMF as a prime example. “He is not market-oriented at all. This is my fear. That the government is slowly unravelling the good work of institution building.” Treasury had star players in the past, he says. It is a shame to see the government move to a policy of appointing senior staff without that quality.

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