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Panama, Republic of Panama The Changing Role of the Debt Manager

Debt Stage Evolution: main drivers, DMO organizational charts, objectives, functions and staff skills. The Multilateral EraThe Brady EraThe International Capital Market EraThe Domestic Capital Market EraConclusions. The Changing Role of the Debt Manager. Agenda. . . The Multilateral Era. . . 1

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Panama, Republic of Panama The Changing Role of the Debt Manager

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    1. Panama, Republic of Panama The Changing Role of the Debt Manager Aracelly Méndez Public Credit Director Ministry of Economy and Finance Fifth Inter-regional Debt Management Conference Geneva, June 2005

    2. Debt Stage Evolution: main drivers, DMO organizational charts, objectives, functions and staff skills. The Multilateral Era The Brady Era The International Capital Market Era The Domestic Capital Market Era Conclusions

    4. First democratic Government in charge, after 20 years of military Goverment. Country was recovering from economic crisis, which had resulted in debt default in 1987. Deficit was partly financed by decentralized institutions (such as: electricity and telecommunications enterprises). Primary sources of financing were loan instruments (with multilaterals and commercial banks) and domestic non-market securities. Debt Management Office was mainly focused on paying debt (current and defaulted debt), lacking a sound public debt strategy. Organizational Structure was not task-oriented.

    7. Debt re-structuring plan was implemented by issuing Brady bonds for a face value of US$3,228 million. As a result, debt composition shifted from commercial bank debt to Brady bonds. Credit-risk ratings were obtained from Moody’s and S&P. Implementation of an external debt management strategy was initiated, supported by the creation of a project control and risk analysis units. Debt Management Office was re-organized by creditor type.

    10. Privatization process of decentralized institutions is initiated. Deficit financing was mostly funded by issuance of global bonds. A Brady refinincing strategy is started (liability management transactions). Debt composition is shifted from Brady bonds to global bonds. As a result, access to capital markets is strengthened. Market and risk analysis functions are reinforced. Some new issues are now been addressed, such as: yield curve design, interest rate and FX analysis, market research, monitoring of public debt ratios.

    13. Due to privatizations, public Goverment finances are pressured by increasing financing needs. A fiscal Reponsability Law is passed. An internal debt funding strategy is implemented. Primary sources of financing are global bonds (long-term securities) and treasury notes (medium-term securities), issued in the international and domestic capital markets. However, public debt strategy is mainly focused on the development of the domestic capital markets and creation of an efficient short/medium-term yield curve. Organizational Chart is a mix of creditor and task-oriented set-up with a backoffice department properly organized. Project control functions are reinforced.

    16. Debt Management Offices are dynamic. Therefore, their organizational charts and staff skill requirements change as a country matures as a borrower. Countries at different levels of development need different organizational structures for their debt office, which should be defined according to the types of financing sources it has access. Thus, there is not a unique organizational structure applicable to all Debt Management Offices. As more functions are undertaken by a Debt Office, greater reliance on information management technology and team-work skills are required.

    17. Thank you Fifth Inter-regional Debt Management Conference Geneva, June 2005 The Changing Role of the Debt Manager by Aracelly Méndez

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