Posted by Mario Pessoa
The Institute of International Finance (IIF), an association of financial institutions, published for the third time the report Investor Relations: An Approach to Effective Communication and Enhanced Transparency. This report provides detailed analysis of investor relations and data transparency practices by the most active emerging market borrowing countries. According to the IIF, by reporting advances in sovereign investor relations practices, the document aims to help authorities identify those aspects of their investor relations and data transparency practices that could benefit from strengthening.
While the focus of the report is on financial market issues and not on public financial management, it should be of high importance to public debt managers. It sets a benchmark for good practices in terms of level of transparency, and availability, timeliness, and comprehensiveness of debt information. In this respect, the report’s very detailed indicators give to the user a broad view of the information available and can be seen as a demonstration of countries’ commitment to transparency in debt management. On the downside, the report focuses only on the availability of information and does not discuss the quality of the information provided by the countries.
The IIF classifies countries in three categories of transparency:
Level 3. High transparency level: The country has adopted internationally recognized standards and presents information in market-friendly formats. Methodological notes and commentaries on data updates are available. Authorities are ready to provide information through active investor relations offices or through direct contact with the corresponding statistical office.
Level 2. Adequate transparency level: The country adopts internationally recognized standards, or evidence suggests an ongoing effort to adopt them in the near future. Relevant information for investors is easy to identify in corresponding websites or bulletins.
Level 1. Need to improve transparency: Relevant information for investors is not available, or adequate economic analysis cannot be done with the information available. The country is highly encouraged to adopt internationally recognized standards and disseminate relevant statistics on a timely and consistent basis.
Regarding data dissemination the maximum score is 43 for the 38 countries evaluated. The best practices are in Brazil, Bulgaria, Chile (41, the highest score), Colombia, Croatia, Dominican Republic, Ecuador, Egypt, Hungary, Korea, Mexico, Peru, Poland, South Africa, Thailand, Turkey, Uruguay, and Venezuela.
The 24 indicators (figure in the brackets is the weight of the indicator from a total of 42 points) related to the transparency of data dissemination are:
Central Government Operations
- timeliness (2)
- periodicity (1)
- time series availability (3)
- breakdown by domestic and external financing (1)
- adopt IMF’s government financial statistics manual (GFSM) 1986 (1)
- adopt IMF’s government financial statistics manual (GFSM) 2001 (or is migrating to it) (3)
Central Government Debt
- timeliness (2)
- periodicity (1)
- time series availability (3)
- breakdown by domestic and external debt (1)
- contingent liabilities (2)
- term breakdown by original maturity (1)
- amortization schedule updated every 3 months (3)
- amortization schedule includes contingent liabilities (2)
External Debt
- timeliness (2)
- periodicity (1)
- time series availability (3)
- resident holdings of public debt issued internationally (1)
- non-resident holdings of public debt issued domestically (1)
- non-resident holdings of private debt issued domestically (1)
- amortization schedule timely and available (3)
- breakdown by sector (private and public) (2)
Subscription to IMF Data Standards
- International Monetary Fund’s Special Data Dissemination Standard (SDDS) subscription (2)
- International Monetary Fund’s General Data Dissemination System (GDDS) subscription (1)
The report presents an evaluation for 38 countries in relation to investors relations. The maximum score is 38. The countries with better scoring are Brazil (38, the highest score), Chile, Korea, Mexico, Peru, Philippines, South Africa, and Turkey.
The 20 indicators (figure in the brackets is the weight of the indicator from a total of 38 points) related to the investors relations are:
- investor relations staff identifiable and reachable through websites (3)
- central bank and government agency websites available in English (3)
- effective data transparency of market-relevant data (3)
- forward-looking policy information available (3)
- active investor contact list (3)
- investor feedback reflected in policy decisions (3)
- presence of formal investor relations practices (2)
- macroeconomic data presented in market-friendly format (2)
- historical policy information available (2)
- structural (legal, regulatory) information available (2)
- web-based communication with investors (2)
- senior policymakers accessible to investors (2)
- reciprocal links to Central Bank, Ministry of Finance, and other government agency websites (1)
- investors able to register for website subscription (1)
- country subscribes to Fund’s Special Data Dissemination Standard (SDDS) (1)
- archives of investor presentations and conference call materials available on websites (1)
- bilateral meetings with investors (1)
- non-deal road shows (1)
- investor conference calls (1)
- regular self-assessment of investor relations practices (1)
For the first time the evaluation includes six Sub-Saharan African countries: Gabon, Ghana, Kenya, Nigeria, Tanzania and Zambia. The report also describes some outstanding practices such as the practical guide for international investors that establishes rules and regulations for foreigners investing in Brazil and the Peruvian report of borrowing statistics and macroeconomic trends delivered daily to investors via e-mail.
The report is available at the following website: http://www.iif.com/emp/ir/
