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September 17, 2013

FOTEGAL: Sharing Experiences of Treasury Management in Latin America

Posted by Israel Fainboim

Latin American budget officials are members of an association (Asociacion Internacional de Presupuesto Público—ASIP) which delivers an annual international seminar and regional seminars and publishes its own journal. Recently, the countries of the region together with two multilateral donors (the Inter American Development Bank and the World Bank) joined forces with the Fiscal Affairs Department (FAD) of the IMF to set up a similar organization for state treasurers.

That is how the Government Treasury Forum of Latin American (FOTEGAL) was born in 2010. The organization was formalized in a document named the Lima Declaration and through the approval of its own statutes. A total of 16 countries are currently members of FOTEGAL (Argentina, Bolivia, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, and Uruguay) and an invitation has been extended to Brazil to join (this country has participated in several of the annual seminars). The Government of Japan (JSA) has also been a key financial supporter of the activities of FOTEGAL. In addition, the IDB is supporting the development of FOTEGAL’s website. A link to this network and many of the documents and presentations made for FOTEGAL already exists within the website of one of the government treasuries, and a separate web page is under construction.

FOTEGAL has become a key forum for engaging with the treasurers of the region, providing technical assistance to them, disseminating information on best practices, and sharing experiences. The treasurers hold an annual seminar (which has been hosted in the last four years by the governments of Peru, Mexico, Colombia and Guatemala) at which presentations on a variety of topics are discussed. Such topics have included: the implementation of a Treasury Single Account (TSA); cash forecasting; cash management (including the investment of excess cash and cash smoothing); coordination between cash and debt management; the relationship between the treasury function and accounting; the respective roles of the treasury and the central bank; improving payment and collection processes; managing financial and operational risks by the treasury; the management of special funds; and the institutional and legal framework for treasury operations. The main issues are usually presented by an international expert followed by an exchange of information on the practices and experiences across the region.       

During each seminar the multilateral entities present the results of an annual survey on treasury operations in the region. The main objective of this survey—which FAD helps to prepare and analyze—is to track improvements in treasury management across the region. The survey is a useful vehicle both for disseminating information on recent trends and generating peer pressure for reform.

At the end of each seminar the treasurers and the representatives of the IDB, World Bank, and FAD discuss and agree on a detailed work program for the year, which usually includes research studies, technical notes, courses, and seminars. The approval of the annual work program by the treasurers signals their degree of commitment to the FOTEGAL network and its activities for the medium term.

Several examples of the success of FOTEGAL may be cited. During the last seminar in Antigua (August 7-9, 2013), the results of some important research studies were presented: for example, a study on the adoption of a TSA in Latin America, a technical note on investing cash, and a study of the legal framework for Treasury operations. In addition, FAD committed during the seminar to deliver the following activities: (i) organizing a course on treasury management in Brasilia in November 2013; (ii) preparing a technical note on the coordination of cash and debt management; (iii) supporting a seminar on the treasury function and accounting to be organized by the IDB in February 2014; and (iv) supporting a study on the relationship between budget and treasury management. Besides these activities, the IMF will continue to take the lead in the preparation and delivery of the annual survey mentioned above.

The activities of FOTEGAL have been a key factor in motivating reforms of treasury management in the region. In contrast to the situation a few years ago, all countries in the region are now either implementing a TSA, are improving its design and/or operation, or are increasing its coverage. Several countries have reduced the “days of reciprocity” of holding the treasury balances in bank accounts without remunerating them—the mechanism through which the treasury pays the commercial banks for collecting the payments of taxes—and one country currently pays a fee per transaction, instead of reciprocity days. In addition, there has been a trend toward increasing the adoption of electronic transfers as the main method of making government payments. Finally, thanks to the dissemination of these tools during FOTEGAL seminars, three large countries of the region have started the implementation of a Business Continuity Plan (BCP) and a Disaster Recovery Plan (DRP) to protect their treasuries from operational risks.    

The success of FOTEGAL mirrors that of similar groups and communities of practice in other parts of the world, such as the PEMPAL network in Eastern Europe and the meetings of accountant generals in Africa. 

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy. 

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