Identifying and evaluating the political determinants of subnational debt

• Autor(a) principal: Zanlorenssi, Gabriel
• Data de Publicação: 2020
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Biblioteca Digital de Teses e Dissertações da USP
• Texto Completo: https://www.teses.usp.br/teses/disponiveis/8/8131/tde-26052020-223526/
• topic: Brasil; Brazil; Debt policy; Dívida estadual; Federalism; Federalismo; Política de endividamento; Políticas fiscais subnacionais; State debt; Subnational fiscal policies

This dissertation aims to evaluate the Brazilian subnational debt policy since 2002. After a series of reforms initiated in 1997, the federal government adopted stricter rules for approving new loans to Brazilian states that directed greater authority for the approval or rejection of these contracts. The analysis of the loans that were approved from 2002 to 2018 shows that the federal government plays an even more important role in the concession of domestic loans because the main creditors of the states are federal public banks. For rule-based top-down models of subnational debt to work, scal requirements must not be relaxed and there must be no party favoritism in the lending process. Otherwise, there is an inherent risk over the scal stability of subnational entities. This study explores whether there are differences between internal and external debt approvals since the federal government has less inuence on the agreements signed with foreign institutions. Using a rare-logit model (KING; ZENG, 2001), loan approval probabilities were estimated. Results show that political factors have a signicantly stronger affect on the approval of domestic contracts. Party alignment with the president increases the chances of approval of a loan in the internal way. Moreover, in contrary of the external loans, the indebtedness level of the states does not affect the success rates in getting loans. These results present evidence that although Brazil has reduced the scope for opportunistic behavior in accessing debt at the sub-national level, there are political factors that affect the success of Brazilian states in their debt strategies.