Background

This term of reference aims to hire an individual consultant to elaborate study materialized through the technical report (paper) and workshop that will address the presentation of a comprehensive diagnosis of existing fiscal risks in Brazil and a proposal of systematic monitoring on fiscal risks in situations of fiscal fragility.

Commonly, 80's are identified as the lost decade for the Brazilian economy. This was a period of economic stagnation associated with a period of strong fiscal imbalance that resulted in the deterioration of the main economic and social indicators, and led the country to a sharp process of hyperinflation and economic breakdown.

Some diagnoses at that time have pointed the fiscal performance of the Brazilian state as the source and cause of the economic problems that resulted in the lost decade. Over the past decades, definitive solutions to the serious fiscal imbalance were continually postponed by opting for palliative measures, particularly by continuous increases of the tax burden, which appears to have reached its limit.

According to diagnoses made at other times in history, the deterioration of macroeconomic indicators observed since the second half of 2014, particularly GDP, inflation and unemployment, occur simultaneously to the lack of prospects for the government's ability to solve the fiscal problem effectively, what affect the credibility of economic agents and further reinforce the negative perception on the Brazilian economy in a continuous process of interaction between the fiscal and economic.

The reversal of this counterproductive process requires a structural fiscal adjustment by broad economic and institutional reforms in order to allow the achievement of consistent primary surpluses, which should be capable of reversing the upward trajectory of the public debt, and restore the credibility of the agents in the economy.

Given the current context of economic and fiscal weaknesses, the implementation of an appropriate framework for integrated monitoring of fiscal risks is considered as one of the important institutional improvement strategies of the Brazilian fiscal framework oriented to the recovery of credibility of economic policy. The implementation of this process aims to promote management analysis more timely and accurately for subsiding strategic decision making, which facilitates the process of fiscal planning and mitigation actions to deal with the fiscal risks.

In general, the concept of Fiscal Risk expresses the degree of uncertainty associated with the fiscal performance expected over a given time horizon and eventually may be associated with events beyond the control of policymakers. In essence, Fiscal Risk is presented as a prospective concept that intends to give some dimensionality to possible events that may impact the predictability of fiscal planning in the relevant horizon.

The first initiative of analysis of fiscal risks in Brazil came up with the Annex of Fiscal Risks, which became an integral part of the Budget Guidelines Law - LDO by requirement of the Fiscal Responsibility Law - LRF, and the intention was to provide a general knowledge of the fiscal situation and improve the predictability of the economic environment.

Despite the legislator's efforts to give greater strength to the Brazilian budget framework, the Annex of Fiscal Risks still needs a number of conceptual and methodological improvements so that can serve as a useful management tool for policymaker's strategic decision making. In addition, structural sources of fiscal pressure and other relevant fiscal risks are not properly identified and quantified therein.

In Brazil, for example, the retirement and pension system of private sector has performed a cost of about 7 percent of GDP in 2014 and is a growing source of fiscal pressure, which is projected to reach 22 percent of GDP in 2050. Pensions and other social spending increased significantly in recent decades in Brazil driven by demographics and the minimum wage policy, as well as the complex structure of revenues earmarking and mandatory spending, especially in items related to health and education.

In situations of economic weakness, other relevant fiscal risks tend to become evident, such as the case of the liabilities related to state and public banks companies, insolvency of subnational governments, risks of the banking system, payroll management, among others.

In this context, several developed and emerging countries have sought to advance in the monitoring of fiscal risks through methodological refinement and enlargement of the scope of analysis to deal with the long-term fiscal pressures and other relevant risks, including demographic changes, various contingent liabilities, institutional reforms, fiscal rules, expenditure rules, assessment systems, etc. Such an approach allows policymakers act in a timely and gradual way to the pressures and known fiscal risks, as well as also helps them to better manage unforeseen fiscal pressures, which help to increase the confidence of economic agents on the conduct of fiscal policy.

Given the relevance of the subject, it is proposed to carry out studies covering a broad diagnosis of existing fiscal risks in Brazil and a systematic proposal for monitoring and tracking the relevant fiscal risks in situations exposed to fiscal pressures. The work should also comprise a review of international literature and a historical comparison of the fiscal dynamics of countries in recent decades under pressure situations in the public accounts, and the list of the main actions of fiscal policy and mitigation adopted in this context.  

This contract, to be performed under the Technical Cooperation Agreement BRA 06/024 - PREMEF, includes the preparation of technical study, containing review of the international literature and historical analysis of the dynamics of countries in fiscal imbalance (including the actions of fiscal policy employed in this context), diagnosis of fiscal risks in the Brazilian fiscal framework and development of a methodology of systematic monitoring of the relevant fiscal risks in Brazil. Besides, the presentation of a workshop to servers of the National Treasury Secretariat – STN/MF is necessary to formalize the end of the consultancy, ensuring the transfer of technology to the staff.

This contract will be part of the result 9, "Enhancement of tools and techniques to improve the efficiency and effectiveness of financial management", product 9.7 to be implemented within the framework of the Technical Cooperation Agreement BRA 06/024 - PREMEF.

Duties and Responsibilities

Elaboration of technical work that enables the improvement of the monitoring processes of the relevant fiscal risks in the context of economic and fiscal fragility in order to provide a better response of economic policy by parts of policymakers. Among other topics, the study should address the items listed below:

1. Report with review of the literature and historical analysis of the fiscal imbalances faced by developed and developing countries over the past 40 years, including the main suggestions of action by international organizations in fiscal management;

2. Report containing broad diagnosis of various fiscal risks in the Brazilian fiscal framework in view of the current economic situation;

3. Report containing management methodology for analysis and periodic monitoring of the most significant fiscal risks identified in the Brazilian budgetary / fiscal framework, including warning systems and proposals for action in situations of fiscal pressure.

It is necessary condition for the acceptance of products which technology transfer takes place on the subjects addressed to the staff of the STN/MF. In this sense, the consultant shall provide access to data sources and bases used in the statistical models developed (where applicable), the references considered and other information relevant to the development of the work.

1. Results and Desired Products:

Competencies

Competências Funcionais:

Gerência do Conhecimento e da Aprendizagem

Conhecimento em assuntos de desenvolvimento, planejamento e interdisciplinaridade;

Efetividade de Desenvolvimento e Operacional

Habilidade em coordenar a formulação, implementação, monitoramento e avaliação de projetos e programas de desenvolvimento;

Gerência e Liderança

Demonstrar abertura para mudanças e habilidade para gerenciar complexidades.

Required Skills and Experience

Mandatory Requirements:

Academic Background:

Professional with at least academic education at Masters level in Economics, Public Finance, Public Policy Management, Political Science, International Relations, Business Administration, Social Sciences, Statistics, Engineering or related.

Professional Experience:

The consultant must demonstrate professional experience of at least five (5) years in projects involving fiscal policy, fiscal planning, public economics, public accounting and public finance.

Desirable Requirements (valid scoring):

Academic or professional experience in activities related to fiscal policy, fiscal planning, public economics, public accounting and public finance:

Experience in consulting projects related to fiscal planning of medium / long term, fiscal rules and fiscal risks:

Experience in publishing articles or working papers (WP) on fiscal planning of medium / long term, fiscal rules, fiscal risks or Brazilian fiscal framework:

Academic Background:

Interview:

At least three (3) candidates will be invited for interview, with the highest score in the qualifying criteria.

An Evaluation Committee will be composed of three members to interview the candidates. Each member of the Evaluation Committee will assign scores to interview of each candidate according to the requirements and concepts set out in the table below. Applicants will be scored on three (3) points per interviewer, getting the maximum out of nine (9) points as the final score of the interview:

Important Remarks:

The delivery of the curriculum must meet necessarily the model contained in Annex A.

When requested, applicants must demonstrate the academic or professional experiences described in their curriculum.

The selected candidate will be the one of highest overall score, considering the final scores of the classification criteria and interview. The total possible score is 60 (sixty) points.

The selected candidate must present Work Plan and Proposal Detailed Financial.

Work Process:

The intermediary discussions during the development of the work may be carried out either in person or remotely, at the discretion of the STN/MF. All travel costs, maintenance and hosting will occur exclusively on account of the consultant.

Throughout the project, the consultant will conduct knowledge transfer activities to the STN/MF in order to enable the STN/MF staff to maintain, develop, manage and improve,from both a technical and business point of view, each of the products mentioned in this Term of Reference.

It is estimated that it will take at least three presencial meetings in which will be discussed the hypothesis to be used in the preparation of the technical work, the work methodology and other technical aspects of the work. The meetings will also have the purpose of enabling the staff of the STN/MF through the workshop related to the project.

To the selected candidate will be requested a Technical Proposal and a detailed Financial Proposal to be approved by the STN/MF containing delivery schedule of products, along with estimate on additional trips, if necessary, at the expense of the contracted consultant.

Immediately upon receipt of each product for evaluation by the "Committe of Product Assessment" to be composed of at least three members of the STN/MF, the consultant must show that the required expertise were transferred to the STN/MF’ss team, detailing the activities that they were held for this purpose and evaluating the activities and byproducts delegates to the technical teams and the STN/MF’ss business. The technical report is a necessary requirement for the acceptance of products. The delivery of the final product must be made electronically and physical environment.

Lodge an appeal

The candidates who wish to file appeals, must do so within two days after the publication of the final result of the selection. The STN/MF will disclose the result after resources in two days after the deadline for lodging of appeals.

Payment Conditions

The services will be paid in local currency, according to the delivery of the products, once approved by the responsible technician.

Available Inputs

The costs arising from air tickets, daily, medical aid, food, local transport, insurance, among other costs of the services provided in this Terms of Reference will run on account of the contracted consultant.

Location of Work

The head office for business meetings and presentation of products object of this Terms of Reference is Brasilia, with the possibility of meeting by remote means.

Starting Date of the Project

Immediately after signing the contract.

Clarifications

Further doubts can be cleared upon demand,and shall be directed to the e-mail ucp.codin.df.stn@fazenda.gov.br. Everyone interested in taking part on the contest shall send curriculum vitae and additional information to ucp.codin.df.stn@fazenda.gov.br, until 06/13/2016.

Only preselected candidates will be contacted.

If the interview is in person the travel costs are the sole responsibility of the candidate, and there will be no compensation.
The process can be canceled at any time by decision of the National Treasury or the UNDP.

Execution Deadline

Delivery of all products is expected to occur within 120 days after signing the contract.

Technical Supervisor's Name: Daniel de Araujo e Borges

Technical Supervisor Position: Coordenador-Geral da COFSB/STN/MF.

Supervisor's Name: Líscio Fábio de Brasil Camargo.

Supervisor Position: Diretor Nacional do Projeto.