Explanatory Note on the Accounting Statements

 
EXPLANATORY NOTE TO THE FINANCIAL STATEMENTS - on March 31, 2004
(In thousand of Reais)
 
Law of Fiscal Responsibility – Information Required
 
a. Impact and fiscal cost of the operations - Supplementary Law 101, Article 7, Paragraph 2
 
The sole paragraph of Article 8 of Law 4,595/64, as amended by Decree-Law 2,376/87, stipulates that “results obtained by Banco Central do Brasil, considering the revenues and expenses of all its operations, shall be, effective from January 1, 1988, determined on an accrual basis and transferred to the National Treasury, after offsetting any losses from prior fiscal years”.
 
This provision was partially changed by the Law of Fiscal Responsibility:
 
“Article 7. The result of Banco Central, assessed after constitution or reversal of reserves, is recorded as revenue of the National Treasury and shall be transferred not later than the tenth business day subsequent to approval of the half-year balance sheets.
 
Paragraph 1. The negative results will constitute a Treasury liability to the Banco Central do Brasil and will be consigned to a specific budget allocation account.”
 
In accordance with item II of Article 2 of Provisional Measure 2,179/2001, this negative result shall be paid not later than the tenth business day of the fiscal year subsequent to the year of approval of the balance sheet by the National Monetary Council.
 
Therefore:
 
I - The result of Banco Central do Brasil (BCB) considers revenues and expenses related to all its operations;
 
II - Positive results are transferred as revenues and negative results are charged as expenses to The National Treasury;
 
III - Such results are included in the Fiscal Budget in the National Treasury account.
 
The Bank recorded a surplus of R$2,108,762 in the first quarter of 2004 and that, with the result of the second quarter, will compose the result of the first half-year to be transferred to or covered by The National Treasury. In conformity with Article 9, Paragraph 5 of Supplementary Law 101, within ninety days after the closing of the half-year, the BCB shall submit, at a joint meeting of the pertinent thematic  commissions of the National Congress, an evaluation of the fulfillment of objectives and targets of the monetary, credit and foreign exchange policies, clearly showing the impact and fiscal cost of its operations and results shown in balance sheets.
 
 
b. Cost of remunerating the cash of the National Treasury - Supplementary Law 101, Article 7, Paragraph 3
 
The cost corresponding to the remuneration of the National Treasury deposits amounted to R$4,760,784 in the first quarter of 2004.
 
c. Cost of maintaining foreign exchange reserves – Supplementary Law 101, Article 7, Paragraph 3
 
The cost of maintaining foreign exchange reserves is calculated as the difference between the rate of yield of the reserves and the average rate of obtaining such reserves, as calculated in BCB’s liabilities.
 
In the first quarter of 2004, with an average daily balance of R$152,148,937, the international reserves recorded a positive yield of 0.9%. Excluding the average cost of liabilities of 2.3%, the net result of reserves was negative by 1.4% (R$2,164,166), considering the effects in the same period, due to foreign exchange indexing.
 
d. Yield of BCB’s securities portfolio, with an emphasis on Government issued securities - Supplementary Law 101, Article 7, Paragraph 3
 
Items
  1st Quarter/2004
Revenues
12,117,329
Government Securities
11,739,167
Banco Central Securities
378,162
 
Expenses
(3,929,427)
Government Securities
(2,518,505)
Banco Central Securities
(1,410,922)
 
Net Result
8,187,902
 
In the first quarter, the positive result was due, largely, to the following factors:
 
I - Government Securities – the result of the Government Securities was positive by R$9,220,262 resulted from monetary restatement and foreign exchange indexing and revenues from interests on Federal Government Securities, partially offset by expenses with adjustment to market value;
 
II - Banco Central Securities - the result from its own securities was negative by R$1,032,760 due, mainly, from foreign exchanging indexing and NBC interest expenses.
 
 
President of the Banco Central do Brasil
Henrique de Campos Meirelles
 
Directors
Afonso Sant'Anna Bevilaqua
Alexandre Schwartsman
Antonio Gustavo Matos do Vale
Eduardo Henrique de Mello Motta Loyo
João Antônio Fleury Teixeira
Luiz Augusto de Oliveira Candiota
Paulo Sérgio Cavalheiro
Sérgio Darcy da Silva Alves
 
Deputy Head of the Department of Financial Administration
Télio da Silva Arantes
Accountant, CRC-DF 013391/0-8