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Public Investment in Latin America - Five Lessons
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Transcript of Public Investment in Latin America - Five Lessons
Public Investment in Latin America:Five Lessons
ICGFM ConferenceDecember 2011
Jonas FrankSr. Public Sector Specialist
The World Bank
Latin American countries invest below the world average…
… and much less compared to fast-growing economies like China and India …
4
… and there is significant variation across countries in the level of investment spending
Source: CEPAL (2011)
GDP
Country Interface IFMIS vs SNIP Single project code in IFMIS Brazil yes yesColombia yes yesChile yes yesCosta Rica no noGuatemala no noHonduras yes yes (social investments)Paraguay no yes (in execution stage but not
at pre-investment level)Perú no yesBolivia no yesUruguay no yes
Lesson 1: Need to overcome isolation of management systems (financial management and public investment)
Source: IDB Survey 2009-2010 and World Bank
Coverage of information systems is uneven
• Colombia• 100% of central government investment • Less for subnationals (no full data)
• Dominican Republic: • 90% of central government investment; • Subnationals part of the system only as of 2009
• Peru: • Central level: 80% (2009)• Regions: 97%• Municipalities: 76%
• Mexico: • 76% of federal investments (2009)
• Guatemala: • 48% of central government
Case of Bolivia: system overlaps and gaps
Level of government
Information System
Public Investment Cycle
Formulation Budgeting Execution Monitoring Evaluation
Central
SISIN web
SIGMA
SPI -MOP
Aplicativo MMyA
SAP - FPS/FNDR
Aplicativo - VT
Departa-mental
SISIN web
SIGMA
SGP
SIGMA local
Municipal
SISIN web (GM)
SIGMA (GM)
SGP
SIGMA local
Source: World Bank
Programming
BPIN
Budget
Execution
SIIF
Monitoring
SPI
EvaluationSIGOB
Formulation
Improved information flow in Colombia: systems cover all steps of the investment cycle
Source: SUIFP - DNP
Other countries are trying other solutions:• Interfaces: Honduras (SIAFI/SIGADE/SISPU/DEI/BANCO CENTRAL)• System Integration: Costa Rica (ERP)• Reducing parallelism: Discussions in Bolivia (SISIN-SIGMA)
• LAC is the most decentralized region in the developing world• Expenditure decentralization is particularly deep in public investment
Lesson 2: Decentralization without planning and coordination can lead to fragmentation
Level of decentralization in public investment(Country samples)
Brazil (2008)
Uruguay (2011)
Bolivia (2010)
Central level 17% 47% 40%
Subnational Governments 30% 18% 31%
Public Enterprises 53% 35% 29%
Total (in percent) 100% 100% 100%
Responsibilities are often unclear in the take-off period of decentralization
• Complex concurrent assignment of expenditures in the social sectors. Example:
• Human resources: national• Planning: regional• Infrastructure: municipal
• Network responsibilities often in flux: – Roads: reassignments– Water: fragmentation
• Regulatory uncertainty in the network sectors:– Incentives for cost-shifting– Obstacles for private investment (Brazil: water)
Trend of project fragmentation in the absence of planning and coordination
2004 2005 2006 2007 2008 20091,183 2,142 1,885 2,319 2,321 2,4091,505
2,035 2,8163,190 2,837 3,072
1,022
1,332
7,186
13,299
19,798 18,891
National Government
Regional Government
Municipal Government
Source: SNIP
Example of Peru
Few countries have effective coordination mechanisms among levels of government
• Latin America’s backlash to planning
• Does planning occur through public investment?
• Platforms for coordinated subnational planning and budgeting– Chile: “Programming Agreements” (“Convenios de Programación”) at
the deconcentrated regional level– OECD countries:
• France: Contrats de Plan Etat-Région • Germany: joint tasks• Spain: agreements (“convenios”)
• Coordination within central government:– Mexico: “Infrastructure Cabinet” led by Presidency
Lesson 3: Differentiated approaches to cater to heterogeneous needs and levels of capacity
Number of local governments has increased significantly: weaker capacities
Often cumbersome national systems:• Procurement• HR• Financial management
Source: Dirección General de Inversión y Crédito Público, Ministerio de Hacienda, El Salvador
2.5
%
PIB
2.6
%
PIB
2.5
%
PIB
2.3
%
PIB2.9
%
PIB
El Salvador: Planned and executed public investment,
2006-2010 (in million US$)
Resource abundance has challenged execution rates: uncovers institutional shortcomings
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2005 2006 2007 2008 2009
Millone
s
PIM Gobiernos Regionales Ejecutado
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2005 2006 2007 2008 2009
Millone
s
PIM Gobiernos Locales EjecutadoLocal Governments Regional Governments
Blue: planned budgetsRed: executed budgets
Peru case
Source: SNIP, Peru
Catering to different capacities: emerging approaches
• Pre-investment• Differentiated by sectors
• Subnational government• Co-financing as means of institutional strengthening
without micro-management• Special arrangements for poverty-stricken areas
• FONIPREL mechanism in Peru
Lesson 4: Quick-gain strategy can prove effective. Focus on the low-hanging fruit but with a strategic view. Procurement can provide high returns on efficiency.
17
Quick-gains strategy in Mexico: focus on high expenditure areas
Fuente: Subsecretaría de Egresos de la SHCP/ Tomo VII PEF 2009 / Análisis Deloitte
360
400Hidrocarburos
($228/537)
SCT($64/1,683)
Electricidad($40/450)
Medio Ambiente ($11/176)
Salud($10/175)
Impartición de Justicia($7/52)
Fomento($6/146)
Educación($5/190)
Seguridad Nacional($4/76)
Ejecutivo Federal($3/161)
320
280
240
200
160
120
80
40
4,0000 3,0002,0001,000
Mo
nto
Asi
gn
ad
o e
n 2
00
9
(37
6 m
ilmil
lon
es
de
pe
sos)
Número de Proyectos(3,652 proyectos)
61%
15%
17%
46%
12%
11%
About 90% of investment is concentrated in three sectors: hidrocarbon, communications/transport and electricity
Nicaragua: Procurement Module is critical for monitoring physical and financial execution
• Monitors execution in two moments: at the award stage and during execution of contracts
• Execution is monitored based on contract programming and milestones
“Project Bank”
Pre-investment system
Pro-grammingMonitoring System
Source: SNIP Nicaragua
Lesson 5: Strengthen the demand side…
Source: MIDEPLAN, Chile
• Interactive tools open to citizens and users • Geo-referencing• Expenditure tracking• Benchmarking
20
…and in parallel also strengthen “gate-keeping” functions