OECD Study on Regional Development
in Brazil
Claire Charbit
Deputy Head of the Regional Development Policy Division
Direct...
OECD Territorial Reviews:
A series of case studies of Regional Development Policy for
Inclusive Growth
Among 34 member cou...
Outline
1. Key facts
2. Some policy lessons
3. Key governance challenges
4. Conclusions/recommendations
Despite Brazil’s high levels of concentration in GDP and population …
Geographic concentration index of GDP and population...
Despite the recent decline in territorial disparities…
…in catching-up economies inequality
is high and it tends to rise d...
Most unsatisfied needs are concentrated in lagging regions

1. The Human Development Index (HDI) is a comparative measure ...
Catching up has been driven mainly by advances in
resource-intensive regions
Despite Brazil’s faster overall growth …
Growth in GDP per capita among types of TL3 regions,
1995-2007

Predominantly rur...
Policies that aim to tap the growth potential of all types of
regions is an important source of aggregate growth
17%
16%

...
Outline
1. Key facts
2. Some policy lessons
3. Key governance challenges
4. Conclusions/recommendations
Isolated sectoral action may have
unintended outcomes (example)
Brain drain

with labour mobility
Human capital
formation
...
A combination of policies is necessary
Sustainable poverty reduction requires creating
local jobs and growth
Different p...
Paradigm shift in regional policies
Traditional Regional Policies

New Paradigm

Objectives

Balancing economic
performanc...
Resources for regional development are soaring, but
target mainly private firms
Resources for Regional Development (R$ mil...
Public investment and BNDES funds still face difficulties
reaching lagging regions

Regional allocation of PAC investments...
Outline
1. Key facts
2. Some policy lessons
3. Key governance challenges
4. Conclusions/recommendations
Brazil is among the most decentralised countries both
in revenue and spending allocations
60,0

Share of
SNGs in
Public
Re...
‘Mind the Gaps’ : a Tool for a Diagnosis of MLG challenges
Administrative gap

Information gap

“Mismatch” between functio...
Brazil faces multilevel governance challenges

Multi-dimensional fragmentation of policies
Sub national governments fina...
Examples of existing tools for co-ordination
Co-ordinating institutions
Convenios (agreements) and pacts
Regional devel...
A wide range of governance mechanisms for
vertical coordination of regional development policy
Central/Federal Government
...
Contractual Governance: Some Findings
 Contracts among levels of government are unavoidable
(vertical interdependencies +...
Towards a diagnosis of sub national capacity challenges
• Strategic planning
• Cross-sectoral, vertical and cross-jurisdic...
Institutions matter
1. Sub-national governments (SNGs) are
responsible for close to three-quarters
of total public investm...
Ingredients for successful commitments, enforced on the
ground

Evaluation

Third party control

Capacity building
Impleme...
Outline
1. Key facts
2. Some policy lessons
3. Key governance challenges
4. Conclusions/recommendations
Key conditions for effective regional development
 Give to this policy high visibility and long term
commitment
 Adopt p...
Recommendations
1. Brazil could develop a place based approach that
would achieve higher complementarities between
social ...
Recommendations (2)
3. Government should contemplate new instruments to
make sure that public funds reach lagging regions
...
Recommendations (3)
6. The status of regional development agencies needs to
be clarified, as currently, they do not provid...
Recommendations (4)
9. Sustain and enlarge programmes for capacity building
at the state and municipal level. In most coun...
Obrigada!

Claire.Charbit@oecd.org

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OECD Study on Regional Development in Brazil / Claire Charbit Deputy Head of the Regional Development Policy Division Directorate for Public Governance and Territorial Development OECD

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OECD Study on Regional Development in Brazil / Claire Charbit Deputy Head of the Regional Development Policy Division Directorate for Public Governance and Territorial Development OECD

  1. 1. OECD Study on Regional Development in Brazil Claire Charbit Deputy Head of the Regional Development Policy Division Directorate for Public Governance and Territorial Development OECD SEMINÁRIO INTERNACIONAL POLÍTICA REGIONAL NO CONTEXTO GLOBAL: SITUAÇÃO ATUAL E PERSPECTIVAS Brasilia, 19th March 2013
  2. 2. OECD Territorial Reviews: A series of case studies of Regional Development Policy for Inclusive Growth Among 34 member countries and non member :  18 National Territorial Reviews ( +2 in process)  22 Metropolitan Reviews (+1 in process)  2 National Urban Policy Reviews (+1 in process)  6 Regional reviews (+2 in process)  5 review s on regional innovation systems Conceptual framework: 1. 9+2 National rural Policy Reviews(+1 in process) Diagnosis and assessment (Chapter 1) Why? Measure sub-national trends Identify key strengths and bottlenecks for growth 2. Review of policy instruments (Chapter 2)   Are current policies adequate for addressing strengths and weakness? Identify areas of improvement 3. Multilevel governance (Chapter 3)   Identify implementation issues and mechanisms for bridging governance gaps What? How? 2
  3. 3. Outline 1. Key facts 2. Some policy lessons 3. Key governance challenges 4. Conclusions/recommendations
  4. 4. Despite Brazil’s high levels of concentration in GDP and population … Geographic concentration index of GDP and population (TL2), 2007 Brazil Sweden Iceland Canada Finland Greece United States Australia Mexico Turkey Japan Spain Norway Korea Portugal Hungary OECD average New Zealand United Kingdom France Belgium Denmark Austria Ireland Germany Czech Republic Italy Netherlands Slovak Republic Poland 61.7 54.2 49.5 47.2 47.2 47.0 46.5 46.0 45.0 44.4 43.9 43.4 41.8 41.1 40.5 39.7 38.5 35.8 34.7 34.5 31.9 31.3 29.9 29.7 27.9 27.6 26.1 25.8 25.7 24.1 0.0 10.0 20.0 30.0 40.0 50.0 Index of geographic concentration of GDP (TL2) 60.0 70.0 Iceland Sweden Brazil Canada Australia United States Finland Mexico Korea Japan Spain Norway Portugal Greece New Zealand OECD average United Kingdom Turkey France Denmark Germany Austria Belgium Netherlands Switzerland Hungary Ireland Italy Czech Republic Poland Slovak Republic 62.0 52.2 52.0 47.6 47.1 44.4 42.6 41.1 40.9 39.1 37.9 37.6 36.9 33.3 33.2 33.0 31.5 30.5 26.9 24.1 24.0 23.6 22.8 22.2 21.9 21.4 20.8 20.4 16.4 16.3 11.1 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Index of geographic concentration of population (TL2) Concentration index of GDP Concentration index of population 64 62 60 58 … concentration has been decreasing over the past decades 56 54 52 50 1980 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 4 2008
  5. 5. Despite the recent decline in territorial disparities… …in catching-up economies inequality is high and it tends to rise due to the presence of growth poles… …in Brazil however it is an exception… Brazil (TL2) 0.33 0.32 0.31 Territorial disparities in GDP per capita among TL2) regions, 2010 Mexico Brazil Turkey Hungary Czech Republic Finland Canada Italy United States Germany OECD 21 average Portugal United Kingdom Poland New Zealand Norway Australia Austria Spain Sweden Korea France Japan 0.34 0.30 0.24 0.22 0.18 0.17 0.16 0.16 0.15 0.15 0.15 0.13 0.13 0.13 0.12 0.12 0.12 0.12 0.11 0.09 0.08 0.08 0.06 0 0.1 0.2 0.3 0.4 0.5 0.3 0.29 Gini idex of GDP per capita (TL2) 0.28 0.27 0.26 1980 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 0.25 … they still remain high in Brazil
  6. 6. Most unsatisfied needs are concentrated in lagging regions 1. The Human Development Index (HDI) is a comparative measure of life expectancy, literacy, education and standards of living for countries worldwide. Note: This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map. 2. This map is for illustrative purposes and is without prejudice to the status of or sovereignty over any territory covered by this map. Source: Calculations based on data provided by (1) IBGE, (2) Ministério do Planejamento, Orçamento e Gestão. Estados and (3) CEPAL/ PNUD/OIT (2008) Emprego, desenvolvimento humano e trabalho decente: a experiencia brasileira recente.
  7. 7. Catching up has been driven mainly by advances in resource-intensive regions
  8. 8. Despite Brazil’s faster overall growth … Growth in GDP per capita among types of TL3 regions, 1995-2007 Predominantly rural Intermediate Predominantly urban Brazil 4.64% 3.14% 1.58% OECD 2.31% 1.88% 1.93% …urban regions have performed below their potential, recording a lower rate of growth than the average for OECD urban regions
  9. 9. Policies that aim to tap the growth potential of all types of regions is an important source of aggregate growth 17% 16% Sao Paulo 15% 14% 13% Contribution toOECD growth 12% 11% 10% Two thirds of national growth comes from intermediate (32%) and rural regions (37%)… 9% 8% 7% 6% Federal Dist. 5% Rio de Janeiro Belo Horizonte Curitiba 4% 3% 2% y = 0.4664x-1.275 1% 0% TL3 regions TL2 regions This will require a differentiated approach, capable of adapting to the different needs and challenges of regions
  10. 10. Outline 1. Key facts 2. Some policy lessons 3. Key governance challenges 4. Conclusions/recommendations
  11. 11. Isolated sectoral action may have unintended outcomes (example) Brain drain with labour mobility Human capital formation Policy responses Persistence of inequality 11
  12. 12. A combination of policies is necessary Sustainable poverty reduction requires creating local jobs and growth Different policies have complementarities: ex infrastructure + economic +social dimensions – Need to co-ordinate policies – Important to target the relevant scale Regional development policy could reinforce the impact of social policies such as Bolsa Familia
  13. 13. Paradigm shift in regional policies Traditional Regional Policies New Paradigm Objectives Balancing economic performances by temporary compensating for disparities Tapping under-utilised regional potential for competitiveness Strategies Sectoral approach Integrated development projects Tools Subsidies and state aid Soft and hard infrastructures Actors Central government Different levels of government Unit of analysis Administrative regions Functional regions Redistributing from leading to lagging regions Building competitive regions by bringing actors together and targeting key local assets
  14. 14. Resources for regional development are soaring, but target mainly private firms Resources for Regional Development (R$ million) 10 000 8 000 6 000 4 000 2 000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 FNE FCO FNO Tax exemptions SUDAM Tax exemptions SUDENE Tax exemptions AFRMM SUDAM Tax exemptions AFRMM SUDENE Source: Sistema de Informações Geranciais dos Fundos Constitucionais de Financiamento (2000-09); IRPJ e IOF-Coordenação-Geral de Estudos Econômicos-Tributários – COGET/Receita Federal; Relatório de Execução Territórios da Cidadania Matriz 2008 and Relatório de Execução Plano de Execução 2009 Territories of Citizenship. 2009
  15. 15. Public investment and BNDES funds still face difficulties reaching lagging regions Regional allocation of PAC investments (2007-10) Northern region 7% Federal district 1% Southern region 8% Regional allocation of lending by BNDES in 2010 Northern region Northeast 7% region 10% Centre-west region 7% Northeast region 19% Centre-west region 7% Southeast region 60% Source: Relatórios Estaduais. Totals for four years, 2007-10. Southern region 18% Southeast region 58% Source: BNDES website, www.bndes.gov.br.
  16. 16. Outline 1. Key facts 2. Some policy lessons 3. Key governance challenges 4. Conclusions/recommendations
  17. 17. Brazil is among the most decentralised countries both in revenue and spending allocations 60,0 Share of SNGs in Public Revenues CAN 50,0 CHE 40,0 USA SWE ESP DEU JAP 30,0 BRA ISL DEN FIN BEL AUS 20,0 SVK KOR ITA POL NOR CZE FRA SLV 10,0 POR NZL LUX GRE HUN GBR IRE NTH 0,0 0,0 10,0 20,0 30,0 40,0 Share of SNGs in Public Spending 50,0 60,0 70,0
  18. 18. ‘Mind the Gaps’ : a Tool for a Diagnosis of MLG challenges Administrative gap Information gap “Mismatch” between functional areas and administrative boundaries => Need for instruments for reaching “effective size” Asymmetries of information (quantity, quality, type) between different stakeholders, either voluntary or not => Need for instruments for revealing & sharing information Policy gap Sectoral fragmentation across ministries and agencies => Need for mechanisms to create multidimensional/systemic approaches, and to exercise political leadership and commitment. Capacity gap Insufficient scientific, technical, infrastructural capacity of local actors => Need for instruments to build capacity Funding gap Unstable or insufficient revenues undermining effective implementation of responsibilities at subnational level or for crossing policies => Need for shared financing mechanisms Objective gap Different rationalities creating obstacles for adopting convergent targets => Need for instruments to align objectives Accountability gap Difficulty to ensure the transparency and integrity of practices across the different constituencies => Need for institutional quality instruments
  19. 19. Brazil faces multilevel governance challenges Multi-dimensional fragmentation of policies Sub national governments financial and political autonomy Institutional and administrative capacity at sub national level Information asymmetries, monitoring and evaluation
  20. 20. Examples of existing tools for co-ordination Co-ordinating institutions Convenios (agreements) and pacts Regional development agencies Single Registry, national census, etc.
  21. 21. A wide range of governance mechanisms for vertical coordination of regional development policy Central/Federal Government Ministerial Departments Inter Governmental Regional Agencies Contracts Council (Brazil, Canada,…) (France; (COAG, Australia) Italy...) Conditionalities Special Commission ( EU programming) (Delta, Netherlands) Sub-national Governments Whatever the type of system – federal, regionalised, unitary – there is a strong need of coordination across levels of government
  22. 22. Contractual Governance: Some Findings  Contracts among levels of government are unavoidable (vertical interdependencies + assignment of responsibilities)  Contracts allow a customized management of interdependencies, useful in either unitary or federal contexts  Evaluation conditions the appropriateness of the contract  Contracts are tools for dialogue, for clarifying responsibilities, for capacity building  Bilateral commitments must be as « verifiable » as possible  The crucial challenges of enforcement mechanisms to make commitments credible
  23. 23. Towards a diagnosis of sub national capacity challenges • Strategic planning • Cross-sectoral, vertical and cross-jurisdictional co-ordination • Stakeholder engagement; ex ante appraisal Planning: Design a portfolio for growth • Integrity, accountability and risk management • Regulatory quality • Professional and technical skills Throughout: Facilitating achievement of goals Critical Capacities needed at all stages of the investment cycle Evaluation and Audit: promoting results and learning • Monitoring systems • Ex post performance assessment • Use of performance information Finance and Budgeting: Ensure adequate resources • Multi-year budgeting • traditional and innovative financing instruments • private-sector engagement Accountability: ensure integrity during implementation • Sound public procurement systems 23
  24. 24. Institutions matter 1. Sub-national governments (SNGs) are responsible for close to three-quarters of total public investment in the OECD. 2. The quality of government (QoG) at regional level varies within and across countries. 3. QoG is strongly related to sub-national human development indicators at regional level. 4. Better QoG is also associated with better returns to cohesion investments in places with relatively large cohesion expenditure. 5. The strong association between QoG and levels of both income and education reinforces concerns about SNG capacity challenges. Source: N. Charron, V. Lapuente and L. Dykstra (2012.) “Regional Governance Matters: A Study on Regional Variation in Quality of Government within the EU” (forthcoming Regional Studies). 24
  25. 25. Ingredients for successful commitments, enforced on the ground Evaluation Third party control Capacity building Implementation of effective contract for regional development From sanction to reputational mechanisms
  26. 26. Outline 1. Key facts 2. Some policy lessons 3. Key governance challenges 4. Conclusions/recommendations
  27. 27. Key conditions for effective regional development  Give to this policy high visibility and long term commitment  Adopt place-based policies  Enhance the effectiveness of vertical and horizontal co-ordination mechanisms  Involve local actors
  28. 28. Recommendations 1. Brazil could develop a place based approach that would achieve higher complementarities between social and other sectoral policies 2. Brazil is using a lot or regional development funds to remediate the difficult access of private enterprises to financing. Over time, it would be better to use regional funds for their specific purposes of investing in soft and physical investment with regional development targets .../...
  29. 29. Recommendations (2) 3. Government should contemplate new instruments to make sure that public funds reach lagging regions (capacity building, technical assistance, joint projects, etc.) 4. The OECD supports the move to complementing the Bolsa Familia programme with related programmes for promoting social and economic inclusiveness of the extreme poor 5. There is a proliferation of co-ordinating bodies without much effective co-ordination mechanisms. An institutional streamlining is required with a clear identification of the co-ordination gaps. The resulting institutions should have effective instruments to operate. .../...
  30. 30. Recommendations (3) 6. The status of regional development agencies needs to be clarified, as currently, they do not provide the coordination mechanisms that they are supposed to deliver 7. Need to simplify and unify the administrative map of Brazil at the intermediary level between municipalities and states 8. Make use of the information generated by universal programmes such as Bolsa Família (Indice de Gestão Decentralisada)or the School Census to better target regional policies .../...
  31. 31. Recommendations (4) 9. Sustain and enlarge programmes for capacity building at the state and municipal level. In most countries, this is the main bottleneck for the successful implementation of regional development policy. It largely depends on evaluation processes.
  32. 32. Obrigada! Claire.Charbit@oecd.org 32
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