Public Investment in Latin America:            Five Lessons           ICGFM Conference             December 2011          ...
Latin American countries invest below the            world average…
… and much less compared to fast-growing    economies like China and India …
… and there is significant variation across      countries in the level of investment spendingGDP      Source: CEPAL (2011...
Lesson 1: Need to overcome isolation ofmanagement systems(financial management and public investment)Country              ...
Coverage of information systems is uneven• Colombia     • 100% of central government investment     • Less for subnational...
Case of Bolivia: system overlaps and gaps  Level of    Information                        Public Investment Cyclegovernmen...
Improved information flow in Colombia:systems cover all steps of the investment cycle                          Formulation...
Lesson 2: Decentralization without planningand coordination can lead to fragmentation• LAC is the most decentralized regio...
Level of decentralization in public investment               (Country samples)                           Brazil   Uruguay ...
Responsibilities are often unclear in the take-       off period of decentralization• Complex concurrent assignment of exp...
Trend of project fragmentation in the absence          of planning and coordination         National Government         Re...
Few countries have effective coordination   mechanisms among levels of government• Latin America’s backlash to planning• D...
Lesson 3: Differentiated approaches to cater to    heterogeneous needs and levels of capacityNumber of local governments h...
Resource abundance has challenged execution  rates: uncovers institutional shortcomings       El Salvador: Planned and    ...
Catering to different capacities:                emerging approaches• Pre-investment    • Differentiated by sectors• Subna...
Lesson 4: Quick-gain strategy can prove effective. Focuson the low-hanging fruit but with a strategic view.Procurement can...
Nicaragua: Procurement Module is critical for   monitoring physical and financial execution                 Pre-          ...
Lesson 5: Strengthen the demand side…• Interactive tools open to citizens andusers• Geo-referencing• Expenditure tracking•...
…and in parallel also strengthen “gate-keeping”                    functions                                              20
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Public Investment in Latin America - Five Lessons

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Jonas Frank, Sr. Public SEctor Specialist, The World Bank

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  • Entre los años 2005 y 2009 se ha triplicado la inversiónpública en el Perú (gráfico II.3).Más de 700 Oficinas de Programación de Inversiones (OPI) descentralizadasqueforman parte del SNIP elaboranpropuestas de proyectosEl marco de planificación no coadyuva a reducir la fragmentación de la inversiónpública. (CEPLAN..)El SNIP no permite un fácil planeamiento de metas ni la evaluación de estas. La evaluación ex ante de la inversión está separada: (i) del monitoreo de la ejecución; (ii) de la evaluación ex post de la implementación y, (iii) de los resultados de la inversión. En otras palabras, la Dirección General de Programación Multianual del MEF, responsable del SNIP, solo tiene una visión de los resultados esperados de cada propuesta individual, mientras que la Dirección General de Presupuesto tiene que realizar evaluaciones ex post del gasto sin conocimiento de las razones de la priorización de un programa de inversión o de la contribución de este programa a las metas superiores de desarrollo. Por otra parte, la programación de la inversión se realiza sin considerar las metas o resultados de mediano plazo. El marco multianual de la inversión es, en esencia, una sumatoria de diferentes iniciativas individuales, sin que estas tengan que ser ajustadas para cumplir metas de inversión nacionales.
  • Public Investment in Latin America - Five Lessons

    1. 1. Public Investment in Latin America: Five Lessons ICGFM Conference December 2011 Jonas Frank Sr. Public Sector Specialist The World Bank
    2. 2. Latin American countries invest below the world average…
    3. 3. … and much less compared to fast-growing economies like China and India …
    4. 4. … and there is significant variation across countries in the level of investment spendingGDP Source: CEPAL (2011) 4
    5. 5. Lesson 1: Need to overcome isolation ofmanagement systems(financial management and public investment)Country Interface IFMIS vs SNIP Single project code in IFMISBrazil 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 Source: IDB Survey 2009-2010 and World Bank
    6. 6. 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
    7. 7. Case of Bolivia: system overlaps and gaps Level of Information Public Investment Cyclegovernment System Formulation Budgeting Execution Monitoring Evaluation SISIN web SIGMA SPI -MOP Central Aplicativo MMyA SAP - FPS/FNDR Aplicativo - VT SISIN web Departa- SIGMA mental SGP SIGMA local SISIN web (GM) SIGMA (GM) Municipal SGP SIGMA local Source: World Bank
    8. 8. Improved information flow in Colombia:systems cover all steps of the investment cycle Formulation BPIN SIGOB Evaluation Budget Programming Monitoring Execution SPI SIIF 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)
    9. 9. Lesson 2: Decentralization without planningand coordination can lead to fragmentation• LAC is the most decentralized region in the developing world• Expenditure decentralization is particularly deep in public investment
    10. 10. Level of decentralization in public investment (Country samples) Brazil Uruguay Bolivia (2008) (2011) (2010)Central level 17% 47% 40%Subnational Governments 30% 18% 31%Public Enterprises 53% 35% 29%Total (in percent) 100% 100% 100%
    11. 11. 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)
    12. 12. Trend of project fragmentation in the absence of planning and coordination National Government Regional Government Example of Peru Municipal Government 19,798 18,891 13,299 7,186 1,332 3,190 2,837 3,072 1,022 2,035 2,816 1,505 2,142 1,885 2,319 2,321 2,409 1,183 2004 2005 2006 2007 2008 2009Source: SNIP
    13. 13. 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
    14. 14. Lesson 3: Differentiated approaches to cater to heterogeneous needs and levels of capacityNumber of local governments has increased significantly: weaker capacitiesOften cumbersome national systems:• Procurement• HR• Financial management
    15. 15. Resource abundance has challenged execution rates: uncovers institutional shortcomings El Salvador: Planned and executed public investment, Peru case 2006-2010 (in million US$) Blue: planned budgets Red: executed budgets 16,000 16,000 Millones Millones 14,000 14,000 12,000 12,000 10,000 10,000 2.5% PIB 2.9% PIB 2.5% PIB 2.6% PIB 8,000 8,000 2.3% PIB 6,000 6,000 4,000 4,000 2,000 2,000 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009Source: Dirección General de Inversión y Crédito Público, Local Governments PIM Gobiernos Locales Ejecutado Regional Governments PIM Gobiernos Regionales EjecutadoMinisterio de Hacienda, El Salvador Source: SNIP, Peru
    16. 16. 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
    17. 17. Lesson 4: Quick-gain strategy can prove effective. Focuson the low-hanging fruit but with a strategic view.Procurement can provide high returns on efficiency. Quick-gains strategy in Mexico: focus on high expenditure areas 400 Hidrocarburos ($228/537) About 90% of 360 investment is 320 concentrated in three sectors: 280 61% hidrocarbon, communi (376 mil millones de pesos) Monto Asignado en 2009 240 cations/transport and electricity 200 Medio Ambiente ($11/176) SCT Salud 160 15% ($64/1,683) ($10/175) Impartición de Justicia ($7/52) 120 17% Electricidad Fomento 46% ($40/450) ($6/146) 80 11% Educación ($5/190) 12% Seguridad Nacional 40 ($4/76) Ejecutivo Federal ($3/161) 0 1,000 2,000 3,000 4,000 Número de Proyectos (3,652 proyectos) Fuente: Subsecretaría de Egresos de la SHCP/ Tomo VII PEF 2009 / Análisis Deloitte 17
    18. 18. Nicaragua: Procurement Module is critical for monitoring physical and financial execution Pre- investment system • Monitors execution in two moments: at the award stage and during execution of contracts “Project • Execution is monitored based on contract Bank” programming and milestonesMonitoring Pro- System gramming Source: SNIP Nicaragua
    19. 19. Lesson 5: Strengthen the demand side…• Interactive tools open to citizens andusers• Geo-referencing• Expenditure tracking• BenchmarkingSource: MIDEPLAN, Chile
    20. 20. …and in parallel also strengthen “gate-keeping” functions 20
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